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Part two: Transforming IT from shadow boxer to strategic business partner

Strategy, value creation and mindset. By Teri Cooper

· IT transformation,Business Strategy,Executive briefing

This article is Part Two in a three-part special from our Transforming IT Executive Briefing, held at Microsoft’s HQ in Melbourne in October 2016. The event featured keynotes from TACT Non-Executive Director and now Aurecon CIO Carl Duckinson, strategic planning specialist Mark Schroffel and Managing Director of The Digital Project, Nikki Scott. If you missed part one, read it here.

Mark Schroffel knows a fair bit about strategic IT thinking. Not only does he run a business that helps business leaders sharpen their strategic mindset and create value through innovation, but having worked with Australian powerhouses like BHP, Newcrest and NAB, he has some serious runs on the board.

Mark Schroffel and Nikki Scott at the Transforming IT Executive Briefing at Microsoft's HQ in Melbourne

Mark Schroffel believes IT leaders need to understand at a strategic, whole-of-business level what their organisation wants to achieve (and the challenges it faces), before they can truly develop strategies to deliver them.

With the emergence of new roles such as Chief Innovation Officer and Head of Digital, business is seeing a branching out of the traditional IT structure into new, often quite separate, areas like ‘Digital’ and ‘Innovation’. This is not necessarily a bad thing, but according to Mark, maintaining continuity and avoiding siloing does require a change in mindset.

“Having been involved in large digital initiatives in the banking sector, I’ve seen the gap between the digital department and the IT department growing … they don’t seem to be able to connect which is where projects can strike trouble.”

As we’ve seen with many organisations, especially since the GFC, when significant or sudden changes occur it can be extremely destabilising. If IT is not able to adapt quickly enough to those changes – say, because outdated infrastructure is constraining productivity, but poor cashflow leaves the business unable to afford to upgrade it – the knock on effect can be substantial.

“We need to understand that today’s business environment is volatile and complex – there’s a lot of ambiguity. How can you write a 2-year or 5-year plan these days without expecting to adapt it along the way?” – Mark Schroffel​

The desire for efficiency and the speed of technological changes have added to the push towards agile methodologies. The days of big budget projects and multi-year delivery timetables for IT projects are largely over. Money is tight and technical redundancy has a far shorter lifespan than ever before.

This point was not lost on Sean Atchinson, CIO at SGT Group, who says his firm has outsourced many of its SAP activities and are accelerating the way projects are delivered. “There’s a mindset (for) doing waterfalls and 18-month projects, when actually we want to deliver in six weeks. That’s something we need to change,” he said.

A cautionary tale from Yarra Valley Water

Yarra Valley Water CIO Leigh Berrell, says they have changed the way IT communicates with the business by “giving people around the organisation insights into how their operation is running, as opposed to how to run their operation”.

When Yarra Valley Water ditched Waterfall several years ago because “it takes too long and costs too much,” it was the start of a journey that is now reaping significant benefits for the organisation. They moved to Agile which was an improvement but “made it difficult to get cross-pollination across the organisation,” so in the last six months they have moved to Scaled Agile.

“Now every quarter we run a two-day planning workshop with 50 IT people and 50 business people in the room,” said Leigh. “Interestingly, the business people resisted at first, saying ‘why do we want to spend two days planning IT stuff?’. They realised they were actually spending two days planning business stuff so now they are the ones pushing for the next planning day because it’s a process they previously didn’t do.“

Leigh Berrell, CIO at Yarra Valley Water, says establishing a relationship between the IT investment and the cost of maintaining that investment has delivered significant benefits to the organisation.

Building value into your IT investments

CIOs know that monetising the value of ‘business as usual IT’ can be tough. If not managed well, this can be one area that causes IT to behave like a cost centre.

Yarra Valley Water’s solution was to negotiate an agreement with the CFO and the CEO that any IT capital spent on strategic work in the business has a technical debt attached to it to cover the ongoing cost of maintenance.

By establishing that there is a relationship between an investment and the cost to maintain that investment, “we don’t have conversations about what’s the value of this IT project any more, it’s just part of a bucket that we’ve agreed is the cost of maintaining an IT investment fund,” said CIO Leigh Berrell.

“We work on a ratio of 7:3, so every seven dollars invested in business IT functions automatically creates three dollars of ‘IT money’ to spend on backend stuff to keep the lights on."

"Monetising the value of IT is an interesting approach if you can get your CFO across the line, it gets rid of lots of useless conversations that rarely have a happy outcome for anyone.” – Leigh Berrell, Yarra Valley Water​

5 essentials for your strategy toolbox

  1.  Have a strategic mindset around adding value to the business – not just IT
  2.  Develop a sophisticated understanding of your entire business – again, not just IT
  3.  Ensure your people have a line of sight so they know what their role is within the organisation
  4.  Don’t drop the ball on the hygiene stuff
  5.  Lean startups, strategic canvasses, value models and Microsoft BI – all these tools are there to  help us, so make sure you use them

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About the author

Teri Cooper is a writer, marketer and digital communications specialist who writes about technology, business strategy and leadership. She founded digital consultancy Scoot Communications in 2014. When she's not hunched over a keyboard, she can often be found roaming around Melbourne indulging in her two current passions, Instagram and coffee.

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