Publication: IBM Systems Journal
Publication Date: 01-MAR-06
Delivery: Immediate Online Access
Author: Hirschheim, R. ; Schwarz, A. ; Todd, P.
Article Excerpt
Despite a variety of management tools, valuable management prescriptions, and the desire of information technology (IT) managers and business managers alike to build a better relationship, the current state of the IT-business relationship is far from ideal. Although many believe the difficulty in managing this relationship is rooted in differences in knowledge, culture, motivation, and language, we argue in this paper that the key to managing relationships is in the frame of reference and that a marketing perspective can prove valuable. We outline how concepts from marketing (e.g., price, product, customer, place, and promotion) are useful within an IT context and propose a marketing maturity model for IT executives to assess how to enhance their relationship with their business counterparts.
INTRODUCTION
Providing business value through the delivery of information technology (IT) is the core mission of IT organizations. (1) It is generally understood that to accomplish this mission it is critical to have an effective IT-business relationship, yet achieving this objective is no simple task. Two main reasons have been offered for the hindrance of effective relationships. First, the belief in the value of the IT function (in general) and the chief information officer (CIO) (in particular) appears to be declining, (2-5) and second, which is closely related, the dramatic cycles of restructuring, reengineering, downsizing, out. sourcing, backsourcing, (6) and now offshoring (7,8) of the IT function have led to a view that the IT department is a commodity. (5) Although some of these activities were undertaken to save costs, many--it can be argued--have been the result of a failure to build an effective relationship between IT and the business. Indeed, efforts to transform IT, such as reengineering and outsourcing, have concentrated on process and structure, but have not been as successful at achieving the goal of fostering a sound and effective relationship between IT and the business as has been hoped for.
The importance of achieving better relationships between IT and the business cannot be overstated. Achieving strategic alignment with the business is advocated as a critical step to realizing business value from IT investments. (9,10) Yet, whereas the concept of alignment is a powerful one, achieving alignment has proved to be a significant managerial challenge. (11,12) IT organizations struggle through almost perpetual cycles of restructuring and restrategizing as they attempt to establish the right balance in response to a complex set of contingencies. (13) Today, the key is to be "agile." (14)
Dropping down to the IT project level, we see a similar situation. User participation and involvement in project development is widely acknowledged to be critical to project success. Yet, effectively managing such involvement in a way that leads to successful implementation has proven to be challenging. (15) Similarly, measuring user satisfaction is thought to be a key tool in managing IT operations. However, translating these measurements into more effective systems and organizations has been far from easy. (16,17)
Many believe the difficulty in managing these relationships is rooted in differences in knowledge, culture, motivation, and language that exist between IT and the business. (18,19) To some extent these barriers lead to goal abstraction whereby common words, such as strategic alignment, have different meanings due to a lack of shared understanding.
One way to ameliorate this problem is to provide IT managers with a frame of reference that helps them analyze IT issues from a business perspective, that is, the perspective of their customers. To be sure, IT managers do currently attempt to understand the business perspective, but we believe that it remains an enduring challenge and suggest that the literature has been relatively naive in providing prescriptive advice on how to bridge the gap. We further believe that focusing on IT managers alone is not the solution, for the relationship is two-sided and includes both the leaders of the business units and IT managers. (20) Hence, the frame that we provide is intended for both business and IT managers, to allow for a dialog on how both sides can approach the relationship. The audience of this paper is thus not limited to IT and should include business executives as they seek opportunities to further enhance the relationship between IT and the business units.
We believe that a marketing frame is a powerful and simple way to provide such a perspective. This provides the motivation for our paper--to explore how the relationship between IT and the business can be strengthened through the application of a marketing lens to the management of the IT organization. We suggest that the marketing perspective will help IT management to look at the challenges they face from the perspective of their customers and will help business unit management to look at opportunities to enhance their already existing relationships. By adopting such a customer-centric perspective--where the customer is the focus of attention--the contribution of IT to the business and the realization of IT business value should be enhanced.
