The IT Strategy Conversation Your Leadership Team Is Not Having

Chief Executive Officers and executive teams spend considerable time discussing operating budgets, discussing cost reductions, discussing how to manage outages when they happen, and discussing reactive responses to technology problems. These are important conversations but they miss something more important. Most executive teams are not having a conversation about how technology should be creating competitive advantage for the organization. They are not discussing how the organization’s technology investments should be making the organization different from competitors in ways that matter to customers and markets. They are not discussing whether the organization’s technology choices are enabling or constraining the organization’s strategy. They are not discussing the relationship between technology leadership and business leadership. This is a critical gap.

Organizations that are led well and that are competitive understand that technology is not a cost center that should be minimized. Technology is a strategic capability that should be deliberately developed and deployed to support business strategy. A financial services organization that has superior technology for analyzing credit risk, that can process loan applications faster and more accurately than competitors, has a competitive advantage. A retail organization that has superior technology for understanding customer behavior and personalizing customer experience has a competitive advantage. A manufacturing organization that has superior technology for optimizing production and managing supply chain has a competitive advantage. These competitive advantages come from deliberately chosen technology investments connected to business strategy.

This article describes the conversation that executive teams should be having about technology strategy. It describes how to structure the conversation. It describes what questions should be answered. It describes how to connect technology investments to business outcomes. It describes how to make technology a strategic asset rather than just an operational cost. Most importantly, it describes how to move from conversations about managing technology to conversations about deploying technology to compete.

The Problem: Technology as Cost Center Instead of Competitive Weapon

In most organizations, the conversation about technology is dominated by operational and financial perspectives. The Chief Financial Officer asks what the technology budget is and whether it is growing. If it is growing, the CFO wants to know why. If the technology organization is asking for additional budget for new initiatives, the CFO wants to know the return on investment or wants to know what business outcome justifies the spending. These are reasonable questions. But they default the conversation to a perspective where technology is a cost that should be minimized rather than an investment that should be made strategically.

This cost-focused conversation creates perverse incentives. The technology organization focuses on maintaining current systems as efficiently as possible. The technology organization focuses on responding to crises and problems rather than on creating capabilities that did not previously exist. The technology organization optimizes for near-term cost control rather than for long-term capability development. The technology organization does not have license to think strategically or to propose major new capabilities because those proposals do not fit in a conversation about cost control.

A more strategic conversation would acknowledge that technology is indeed a cost but is also a potential source of competitive advantage. Some technology investments should be evaluated on a cost-control basis. Buying a database server to replace an old server is a cost decision. The question is what is the most efficient way to do this. But other technology investments should be evaluated on a capability and competitive advantage basis. Investing in artificial intelligence to improve customer service, or investing in advanced analytics to improve business decisions, or investing in mobile-first architecture to improve customer experience are strategic investments. These investments should be evaluated not on cost but on business impact.

The challenge is that executive teams often do not distinguish between these two types of investments. They apply cost-control logic to strategic investments or they apply strategic investment logic to cost decisions. The right approach is to distinguish between the two types of decisions and to use the appropriate framework for each. Cost decisions should be managed for efficiency. Strategic investments should be managed for impact.

An executive team that views all technology spending as cost to be controlled will not invest adequately in strategic technology capabilities. An executive team that understands the difference between operational costs and strategic investments will be able to make better decisions about technology spending.

The Conversation Framework: What Should Be Discussed

An effective technology strategy conversation includes four major components. The first component is understanding the organization’s competitive position and strategy. What is the organization trying to achieve? Who are the competitors? What competitive advantages does the organization currently have? What are the organization’s vulnerabilities relative to competitors? What are the major trends in the market and what implications do those trends have for the organization’s strategy? This component is usually led by the Chief Executive Officer and business unit leaders. The technology leadership should understand the business strategy clearly before proposing technology investments.

The second component is assessing the organization’s current technology capability relative to what is needed to execute business strategy. Where does the organization have technology advantages? Where is the technology capability weak? Are there technology gaps that are constraining business strategy? Are there areas where the organization is investing too much in technology that is not creating competitive value? Are there areas where technology competitors are ahead and what is the gap? This assessment requires honest evaluation from the Chief Information Officer about where the organization’s technology is strong and where it is weak. An honest assessment is more valuable than a rosy assessment.

The third component is defining what technology capabilities the organization needs to build or develop to execute business strategy. What new technology capabilities would create competitive advantage? What would those capabilities enable that is not currently possible? What would it cost to build those capabilities? How long would it take? What risks are there? Who would need to be involved? This component is led by the Chief Information Officer with input from business unit leaders about what capabilities would matter most.

The fourth component is deciding what to do. What technology investments will the organization make? What will the organization not do? How will resources be allocated across maintaining current systems, improving current systems, and building new capabilities? What is the timeline for capability development? What are the success metrics? What will be the competitive advantage if we execute on these investments? What are the risks if we do not execute? This component is a decision-making conversation where the executive team decides on the organization’s technology investment priorities.

Connecting Technology Investments to Business Outcomes

The most important aspect of an effective technology strategy conversation is connecting technology investments to business outcomes. Too many technology investments lack clear connection to business value. An organization might invest millions of dollars in modernizing infrastructure, in updating platforms, in implementing new tools, and not have clear metrics for whether those investments created business value. The investments might improve operational efficiency or might improve employee experience but the business impact is unclear.

A better approach is to define business outcomes first and then identify what technology investments would achieve those outcomes. For example, if the business outcome is to improve customer satisfaction, what technology investments would improve customer satisfaction? Those might include better customer service tools, better access to customer information, mobile applications, improved website experience, better data analytics about customer satisfaction. All of these technology investments connect to the business outcome of improved customer satisfaction.

