Here is an excerpt from an article written by Klemens Hjartar, Krish Krishnakanthan, Pablo Prieto-Munoz, Gayatri Shenai, and Steve Van Kuiken for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out others, learn more about the firm, and sign up for email alerts, please click here.
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The modern IT function: Concepts to know, questions to ask
Based on our extensive work with CEOs and top executives at large companies, three concepts define today’s most effective IT functions: a new role that calls for collaboration with the business on strategy and operations; an updated resource model offering the talent, methods, and tools to accelerate innovation; and a future-proof technology foundation of flexible, scalable systems that speed releases of IT products. To help CEOs assess where their companies stand with respect to these three concepts, we’ve included ten key questions that CEOs can ask (exhibit).
A new role for IT: Collaboration with the business on shaping strategy and streamlining operations
Many IT functions have trouble matching their priorities with those of the business. The problem often starts at the top: CIOs aren’t included in strategic discussions, where they can shape other executives’ thinking on how the business can best use technology. CEOs are ideally positioned to correct this. At the successful companies we know, CEOs have defined a strategic role for the technology function according to the following principles:
Alignment between IT and the business. We’re seeing companies make organizational changes specifically to promote seamless collaboration between the tech function and other units and functions. CEOs are adding CIOs to their leadership teams and asking CIOs to report directly to them. 1 Some companies form unified business and technology teams that each support one technology product (for customers or employees) or one IT platform (a component, such as a customer-relationship-management [CRM] system, that supports multiple functions). CEOs can test for these patterns by asking, “How are we making key technology decisions at all levels of the company?” They’ll want to hear that business users and tech experts are working side by side.
Targeted technology investments. Top economic performers are more likely than other companies to develop new digital businesses in addition to digitizing their core business. Both activities require investments in technology. However, the typical company’s wish list of technology investments exceeds its technology budget. CEOs must therefore commit their organizations to prioritizing high-value investments. To reinforce this discipline, the CEO should start by asking: “How do we track and maximize the value produced by our major technology investments?” An effective approach will involve not only measuring the payback from technology investments, but also reallocating capital frequently to promising opportunities—another practice associated with strong economic performance.
Advocacy for end users. Modern IT functions follow design-thinking practices, by which they develop an in-depth understanding of users’ needs as the basis for new products and features.Such practices should interest the CEO: McKinsey research shows that they’re correlated with strong financial performance. CEOs can probe for them by asking, “How often do our tech teams seek input from users?” If the answer isn’t “at every step,” the tech function probably hasn’t adopted design thinking.
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Here is a direct link to the complete article.
Klemens Hjartar is a senior partner in McKinsey’s Copenhagen office; Krish Krishnakanthan is a senior partner in the Stamford office; Pablo Prieto-Muñoz is a consultant in the New York office, where Gayatri Shenai is a partner; and Steve Van Kuiken is a senior partner in the New Jersey office.