This article originally appeared on the BeyeNETWORK.
Most CIOs know by now that technical prowess will only get them so far, and that leadership and organizational skills are far more valuable when it comes to enabling business initiatives through IT. Nevertheless, the majority still focus on the short-term, operational aspects of running the IT department.
These CIOs spend their time juggling immediate business needs: upgrading financial packages, supporting imminent compliance or legal edicts, or driving inevitable infrastructure improvements and product upgrades. The result is that budget allocation takes an inordinate amount of time. Project planning conversations usurp getting things done. Priorities constantly change. Some CIOs never get out from under the operational issues, thus implicitly establishing a temporal, administrative and reactive IT culture. In a recent Gartner report titled Six Things CIOs Need to Stop Doing to Enable More Value-Adding Work, CIOs surveyed claimed to be time-strapped due to administrative issues. The report criticized IT leaders for spending too much time vetting and prioritizing technology requests from individual lines of business.
While IT operations are important, strategy matters. If the CIO wants to align IT with the business, he or she needs to understand and account for corporate strategic objectives. Not surprisingly, it’s common for most IT budgets to concentrate on well-defined business functions: billing, HR, finance, to name a few. Often, the only allocations for strategic business initiatives occur when there’s leftover budget money or business units fund the programs themselves.
This has significant implications on business intelligence (BI) programs since they often fall outside of operationally focused priorities. Almost all companies face the conundrum that the number of project requests exceeds the budget dollars to fund them. This thrusts important strategic initiatives, most of which will rely on rich information and analytic capabilities, into an apples-and-oranges comparison with operational systems. Support of strategic initiatives thus drops to the bottom of IT’s priority tree.
As IT stays busy trying to fix what’s broken, the business complains that IT doesn’t listen. “Requirements fatigue” is an increasingly familiar syndrome for business users tired of explaining what they need and seeing no payback – never mind being kept in the loop. Meanwhile, business intelligence and analytics get shoved further and further back in the priority queue. “I have to face the facts,” one BI development manager told me recently. “People buy new packaged apps around here all the time, but simply implementing a new data mart requires an act of Congress.”
In the past several years, IT magazines and journals have finger-wagged at CIOs to change the perception of their organizations from necessary evil to business enabler. As they become more focused on the business as a customer, CIOs should start factoring strategic objectives – and accompanying business intelligence capabilities – into their budget and planning cycles. This means an awareness of the business-as-usual operational issues, as well as a newfound focus on strategic goals. As Figure 1 shows, the paradigm differences between operational and strategic focus can be significant, and can even foster cultural entrenchment.
Figure 1: The Differences between Operational and Strategic Focus
Consider the gaming industry. Traditionally, casinos relied on personal, subjective decisions in order to attract and keep players. The pit boss at the blackjack table would decide when to “comp” a free room to a high-roller. The casino’s IT department would thus focus on operational metrics: providing player data to the casino staff as quickly as possible or reporting the “take” on slot machines.
In the mid-1990s, an industry shift occurred. Casinos wanted to transform themselves from gambling centers to destination resorts. Lines of business suddenly wanted to view customer activities across their relationships – not only as players, but also as hotel guests, diners, ticket-buyers and shoppers. The goal was to use this data to drive differentiated target marketing programs and customer segmentation strategies. Several of the large casinos attempted to put customer-focused programs in place, only to discover that their systems couldn’t support the new requirements.
One of the reasons Harrah’s Entertainment was successful in the early days is that the company’s management had the foresight to delineate strategic needs from their daily business needs. Harrah’s realized that its operational systems couldn’t always flex to support new, customer-driven ways of running the business. As I wrote in The CRM Handbook, Harrah’s relied on hard data to transform fundamental customer philosophies.
In the 1990s, Harrah’s began an expansion and acquisition strategy that included the Showboat casinos and the upscale Rio, broadening its market offerings in both the hotel and gaming businesses and more than tripling the number of properties. As the company reached across different cities and markets – there are twenty-one Harrah’s locations across the U.S., including high profile locations from Las Vegas to Atlantic City, Joliet, Illinois, to Tunica, Mississippi – it made the same assumption its competitors made: that each customer patronized a single casino. A little market research commissioned by senior management suggested that Harrah’s might not know all it needed to know about its growing customer base.
The company subsequently introduced its Total Rewards program, which allowed it to identify and analyze the behaviors of high-value customers versus “one-trip wonders” and measure the sales uplift of targeted marketing and relevant offers. In the years between the launch of its original rewards program in 1997 and marketing analysis done in 2001, the number of customers visiting more than one Harrah’s property had risen by 72 percent.
It’s important to remember that operational systems are focused on business efficiencies. These systems, often purchased as packages, are designed to automate repeatable business processes in a rigorous manner. But when business goals change, flexibility is key, and flexibility is a cornerstone of business intelligence. Business intelligence allows businesses to understand the impact of change. As such, IT needs to profile, acquire and enrich data to support new business processes, tools and techniques in order to help drive that change. Conversely, a company’s strategic objectives are usually more focused on growth, as shown in Figure 2.
Figure 2: Parallel Goals – Efficiencies and Growth
Tracy Austin, former Harrah’s executive and the first-ever CIO for Mandalay Resort Group, was all too familiar with the operational versus strategic divide. As she began engaging with the business to determine its needs and streamline IT processes, she delineated two separate on ramps where the business could engage with IT. “We needed to handle ‘demand management’ separately from ‘support management,’” she explains.
Austin instituted two parallel functions, Business Solutions and Operations Support. “Business Solutions was our demand management group,” she says. “They did the triage for incoming requests from the business side, including vetting business cases, building business requirements and validating ROI. That left Operations Support to understand and prioritize operational enhancement and upgrade requests. This helped ensure that important new business goals that required business intelligence and advanced analytics were given rigorous consideration, and nothing fell through the cracks.” The main advantage? “It leveled the playing field.”
Effective CIOs should consider compartmentalizing their budgets to support the strategic needs of the business. As new business requests are made, IT needs to distinguish between operational needs and those programs that mandate business intelligence. Moreover, CIOs should have the right skills and processes in place to distinguish between new, business-driven requests and operational enhancements. While business intelligence might be a fraction of the CIO’s overall budget, IT should always ensure that strategic objectives do not routinely draw the short straw. “We essentially turned our business needs deliberation into a repeatable and metrics-driven process,” Austin explains. “So over time, the business knew what to expect from IT, and how much of the time and resource burden they’d need to share.”
Marketing, product management, strategic planning, sales optimization and other corporate functions are establishing how the organization as a whole moves forward and stays competitive. If CIOs lack the evaluation, budgeting and prioritization processes to enable strategy, it could be inhibiting nothing less than their company’s ability to compete.
Jill Dyché is a partner co-founder of Baseline Consulting, a technology and management consulting firm specializing in data integration and business analytics. Jill is the author of three acclaimed business books, the latest of which is Customer Data Integration: Reaching a Single Version of the Truth, co-authored with Evan Levy. Her blog, Inside the Biz, focuses on the business value of IT.