Once the investments are defined that connect to the business outcome, the organization should define metrics for measuring whether the investments actually achieved the business outcome. If the business outcome is improved customer satisfaction and the investment is in better customer service tools, how will the organization measure customer satisfaction? The metric might be customer satisfaction scores, might be reduced customer complaints, might be improved net promoter score. With clear metrics, the organization can determine whether the investment created value.

This approach also helps with prioritization. If the executive team has defined multiple business outcomes they want to achieve (improved customer satisfaction, improved operational efficiency, improved decision-making, better employee experience) and has defined technology investments needed to achieve each outcome, then the executive team can prioritize which outcomes matter most and can allocate resources accordingly. This is much better than having a generic list of technology projects and not understanding which projects matter most for business strategy.

The Conversation: Who Should Be Involved

An effective technology strategy conversation requires the right people in the room. The Chief Executive Officer should be involved because the conversation is about connecting technology investments to business strategy and that is the CEO’s responsibility. The Chief Financial Officer should be involved because the conversation is about how to allocate resources and that is the CFO’s responsibility. The Chief Information Officer should be involved because the conversation is about technology and that is the CIO’s responsibility. Business unit leaders should be involved because they understand what business outcomes are critical and they understand what technology capabilities would help them execute business strategy.

The conversation should not include people who are going to say no to everything or who are going to minimize the importance of strategic technology investments. Financial leaders who view all technology spending as cost to be controlled are often obstacles to strategic conversations. Business leaders who do not understand technology and do not want to learn are obstacles to strategic conversations. The conversation works best when all participants come with the perspective that technology is important and that it is worth thinking carefully about.

The conversation might happen in different forums. It might happen in an annual strategic planning process where the executive team discusses business strategy and also discusses technology strategy. It might happen in a quarterly business review where the executive team discusses progress against strategy and also discusses progress against technology investments. It might happen in a specific technology strategy meeting separate from broader business strategy meetings. The forum does not matter as much as the fact that the conversation is happening regularly and that the right people are involved.

The conversation should have a clear outcome. The outcome should be documented technology strategy that describes what technology capabilities the organization is trying to build, why those capabilities matter for business strategy, what investments will be made, and how the organization will measure whether the investments are creating value. This strategy should be communicated widely throughout the technology organization so that everyone understands how their work contributes to business strategy.

Common Mistakes in Technology Strategy Conversations

One common mistake is assuming that because the executive team discussed technology strategy once that strategy is now clear and understood. Strategy is not clear unless it has been discussed repeatedly, unless it has been asked for input from multiple perspectives, unless it has been challenged and refined, and unless it has been communicated widely. A good technology strategy is one that the executive team has discussed multiple times, that has evolved as more information has emerged, and that the entire organization understands.

A second common mistake is making technology strategy so complex or so detailed that it becomes inaccessible to most of the organization. Technology strategy should be stated simply and clearly. It should be possible to communicate the technology strategy in one or two pages. The strategy should describe what capabilities the organization is trying to build and why those capabilities matter. The strategy should not describe every technical detail or every implementation decision. Those details should be left to the technology organization to decide.

A third common mistake is having a technology strategy that does not connect to business outcomes. A technology strategy that says the organization is going to migrate to cloud or is going to implement artificial intelligence is strategy at the tactical level. A real strategy connects those tactical decisions to business outcomes. The organization is going to migrate to cloud because cloud infrastructure will reduce operational costs by twenty percent and will free up internal people to focus on more strategic work. The organization is going to implement artificial intelligence because artificial intelligence will improve customer service response time or will improve the quality of business decisions.

A fourth common mistake is spending a lot of time on strategy but not spending the time necessary to execute the strategy. Strategy is just the beginning. Execution requires that the organization allocates resources, that the technology organization focuses on delivering against the strategy, that the executive team maintains discipline about priorities, and that the organization measures progress against the strategy. Many organizations spend months developing technology strategy and then spend minimal effort on execution. The result is that the strategy does not change behavior or produce outcomes.

A fifth common mistake is not revisiting strategy as conditions change. The market changes. Technology changes. Competitors change. The organization’s strategy should evolve to reflect these changes. A technology strategy that was relevant three years ago might no longer be relevant today. The executive team should review technology strategy at least annually and should be willing to make significant changes if conditions have changed significantly.

Strategic Alignment: Every major technology investment should be directly traceable to a business outcome or to a competitive advantage the organization is trying to achieve. If an investment cannot be connected to business strategy, question whether it should be funded.

Clear Metrics: Define clear metrics for measuring whether technology investments create business value. The metrics should be business metrics, not technology metrics. Measure customer satisfaction, not system uptime. Measure revenue impact, not infrastructure utilization.

Regular Communication: Technology strategy should be communicated regularly to the entire technology organization and to key business leaders. Everyone should understand how their work contributes to strategy. Repeat the communication frequently because people do not retain information they hear once.

The conversation about technology strategy that most executive teams are not having is a conversation about competitive advantage through technology. It is a conversation about how the organization will use technology to compete differently and better. It is a conversation about connecting technology investments to business outcomes. It is a conversation about allocating resources across maintaining current operations and building new competitive capabilities. Most executive teams are having conversations about managing technology costs and managing crises. These conversations are important but they are not enough. The executive teams that are going to win are those that have strategic conversations about technology in addition to operational conversations about technology.

Valukoda helps growing businesses make smarter technology decisions. Whether you need strategic IT leadership, managed services, or a security program built from the ground up, we bring decades of CIO and CISO experience to your team. Schedule a conversation or call us at 888.380.7212.