Understanding Business Strategy Enables An Aligned IT Strategy

football diagram of a play using "x's" and "O's"The key to a strong IT strategy is a solid understanding of your business strategy even when your business is government or a non-profit. Having a solid grasp on your the business models  in place and the business strategy is also essential to being a more influential and strategic CIO and in turn developing an IT strategy that is truly aligned.

This goes much deeper than simply knowing what business you are in, the products you offer, and your market share. It involves intimate understanding of your business models, revenue model, markets, niche’s, and the forces affecting your business from every angle.

That is why I chose Michael Porter’s Harvard Business School YouTube interview where he explains The Five Competitive Forces That Shape Strategy for this weeks Things to Consider.

This is a great insight for every CIO into the forces that shape strategy in every business. The clip includes several mini examples which are glimpses into case studies of how business strategy should respond to these market forces.

Once you have watched the clip a couple of times you should take a minute and outline the narrative of the five competitive forces for your organization. Next connect them to your current business strategy and look for any gaps or weaknesses. Sort of like doing your own SWOT analysis.

Now consider how the IT department could respond with an IT strategy based on your SWOT analysis. When you look at it this way you likely won’t have specific technologies in your list but instead will have ideas to help the business overcome some challenge or remove some friction. This is your list of how you see yourself helping them out, not what technology you will use.

It is also critical for CIO’s to understand at a very fundamental level the business models and revenue models used by your organization. This is another way in which CIO’s connect their IT strategy to the business strategy and increase their influence. Even in the non-profit and government sectors, every CIO , and especially those who want to be more of a strategic business leader, must understand the details behind revenues and profits (budget surplus).

No longer can you settle for simply knowing you sell thermostats at 3 times cost or that your college gets revenue from state aid, tuition and grants. You need to know the breakdowns and formulas behind state aide or how costs are developed and loaded. You also need to know how the IT component is allocated or charged out.

It is in these details that you will truly understand how to contribute an IT strategy that address the real issues in your business strategy and tackling the five forces instead of simply parsing the vision statement.

In each of these two areas: understanding the competitive forces that shape strategy and understanding the business models, the real key for CIO’s is in developing an ability to monitor the subtle changes and adjust your IT strategy. I like to think about this like setting up an antennae array or network of sensing devices to detect changes in market forces proactively and in tune with your peers so you can respond with a higher degree of engagement.

By being able to see the slow and subtle changes in the market forces you will also be ready to assist in shaping the changes in your business strategy. That is why I included The Long Tail as my Currently Reading choice. I have just started reading it but it is another great source of thinking about some of the new business models emerging today.

Overall the point of this post and the two resources is to help CIO’s widen out the funnel they use to take in the world and not restrict it to the IT media sources. In fact if you could take the next 30 days and restrict yourself to a business only diet you may be very surprised by what comes of it.

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