Best-selling author of The Real Business of IT and research

scientist leading MIT’s Center for Digital Business, Dr. George Westerman joined us for a live webinar on ‘communicating the value of IT to the business.’ The format of the event was a question-and-answer session between Gottfried Sehringer, Mendix VP of Worldwide Marketing, and Dr. Westerman.

Your book, The Real Business of IT is about IT, but there’s nothing about technology in the book. It’s all about communication – what’s behind that?

So there’s a little bit of technology in there, but you’re right: it’s about

technology and it is about communication. And this was kind of a

surprise when we came into the research. I spent a lot of time with

non-IT executives through this course that I have, and also through

interviews that we did in research. What we found in our early studies is

that the number one driver of their perception of value wasn’t from the

technology; it was from whether they

had effective oversight of IT. Whether

they had a transparent view of what’s

happening in IT, whether they knew

what IT was providing, what role they

needed to play, and what benefits they

were getting. This, over and over again

in our studies, showed up as important,

and that’s when we realized there’s

something really essential in learning

how to communicate the right way.

Communicating IT’s Value to the BusinessQ&A with Dr. George Westerman

Communicating IT’s Value to the Business 1

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The number one driver of their perception of value wasn’t from the technology; it was from whether they had effective oversight of IT.

More important to the career of the CIO altogether, can you describe the framework of the book?

The important thing here is that the CIO is a

leadership role, not a technical role. And as you move

up to the leadership ranks, sure you need to learn how

to run your organization well, but it’s also a whole

different way of communicating because you’re

no longer communicating about the technology;

you’re communicating about how your organization

is performing and how it’s helping the rest of the

organization work. And there it’s about joint goals.

It’s about how you’re helping other people. That’s a

new communication method, and that’s often what

CIOs need to learn to do.

So there are steps. You asked about the framework.

We found that in studying dozens of CIOs who turned

their IT organizations from disrespected order-taker

to strategic partner, tended to go through four steps:

changing how you think about the organization,

showing you do your job well, showing you help

people do their job well, and then getting more jobs

to do.

So what are some of the typical mistakes you see CIOs make?

Well, this is the interesting thing about value traps.

There are things that I grew up in IT learning to say,

and there are things that I see IT executives do, that

just get them in trouble. One, for example, is talking

about IT as a cost of doing business. We know what

you want to do to a cost of business. If you say I’m a

cost of doing business, everyone else says, “How do

we reduce you?” That’s not the situation you want

to get yourself in. If you say you’re the technology

leader of the organization, you’re kind of saying,

“When you want to talk technology, bring me into the

conversation – but otherwise don’t.” So these kinds of

ways of talking are ways that we learned how to talk,

and they get in the way of actually being that true

strategic partner you want to be. You want to find

ways to avoid them.

So you mentioned the term ‘value trap’ - can you explain that, and maybe give us some examples?

The idea of the value trap comes from the concept

in management called the competency trap, and this

is the idea that often when you’re faced with a new

situation, people double down on what they know

they’re good at. So sailing ship manufacturers faced

with diesel engine boats added more sails to their

ships that made them even less maneuverable in the

face of their competition. This happens over and over

again, and you want to get out of those competency

traps. In IT it’s the same way: doubling down on how

Communicating IT’s Value to the Business 2

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If you say I’m a cost of doing business, everyone else says, ‘How do we reduce you?’ That’s not the situation you want to get yourself in.

something you want to keep doing. You want to talk

about IT as being an integral part of the conversation,

and an integral partner in everything you do.

That’s a great point, and certainly not something you hear very often. You mentioned already the fact that a lot of times IT has to say No, and we’ve all heard those jokes about the CI-No or the ‘land-of-no’ – any recommendations how to avoid that?

Well, one thing to do is to just not say flat-out no ever.

Every time you say no, there ought to be a reason why

you said no, and it ought to be followed up, if you can,

with a better solution. One of the best CIOs I know

was a CIO at an electric utility company, and people

would come in with project requests and they’d say

“I want to have this done and I want it to look like

this.” And he knew it was the wrong way to go. But

instead of saying No, he’d say “OK great, let’s take a

look at that. I’ll come back in a month and we’ll run

up the estimates on that.” But what he also did was

run the estimates on that requests, along with two

other requests that were better. So instead of saying

“Here’s your idea, it’s a bad one” he’d say, “Here’s your

idea, here are two better ones, which one do you want

to do?” And that tends to work tremendously well for

him. I think that’s what you want to do in IT also. If you

you learned how to talk when you were a low-level IT

person only gets you in trouble when you’re a high-

level IT person.

