IT Value Chain

IT Value Chain

 

I believe in the power of focus to make a difference in performance. I love the analogy of the laser which gets it’s power from being focused on one small point. As much as I believe in the power of focus in principle it is incredibly difficult to achieve in practice. As a CIO you have a lot of demands for your attention. This is true of all CXO roles but I believe the CIO role is the worst because of the ever changing nature of IT and the organisational scope of what IT touches, which is everything. In this environment how do you get focus and perhaps more importantly what do you focus on?

I spent a long time pondering this issue while I was the CIO at The Warehouse. Over time I began to get insights to build on and ultimately the answer surprised me and to some extent disappointed me. Allow me to take you on my journey.My first key insight came when I was reading The New CIO Leader (PDF summary here). What stood out to me was their use of the phrase “persistent business needs” to quote:

“The technologies that matter to your organisation are those that address its fundamental strategic goals and persistent business needs”

As I thought about persistent business needs I began to realise that because they are persistent they provide a basis for focusing IT’s efforts and therefore my efforts. I also realised I had seen this before in what Stephen Covey calls the “big rocks” for an organisation. This gave me hope but what are IT’s big rocks?I continued to look, and remember things I had learnt. What I found was best summarised by Heskett et al in their article “Putting the service profit chain to work” Quoting the article, the essence of the service profit chain is as follows:

“Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers.”
 As I reflected on this, it’s applicability to IT departments, grew on me. While IT departments don’t have a direct profit growth incentive they certainly provide services to their customers (both internal and external) and are very dependent upon the team to provide those services. I then compared it to our existing departmental strategy. Our strategy at the time nominated 4 key priorities:
  1. Improve our operations
  2. Invest in our people
  3. Deliver critical projects
  4. Deliver our value add

The match was not perfect but I began to realise that our nominated priorities for today were not just for today but they represented persistent needs that must be addressed on an ongoing basis if we were to build a high performing IS Team. I validated this view with my team. They agreed. I then began to play with these ideas including putting them in a 2x2 matrix. As I looked at the 2x2 I realised I had created a balanced scorecard. This was very perplexing to me. I was half elated as the thinking seemed to be real, half left wondering why did I need to take this wandering journey to end up with a concept I knew about and loved.Be that as it may, the IT Value Chain were born and I knew where I needed to focus and importantly I knew that it wasn’t on what is the latest greatest technology. It was on developing capability to be able to deliver to my organisation as described in the service profit chain.The IT Value Chain looks at the 4 core areas which an IS department needs to excel in to be successful. This is presented as a balanced scorecard and is consistent with the concept of the service profit chain. An example is shown below. The first example shows the 4 areas and what specifically within these that you need to focus on to be successful.

 

 

The second example shows sample KPIs that demonstrate whether you are tracking towards achieving your goals.

 
 

I don’t intend to explain all the thinking behind this because others have done this filling many books in the process. Rather here are some key resources that have impacted my thinking.

and finally

 
 

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