The remainder of the paper is organized as follows. After first explaining the need for a marketing perspective, we argue that this new lens can be used by IT managers to guide the development of a customer-centric IT management strategy. We culminate our discussion of the prior approaches to customer-centric IT management with our marketing maturity model, followed by a discussion of each of the elements of this model. To illustrate the strength of this approach, we analyze the past 40 years of IT at Texaco Corporation, demonstrating that the marketing approach can be useful in explaining problems with the perceptions of the IT function. We conclude with some recommendations for practitioners.
THE NEED FOR A MARKETING PERSPECTIVE
How can the IT-business relationship be strengthened? We posit that marketing, and taking a marketing perspective on IT in particular, can help IT managers better understand their customers within the business and can guide the development of a customer-centric IT management strategy. By a marketing perspective, we mean that the IT function views its structures, processes, and relationships as if it were delivering a product and thus adjusts the price, the promotion, and the place to meet the unique needs of the customer. Evidence from the internal marketing literature suggests that success with internal marketing efforts translates into greater success with customers. (21) This is the ultimate goal of any IT investment.
To understand the need for a marketing perspective on IT, we must first highlight the limitations of current management approaches. Within the practitioner literature, three main prescriptive tools exist to guide CIOs to increase success--portfolio management, the balanced scorecard, and structural/ organizational approaches. We argue that these approaches, although useful in their own right, are deficient in guiding how to achieve a successful IT-business relationship.
According to the portfolio management approach, (22-25) IT assesses four areas for each project: the economic value of the project, the strategic value of the project, the project risk, and the project reward. All projects are examined on each of these dimensions, and they are then ranked in order of importance. This examination is based on a dialog between the business and IT executives. The rationale behind the portfolio management approach is to provide a common basis by which IT and the business can discuss and prioritize the work of IT. However, whereas the portfolio management technique does provide a basis for the discussion to take place, the focus is not on how IT can manage the relationship, but rather what to talk about.
The second management approach is the balanced scorecard, which has attracted much academic attention. (26,27) The balanced scorecard directs IT to define the key metrics (typically areas related to finance, customers, internal processes, and learning and growth) that define "success." Each of these dimensions is measured, and IT makes adjustments to the appropriate business processes. In other words, the process of developing the balanced scorecard allows IT and the business to jointly determine what dictates success, which, in turn, should increase the likelihood of the perception of success. While the balanced scorecard allows IT and the business units to jointly determine what success looks like, we believe this is only part of what IT needs to do.
The third management approach is structural/ organizational, which consists of a series of recommendations on how to create a better working relationship. These suggestions range from ensuring the CIO has a place on the board to the creation of account executive positions within the business units. Whereas these structural changes provide the impetus for achieving a successful relationship, once these governance arrangements are in place, little advice is offered about how to leverage the structures to actually achieve a better relationship (apart from "relationship management" skills).
We have summarized these three approaches in Table 1.
With the limitations of the three major management approaches in mind, we contend that a marketing perspective focuses attention on "determining the needs and wants of the target customers and then delivering satisfaction more effectively and efficiently than competitors." This has a number of effects on an IT organization. First, such a perspective can help understand and manage customer expectations, ensuring these expectations are realistic with regard to what IT can truly deliver at a certain cost. (28) Second, it can change the focus of the IT organization from delivering finished products to providing ongoing services. This involves the transfer of the IT function to a service organization with a customer focus. (29) Third, it forces IT to embrace the concept of becoming, through competition with the external market, the preferred supplier of service to the business units. In order for IT to become the preferred provider, it must afford high quality service. (30) Fourth, given the wealth of shared service organizations (e.g., human resources, marketing, etc.), the internal IT function will be one of many options open to the business units; as IT struggles with the proliferation of outsourcing options, IT is constantly being benchmarked by the business units. (31) And fifth, with IT services increasingly facing the "real" customer of the organization, the need for a positive experience on the part of the customer becomes critical. (32,33) In many cases, IT has become responsible for the way in which customers interact with the organization, that is, through Web pages and electronic data interchange. Taken together, these motivations suggest that there is considerable value in thinking about IT from a marketing perspective. To do this effectively it is important to understand that customers have a variety of IT needs and that these needs will drive the IT-business relationship.
To understand how a marketing perspective...
NOTE: All illustrations and photos have been removed from this article.
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