Larger corporations with multiple operating companies, business units, or brands must confront a debate about the merits of centralized vs. federated organizational structures. The rationale for the former is often the desire to set common standards, create efficiencies, and leverage economies of scale by purchasing software and vendor services globally rather than locally, where possible. The rationale for the latter is often to have IT closest to where the business is done, to increase flexibility, and to efficiently deliver capabilities based on the unique needs of each individual entity.
There are a number of businesses that are taking a hybrid approach that befits major technological transformations that are afoot in the market. In so doing, they are recognizing the role that IT can play in fostering partnerships across the traditional business silos, and in creating efficiencies and fostering innovation.
Microsoft used to operate in the analog world, where its software products were manufactured on discs and sold in boxes. IT reflected the businesses it served, supporting manufacturing applications that were quite different from engineering applications. Over the past few years, given the availability of increased bandwidth and consumers’ comfort with digital products distributed over the web, customers now prefer downloading software to their device or accessing it over the web, as a service. Microsoft CIO Tony Scott, recognized this change and realized that his IT organization needed to adapt, speeding up the company’s processes and focusing on customer satisfaction.
Scott realized that his key leverage was with the IT organizational structure. The IT operating model, which is the engine through which IT delivers capabilities, aligned with the organizational structure of the business. Members of his team aligned with Microsoft’s many businesses. As Microsoft developed a digital business, however, he has needed to be more flexible. As Scott explained in a conversation with me, “digital process and business does not respect organization charts. I concluded that IT architecture and therefore governance could no longer be a one-to-one relationship with our company org chart.”
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Scott’s team reorganized around business processes, taking a customer-led, outside-in perspective. For Microsoft’s IT organization, this meant organizing into three groups: IT business functions; shared services; and business process units. The latter is a group of teams that aligned to six business processes, such as marketing, sales, product licensing, and support services. Scott’s team began this realignment a little more than a year ago, and the effort has produced early results. As part of the licensing process, they’ve managed to reduce application build time by 25%, reduce product launch time by 60%, and increase channel partner satisfaction by 83 points. In the employee hiring process, resumes now get routed to the right recruiter in less than two minutes compared to more than 30 minutes, and jobs are posted to the website in one second compared to more than 30 minutes.
Now, instead of gauging success based on on-time and on-budget projects, which is legacy thinking in his estimation, IT is judged based on speed to market and customer satisfaction, with the customers being internal and external.
Rebecca Jacoby, the chief information officer and senior vice president of the IT and Cloud and Systems Management Technology Group at Cisco, is leading a comparable transformation. Like Microsoft, Cisco is an extraordinarily diverse business, and IT had been aligned with the business structure. The company articulated a new vision, based on doing more across business units. Jacoby recognized the opportunity for IT to play a lead role in identifying common business processes that would form areas of potential collaboration. Services were identified to drive greater transparency and alignment. Jacoby told me that she created the Operational Excellence and Service Enablement team, “which sought to change the level of conversation with the business from technology deployments to IT capabilities and value creation, and to create a transparent partnership between IT and the business to bring about more effective management of the strategic goals of the organization.” There were four steps that IT followed:
- Defining an operational model
- Creating a service taxonomy
- Understanding the cost of services
- Determining roles and responsibilities
The results have been profound. Jacoby has been able to:
- Improve the quality and timeliness of what IT delivers
- Increase efficiency and quality by thorough process improvements
- Lead conversations with the businesses about value-based discussions concerning the services IT provides
- Develop a service oriented, consultative culture rather than that of an “order taker”
In neither of these examples did the IT department do away with its responsibilities in managing infrastructure, maintaining a help desk, and performing other traditional tasks that IT departments must undertake, but these changes are significant and demonstrate the role that IT can play in facilitating more cross-company value creation.