Aligning IT to Strategy

Hi Dan,

We have a lot of discussions with clients around their web presence and the investments (which are often very significant). We seldom speak to IT departments, it is normally marketing departments or in smaller companies, the CEO/ Head of Sales.

What we find is that discussions are always driven by ROI – the starting target is usually increased sales from clearly identifiable leads. After that it starts to get a little more involved – especially when you start to look at the ROI of social networking and other such web initiatives. For blogging for example you start to evaluate the volume of traffic to a blog, the quality of search terms that are being used to generate traffic to blogs and also who are the specific organisations who are looking at your blog and what is their profile through your blog – what are the content areas that are of interest to them.

Are these false metrics? Well, the language we use around these is that they are indications of interest and the impact that your web2.0 strategy has even if you can’t resolve those levels of interest to direct sales. For us, the approach is that it is 50% around the IT and then 50% around the application of the IT – what are the behaviours that flow from that – how do people use the technology and the intelligence generated from these tools.

Especially in the current climate, we are finding that any investment in technology has to be driven by ROI and supporting companies to understand how their investments are moving them closer to achieving ROI even if it doesn’t result in direct sales.

I am curious about your approach to ROI. I am very involved in a group called the Institute for Innovation and Information Productivity (www.iii-p.org) and one of their key positions is that in the knowledge economic, many approaches, like traditional ROI, are found wanting in light of being applied to information age/knowledge economy processes that end up looking like industrial age justifications. In a more tangible way of saying that, in many cases the inputs and the outputs aren't clear, so we revert to time savings as a means of justification, often loosing the higher order outcomes, like growth, employee retention or innovation, because we can clearly create an economic model that accounts for cause and effect.

If I take your blogging example, my question would be is traffic enough? Or should organizations be looking at how the blog posts actually affect sales - do they drive perception change or revenue directly - is activity enough of a proxy for results - for outcomes - or does the connection between the strategic business metrics and the application of technology leave them feeling a bit disconnected from what really matters to the business?

Hi Dan

You mention industrial age justifications.  If the UK is shifting towards a service based economy with a need for high value information workers then I think I can add another slant on blog metrics. 

At GJ we've recently started a new team GJ blog.  We have informal blogging workshops where individuals get used to the tools and writing for the web.  For our organisation I'm not too worried about the traditional web metrics.  I'm actually expecting low visits and comments - at the very least initially. But that said I am a great believer in metrics and making decisions based on them - so why bother?

One of the answers goes back to your comment on the industrial age.  We are clearly not living in it.  Therefore, the actual process of our team members learning new technology tools will probably be useful.  More importantly, spending time writing informal content targeted at our general client base on matters they care about will undoubtadly be a worthwhile exercise.  The value those individuals get from that process and indirectly pass onto our clients can't be measured with traditional web stats.  

I agree Philip. In a networked world value cannot just be computed with traditional tools. Maybe that's why it's hard to place a business value on consumer social networks where not all connections are the same; even though in abstract terms we can connect with millions on Facebook or Twitter for example in reality we connect with people we know first and foremost.

To look at it another way, from an enterprise point of view, I was impressed by the what Eugene Lee, CEO of Socialtext blogged recently on the value of 'attention'. So how do we measure that?:

"I think the concept of attention is a key way to think differently about social networking inside the enterprise.  As I already talked about in a previous blog post Will you be my friend yes or no? the explicit network ties between people who work for the same organization is nowhere near as useful or valuable as the implicit ones - it's not "who knows whom" (and the vanity rolodexes that people put together) but rather "who knows what" and "who knows who knows what" that helps people leverage the company's social network to personal and group productivity.  This implict network is primarily based on who works with whom - independent (but not exclusive) of official org charts."

@Dan - the notion of aligning IT to strategy is a non-sequitor. How often do we see strategy change and then IT no longer fits?

@Casper - ROI? I'm almost convulsed with laughter on that one. ROI calcs can always be made to fit.The question is - who goes back and remeasures them for impact? Who looks seriously at TCO?

Traffic on blogs has nothing to do with value unless you're in the mass media, scattergun model. It's all about WHO is looking at your stuff and what they're doing with the information they find. I know for example that my blogs represent one data point in decisino making processes. In some cases, (rare) they are THE decision making data point.

What I think people should be doing is dividing up projects into 'commodity' (like a general ledger), value add and nice to have. That way you can get them put into the right investment buckets and develop the correct metrics for each.

@Stuart: where you say: "in reality we connect with people we know first and foremost." - do we? Depends on your motivation. I have 1830+ people following me on Twitter. I guarantee I don't know at least 1600 of them. BUT - they help me discover things I didn't know. In the connected world, that's important.

@Dennis Maybe it would have been clearer if I'd had said we connect with people we trust first and foremost.

Very insightful commentary and I appreciate the views into what companies are actually doing.  When I work with organizations I look at strategic connection first. Does that activity accrue to the goal of the organization. Now, that goal may not be revenue. It may have goals that include employee retention or perception shift. Those are great places where knowledge economy tools can play a role.

The question that still nags at me is how we create a connection between the activity and the value. The 1830+ twitter followers is a great number. But if you look at time investment to payback, is that the right place to spend that time - would it be better to read a particular set of blogs or a single blog where the analyst culled out the important issues. How do we determine the investments that best meet the goals of the strategy. Or, in the knowledge economy, is the real metric the network, and its breadth and depth without worrying about the results - but knowing that a network will bring results, and even that it will bring results when needed - and that it may drive innovation spontaneously.  Therefore the entire equation changes from understanding the output to measuring the capability of the network.

@Dennis:

I don't think strategy is a non-sequitur if it is done right. Strategy defines the unique competitive differentiator in the market. Strategy is an often abused term, but if done right, that what it reflects.  There are then a number of strategies that help an organization achieve its top order strategy. It is at that layer, when the over arching goal is in sight, that IT needs to link it. 

If you look at an online retailer tracking perception information about themselves through twitter. Let's say their strategy is "to be the number one retailer of X on the Internet for X market" - trading off profitability for size in this case - as Porter would have us do with a good strategy.

To me, the IT investments should not be independent of that goal. If the IT is not leading them toward being the number on retailer on the Net for their product with their selected customer base, then it shouldn't be done. Many arguments will be made about being innovative, doing different things, experimenting. That is all well and good, but history shows that companies with a clear focus on strategy and the execution of that strategy win. IT is part of the execution of strategy. People just blogging about something with low traffic is probably not something I would recommend to this company. They need to blog with traffic to drive brand awareness - and brand awareness is about mass touch, which in the blogsphere doesn't happen from low traffic sites - it does happen from high traffic sites. So that doesn't mean blogging is not a good choice, but that the blogging needs to be strategic.

And to that end, if the strategy changes, the alignment of the infrastructure should change to. A company that decides to make something new on a production line at minimum changes the code and the configuration, event the equipment. IT should not be seen differently. Yes, that is an industrial age metaphor, but an apt one when talking about alignment. We have to think meta here. Blogging is just a tool and it may survive a strategy change, but what you blog about, and the goals for the investment should change when strategy changes.