Another example is what happens when things go

wrong. Anybody in the service business knows that

you don’t say “Hey, this is just what happens.” The

right answer is “This should never happen and I’m

going to do something about it.” This is one of those

things that just requires thinking over and over again,

and reinforcement over and over again. In many

ways, it’s kind of a culture change and the best way

I’ve seen a CIO take this to heart is anytime there’s a

conversation going on in their business, they stop it

when they say something the wrong way. They talk

about “Hey, we’re technology people” – okay, let’s

talk about that differently. “Hey, we’re a cost” – no

we’re not a cost, we’re an investment in making the

business work. If you have any of your people that

ever say, “If you don’t do it my way, I can’t guarantee

the results” you have to stop that right away. Because

the way people hear that one is “I don’t care about

what happens to you.” These are all value traps.

There’s one that’s really interesting to me, though.

Many IT organizations are out there saying the

business is my customer. There’s some value in that,

giving yourself a customer’s orientation, especially

when things are really, really bad. But if I set you up

to be my customer, I’m setting myself up to be the

vendor. That’s not a partnership. We know what we

do to vendors. In IT, we know especially what you

do to vendors. You don’t want to put yourself in that

position. So talking to business as a customer may

get you started at the very beginning, but it’s not

Communicating IT’s Value to the Business 3

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If I set you [business] up to be my customer, I’m setting myself up to be the vendor. That’s not a partnership.

got a flat-out no [type of request] try to avoid it, and

at least give a reason for the No, but even better, give

them a way to accomplish what they want without

having to violate all your rules.

Which types of tasks in IT organizations effect business value more than others?

Another thing that came out of this research with

non-IT executives – we interviewed 150 or more

of these people – was that the four tasks that were

the most associated with value in their eyes, number

one was transparency, but the others were about

application development: doing a good job of needs

identification and process and organization change.

What that says to me is that the real value comes

from developing applications better to get more

value out of them. Once again that’s not a technical

problem – it’s really about what value are you signing

up for? Are you developing well, and then did you get

the value you originally signed up to provide? We call

this the virtuous cycle of IT value, and there’s as much

management in there as technology.

I’m glad you mentioned the value of application development. What impact do you think that has on the business?

Better application development? I think the idea of

doing application development better has benefits

all throughout. There’s another reason beyond our

survey research to think that getting systems in

and changing the business has the most value, and

actually if you look at changing the way you run IT,

let’s just say on average between two and five percent

of revenue goes into IT. If you cut that in half, you’re

generating one to two percent of revenue in savings.

So developing processes – changing the business – is

effecting the other 95% of the business, there’s just

more territory to make change happen. So getting

things developed better is a huge source of value,

as long as you make sure you’re actually getting the

benefits you signed up.

As part of this virtuous cycle of value, one of the

things we looked at was what it takes to get through

the process. In the book, we call them value harvest

reviews. That’s where it really becomes real. You go

through and if you’re a business unit chief and you

want money over a certain threshold, you go to the

executive committee in IT and you say “I need three

million bucks, and this will return ten million dollars

over the next two years.” The next question is: How

do you know that? And you have to say “I counted

these measures and they’re going to move this far

and it’s got this much value.” And then the next

question is: Do you have everything else set up to

make sure this is going to deliver? And you say “Yes,

we thought about this and this and this.” And then the

answer is almost always yes. Now the interesting part

about this is that a lot of people will withdraw their

Communicating IT’s Value to the Business 4

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Instead of saying ‘Here’s your idea, it’s a bad one.’ he’d say, ‘Here’s your idea, here are two better ones, which one do you want to do?’

request when they get those first questions, because

they’re not ready. Now why would they withdraw

their request? Because whenever the solution goes

in, the CFO knows that you had promised 10 million

dollars – that’s automatically in your numbers. On top

of that, you have to get up next year and say “I took

three, I promised you ten, here’s how much I actually

delivered.” in front of the CFO and the rest of the

executive team. Now you don’t want to repeat your

mistakes more than once there. So the CIO got out of

the CINo job by putting the process at the right level –

the CFO was happy to run it, and the CFO had ways of

making conversations happen that the CIO couldn’t.

Very good. That actually might tie into my next question about measuring progress from a CIO perspective, but also from a business partner’s perspective. How do you measure progress? How do you know you’re doing the right thing as the CIO?

You know, there are people out there saying if you don’t

talk about revenue, you’re just not an effective CIO.

There are times when you want to talk about revenue,

but there are a lot of times you want to talk about

other things. What we found is that a tremendously

useful way to talk in IT is about business process

metrics, because if IT is going to affect business, it’s

going to do it by business processes. And those repeat

enough where you’ve got pretty good measures to

how they perform. What’s happening in your supply

chain, in your inventory turns, with your customer

satisfaction in this process – those are things that

people should be measuring already, and if you can

do a before and after look at them, that’s where

measuring progress is really useful for the outcomes.

Absolutely. We’ve seen this a lot, that business “takes matters into their own hands” and they end up not talking to the CIO or their IT team. They just do what they need to do. Do you have recommendations for the CIO on how to deal with that?

That’s a tough one. I think the first thing you want to

do is ask yourself why that is happening. If people are

saying they’re doing it because IT is just too slow, that’s

something you might want to do something about.

