A Holistic View

By Tom Barker and Michael E. Raynor*

CIOs are in a unique position to advance their companies’ continuous-improvement efforts, if they can only stop defending their own turf.

Continuous improvement involves learning about business processes and acting on that newfound knowledge to increase the value provided to customers: in short, becoming a customer-driven business. The CIO is arguable one of the most underutilized resources in any company’s attempts to implement continuous-improvement methodologies. Because information cuts across all departmental lines, and because IS is privy to how work gets done everywhere within an organization, the CIO can help overcome the bane of any continuous-improvement attempt: departmentalism.

Unfortunately, the power structure inherent in departmentalized organizations frequently hinders CIOs from exercising this leadership. IS executives, like other department heads, must pay almost as much—sometimes more—attention to preserving their own power base than to addressing corporatewide business issues. This situation is exacerbated by a budgeting process that generally allocates resources based on department size.

Thus, CIOs often find themselves concentrating on building up large, centralized organizations rather than exploiting the global view that facilitates continuous improvement.

In addition to these structural constraints, cultural issues can impede the CIO’s ability to lead continuous improvement efforts. Chief among these is the shift to customer-focused IS organizations where the word “customer” refers to other departments rather than to the ultimate consumer. In order to better serve these internal “customers,” IS is often encouraged to systematically marginalize the true—that is external—customer. Ironically, this belief that IS doesn’t need to consider the requirements and desires of the ultimate consumer has robbed it of the ability to integrate the efforts of other departments whose mission is to serve that consumer.

Peter Newson, associate professor of management at the Western Business School in London, Ontario, describes the problem this way: “What we’ve seen is an explosion in the demands on MIS without any meaningful framework to prioritize requests or resolve conflicts. The business role of the CIO has largely been overlooked in favor of a technology focus. The result has been a proliferation of shopping lists dumped in the lap of IT people, with the overall business issues relegated to the back seat.”

The framework of which Newson speaks is provided in some companies by effective leadership from the CEO. Under ideal circumstances, the top executive will articulate a clear vision and a planning process that requires managers to subordinate departmental objectives to the greater good. But where such CEO leadership is lacking, the onus falls upon the CIO to see that IS lives up to the full potential inherent in its position and capabilities. Toward that end, CIOs must concentrate their efforts in two areas: what IS staff can do differently within their own domain, and how they can work differently with other parts of the organization.

Perhaps the most important thing CIOs can do within IS is to reorient their organizations to “think through” to the external customer. An internal-customer focus encourages IS to view each department separately rather than to consider how all work together to service the ultimate consumer. IS can be of greater service to its internal customers by focusing on the value that each department contributes to that ultimate consumer.

To accomplish this, IS should concentrate on genuine business issues instead of on internally generated information needs. The idea is to work with other departments rather than either dictating to or blindly serving them. At the same time, the CIO can ensure that a service orientation remains firmly entrenched, thus preventing any further backlash against IS.

A more aggressive approach involved seeking to change the departmental focus of the budgeting process itself. It is this focus, more than any other single factor, that forces the CIO to act like the head of a discrete organization rather than take a companywide view of information. Resource allocation could be restructured so that funding goes to value-adding IT efforts rather than to a centralized IS organization. Naturally, certain skills would remain essential: designing and maintaining databases and ensuring hardware and software compatibility, for example. But a whole department is not necessary to carry out these tasks.

Instead, the CIO would coordinate the efforts of people with IT expertise within the various departments. Issues such as software compatibility and platform and code selection would remain within his or her purview, but such technical issues would be subordinated to concerns about how best to apply information to meet ever-changing customer needs. Such a role would formalize the CIO’s position as a corporate professional with a businesswide view and a focus on the external customer.

But pursuing changes within the IS organization is not enough. Because information is generated, used and shared among all parts of the organization, CIOs must also consider the ways in which IS professionals deal with other departments. The failure of most companies to exploit their information assets was made clear in a recent study by Tim Schlange of St. Gallen University in Switzerland.

Schlange analyzed the quality of information systems in six American companies, all considered leaders in implementing continuous-improvement systems. According to his report, the information systems in place at these companies did an excellent job collecting data at the “field” level and transmitting it up the organizational hierarchy. But missing in every case was a formalized system for transmitting information back to field personnel from the executive suite. The loop wasn’t closed: Information essential to a continuous-improvement initiative was gathered and transmitted, but in no case was it acted upon.

The mere fact that information, gathered at great expense, is not used deserves real attention. These six companies were chosen for the study because they are considered among the best and most innovative in the country. Given that fact, it is not unreasonable to assume that many other organizations have not closed the information loop either.

Schlange also noted that in all six companies, no significant differences existed among the type of information transmitted to various levels of management. Line managers, department heads and CEOs all received the same information concerning quality and continuous improvement. The only difference Schlange observed was in the level of detail involved: Line managers got raw data while executives got summaries.

This defies logic. In every other aspect of information gathering, it is correctly assumed that different management levels require different management information. After all, CEOs don’t waste their time dealing with invoices for office supplies. Yet in the field of quality and continuous improvement, apparently there has been no successful effort to differentiate the information needs of various management levels.

What this means is that information technology is being used as a broadcasting tool rather than as a meaningful decision-support system. The information that executives receive is determined by data-collection capability not business need. It is often not the kind of information they really require. It’s no wonder the loop remains open.

To address this issue, the CIO must take the lead in assisting managers to determine what kinds of information they actually act upon, or would act upon if they had access to it. It is not enough to determine how to collect, process and store information. With their holistic view of the organization, CIOs can teach departments what information they can use to improve their abilities to serve the ultimate customer.

Only by approaching their tasks with an external-customer perspective while maintaining their sensitivity to the needs of the internal stakeholder can CIOs build a learning customer-driven business.

This article first appeared in CIO Magazine Vol. 7 Page 22-24.

*Michael Raynor is a Director in Deloitte, the global professional services firm. He can be reached at www.michaelraynor.com

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