Business-IT alignment boosts innovation, but there’s an important exception you really want to know about.
Having your Business and IT aligned, has a huge impact on the return on your IT-investment. As IT reinforces not only the business processes and products, but also the planned changes in business processes and products, every Euro spent on IT will have an immediate effect on quality (going up) and costs (going down).
As a result, time to market drops and efficiency increases.
Studies have also shown an important correlation between Business-IT alignment and innovation: product innovation (the ability to create new products) as well as process innovation (the ability to implement new processes to build existing or new products). Companies with a high level of Business-IT alignment and developed IT governance mechanisms, show the highest level of product and process innovation.
So, IT not only reinforces financial results, but also boosts innovation, making your business more agile than ever.
What makes this possible?
Business and IT are aligned when the IT plan reflects the business strategy and when the business strategy includes strategic IT investments. This means:
a) both plans at least exist and
b) communication between Business and IT has taken place to find a common strategy.
Dwight D. Eisenhower once said: “In preparing for battle I have always found that plans are useless, but planning is indispensable.”
This is also true in business. The mechanism behind the planning process is more important than the outcome. If the environment is changing, the actual plan gets outdated very quickly. But having strong communication mechanisms between Business and IT, lets your company adapt to the new circumstances by the blink of an eye.
Now here is the catch!
In general, having the CIO in an executive position is conceived as a very strong sign of Business-IT alignment. Moreover, in organizations that are strongly dependant on IT, having an executive CIO is considered a best practice.
But research shows that if Business-IT alignment is high, having an executive CIO has a negative correlation with product innovation!
This indicates that even CIO’s are human and show resistance to substantial changes. If the CIO is on the Executive Committee, he or she will be involved in product innovation discussions and arguments against substantial changes in applications and infrastructure will slow down product innovation. If the CIO is not on the executive committee, decisions about important product changes will have been taken, before IT gets involved. At that moment, the CIO will push them through the IT organization (remember, we are talking about companies with a high level of Business-IT alignment, so IT adapts to the needs of the Business.).
This is not an argument against having an executive CIO. On the contrary, if you want good Business-IT alignment, it is an excellent idea to have an executive CIO. But it is good to be aware of the catch. The CIO can act upon this information by being prudent in bringing up IT hurdles to soon in product innovation discussions. The other members of the Executive Committee can use this information not to get discouraged too fast by them.