And you know, speeding up application development,

speeding up your governance processes – that’s the

way to do that. If they’re doing it because you said No

to the request, you have to ask: Was it an appropriate

No that you gave them? And then there are also

times when people are going to do what they want

to, because they want to. We were doing studies on

these new digital technologies and I heard five times

Communicating IT’s Value to the Business 5

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What’s happening in your supply chain, in your inventory turns, with your customer satisfaction – those are things that people should be measuring already, and if you can do a before and after look at them, that’s where measuring progress is really useful.

in 50 interviews, “Officially, I’ve had it not allowed in

the enterprise, but half the executive team has it.” So

you’re not going to stop that one, but you do want

to think through in IT, are the processes that you’re

doing creating this shadow IT and what can you do to

fix that.

Shadow IT is of course one of the extreme cases. The other part is partnering with business to get things done, or enabling the business to do more, without losing the control of IT. That’s certainly something we see a lot with our customers.

Often developing the systems is the smallest part

of the value you’re going to get. It’s important;

you’ve got to get it right, you’ve got to do it fast, but

it’s also about the organizational change that goes

with it. It’s whether the organization is ready to

change their processes. One guy I talk to, the CIO

at a large almost billion-dollar grocery chain, was

complaining he had spent millions of dollars putting

these systems in place, and nothing had happened in

the purchasing department because he could not get

the people doing purchasing to change the way they

were working because there was new data there. He

had just wasted his money. He was trying to figure

out how to get the organization to change. So why

am I saying that – because often when projects fail,

it’s not the technology failing, it’s what the rest of

the organization is not doing. And if you can put the

transparency in early, people know what roles they’ve

got to play. And you can get to the point where the

organization doesn’t sign off until all the roles have

been done, and that’s where you want to get going.

You know one of the things you mentioned was

speeding up application development. We can speed

up application development so much faster, and you

absolutely want to do that because so many times

people complain about things being too slow in IT.

So speeding up application development can be a

tremendously useful thing to do, especially if you can

do it to the point where those other organizational

processes begin to speed up too.

We’ve seen that as the really exciting pivotal moment in customer projects: when the business all of the sudden has to slow down the rest of the project team because they need to and want to contribute. Now a different dimension to this, in today’s world of digital and mobile and social that we all hear about – what does that mean for the CIO? Does that change anything?

I think there are a couple things. One is that it’s

happening – so you’ve got to get ready for it. We

know about the consumerization of IT and we’ve

talked about shadow IT and how this all fits in. You’ve

got to be ready for it. You’ve got to have a plan for

Communicating IT’s Value to the Business 6

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Often when projects fail, it’s not the technology failing, it’s what the rest of the organization is not doing.

getting there. And what I’m hearing even more than

before is that people were unhappy with IT before,

they’re really unhappy with IT now. So it’s also a push

to drive your transformation. The difference is this:

with so much of the digital happening in marketing,

where before they might not be happy with IT, but

they kind of had to live with you, with so much being

driven out of marketing now, if they’re not happy

with you they’ll just go around you. We’re seeing the

emergence of an organizational role called the chief

digital officer. And it’s a natural role for many CIOs to

take – but not a lot of CIOs are entering that role. So

one of the things you want to think about is, as you

take governing technology to governing all of digital,

how can you make yourself part of that conversation

so even if you’re not running the whole thing, you’re

an essential part of making it happen.

That’s a very interesting point, and that goes with my next question here on your book in general and maybe your research over the last few years – what are some of the biggest surprises you found when you wrote the book?

So the biggest surprise I found, you know we

had known from the early research that this idea

of transparency was important, but I had never

understood just how powerful it is. I didn’t know

whether transparency was just an effect of well-run

organizations. But it helps with so many things. It helps

to shape the conversation that you’re having with the

business, so you can shape it first of all to address

the issues that you’re not performing; you show

your value for money. And then that you’re a good

executive, so you get invited into more conversations.

If you shape the project conversation right, you show

that you’re helping them every step of the way. So

yes, you’re shaping the conversation in your role, but

I didn’t realize how much transparency also improved

the performance of IT in itself. I thought that was a

separate process. Yet when Intel first put up its first

picture about how bad they were, business already

knew it, the IT people didn’t realize how bad they

were, and within three years they were much better.

I’ve seen this even to the extent where a company

went through and started marking up what parts

of the data center were associated with what parts

of the business. Suddenly operations performance

improved. Suddenly people weren’t managing boxes;

they were managing parts of the business. So that

was the biggest surprise, that transparency has such

a big impact not only upwards, but also downwards.

Communicating IT’s Value to the Business 7

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Where before they might not be happy with IT, but they kind of had to live with you, with so much being driven out of marketing now, if they’re not happy with you they’ll just go around you.

WATCH THE WEBINAR REPLAY NOW

Dr. Westerman continued to answer questions from the live audience.

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