We spoke to Haim Mendelson, professor of Electronic Business and Commerce, and Management at Stanford University and codirector of the Center for Electronic Business and Commerce, for his views on alignment.
CIO Insight: What difference do relationships make in alignment?
Mendelson: Very often, personal relationships can make a big difference. As a matter of fact, all throughout business, good things happen as a result of an idea developed by two friends. But I think the right approach is to organize things in such a way that relationships don’t matter that much. I think it’s a mistake to say we’re going to let personal relationships take care of the problem. You have to structure the organization so that these partnerships will not be the exception, but the rule.
Can you explain that idea some more?
Alignment is so crucial that, in many situations, business cannot realize value without having the right infrastructure in place, and IT cannot deliver value without being aligned with the business. At the same time, you cannot have a successful alignment without an IT-business partnership. But, you know, there is a variance in the tightness of personal relationships that depends on many factors. So, you can’t leave it to the ups and downs of personal relationships. It has to be structural.
What do you recommend?
Your structure needs to enable you to align with every part of the business—marketing, finance, everything. One approach is to see that different IT units have representatives working with different parts of the company. The IT organization then has a shadow structure that reflects the structure of the rest of the business and supports different business units. That way, alliances are part of the system rather than the product
of a special project. And the incentive structure has to be set up so that IT and business units always need each other. For example, in some companies, IT will treat different business units as their customers.
Should this be companywide?
You want to make sure relationships are developed at all levels. You also need a knowledge transfer, so that the person in IT gains domain knowledge of the business issues and can think of IT in the context of the business, and vice versa for the businesspeople. Once they gain a better understanding of IT capabilities, they know what is possible and impossible, and think more realistically.
Why is there still such an alignment gap in companies?
The simple reason is that IT was viewed as an implementation arm, and was basically operational. Now, IT is becoming more strategic, but organizational systems haven’t caught up yet. You tend to see alignment in companies that generally manage IT well. At the Charles Schwab Corp., for example, the CIO is a member of the senior management group, and each business enterprise has its IT counterpart. At Cisco Systems, Inc., IT divides into units that serve different parts of the organization.
Have you seen improvement?
I clearly see a shift over time to the type of structure I’ve described. Part of it is a matter of education. Part of it is that more and more CIOs have a different understanding of what their jobs should entail. It’s become the expectation, so I’m very optimistic.
