Step 1 to becoming a business-savvy CIO

Business alignment is often heralded as a key tenet of successful IT strategies. Popular ways of ensuring IT efforts align with business goals range from co-developing strategic plans with executives on the business side of the company to actively collaborating with business users on projects aimed to derive more value from their efforts.

All are sound approaches, but CIOs should dig deeper by pursuing full awareness of what their companies do and what it takes for their companies to succeed.

Business awareness is a vital aspect of IT leadership today. It requires knowing how the organization operates, its market context, and what must be achieved by the organization as a whole to ensure its success. On the ground, business awareness can take a variety of forms, but when I’ve seen it best in action, it was an IT manager or employee stepping up to say, “We’re losing market share in the Northwest region and this is how we’re going to fix it,” or “Our OPEX is up because of operational inefficiencies and here is how we’re going to solve them.”

Ideas like these immediately align with the business, and they do even more. They spark enthusiasm and endorsement from the board, CEO, and C-suite because they tackle problems that these executive leaders have found to be elusive in the past. And it shines a great light on the value the IT organization has for the business as a whole.

Here’s how to develop this important IT muscle.

Start with the financial fundamentals

Developing business awareness begins by understanding the key indicators that the company uses to judge its success.

Companies use financial statements such as balance sheets, income statements, and cash flow statements to assess performance. CIOs should be familiar with these, and with the key indicators that specific industry verticals use to assess success.

For example, if you are in banking, your organization is likely to measure itself by profitability ratios such as net interest margin (the difference between interest income generated and interest expenses) or PCL (provision for credit losses). So, if the bank sees that too many of its loans are defaulting, resulting in losses, how much would an AI-driven loan decisioning software be able to help?

If your company’s business is semiconductor equipment manufacturing, it probably keeps a constant eye on book-to-bill ratio. Book-to-bill shows whether orders are outpacing billings (i.e., business is growing) or if the ratio is showing the reverse (i.e., business is slowing). Book-to-bill is an extremely relevant ratio in semiconductors, a highly volatile industry that could go boom or bust at any time. How much would a flexible IT infrastructure that enables the company to subscribe or unsubscribe to cloud services as needed, paying only for what it needs, help?

Both examples show business awareness. They deliver pain relief to the board, CEO, and the C-suite.

Investigate continuously and communicate

CIOs should visit — and visit often — with the board, CEO, other C-level executives, middle managers, and IT and user staffs. Doing so gives the CIO an opportunity to bounce strategies and project ideas off a variety of individuals, and to see how well these ideas align with what others feel is important. Regular communications open the door to stronger business relationships. They also help CIOs better understand the company strategic and organizational pain points.

Additionally, CIOs should research and visit with outside advisors and colleagues to see what’s going on in the company’s industry in the way of trends, products, market share, technology, lawsuits, regulations, human resources, and so on. Some of these areas might not seemingly be IT-oriented, but at some point they are going to demand IT involvement, because IT gets engaged with everything as a solutions-oriented organization.

Consider IT investment from a business outcome perspective

Armed with a better understanding of what makes the business tick, CIOs must then shape their IT investment strategies in ways that move the needle for the business.

Using more on-demand cloud resources instead of entering into long-term capital expenses for the data center resonates well in a volatile industry like semiconductors, and is likely to set the CEO’s mind at ease.

Assisting loan underwriters with AI-driven loan decisioning software that can assess the likelihood of each loan being paid back can reduce loan losses and produce a measurable and profitable ROI for the technology investment.

In both cases, stakeholders can immediately see how technology is working to produce positive business outcomes. And they will be able to explain in plain English how these technology investments will benefit the business, because others (industry analysts, stock holders, etc.) will surely ask them. Sometimes, as in the case of an IT infrastructure project, it’s difficult for a non-IT person to explain why a certain technology is needed for the business. When these situations occur, there can be pushbacks on funding. Shaping your IT investments to desired business outcomes will go a long way toward getting more green lights for your initiatives.

Link technology projects to corporate metrics that matter

The financial fundamentals of most companies boil down to revenues and expenses. Linking IT technology strategies to these measuring points is vital, but it’s also important to link individual IT projects to relevant and measurable business outcomes as well.

For example, I once worked at a bank where our IT department ran a simple report that showed that one-third of the customers enrolled in the bank’s new credit card program weren’t using their credit cards. This was a blow to sales and marketing, which had spent three months promoting the cards and incenting tellers and bank reps with bonuses.

Marketing and sales had measured success by how many new card accounts were opened. But no one followed up on usage — except for a business analyst in IT who wanted to see the results of card usage months later.

The bank subsequently enlisted bank reps to follow up with customers, who told them that competing cards offered more perks and advantages. Marketing revised the card offering and subsequent IT reports showed an uptick in card usage that reflected positively in bank revenues.

The IT project delighted everyone. It had been instrumental in turning a card product failure into a revenue success. But it took business awareness on the part of that business analyst to discover the problem in the first place.

Elevating through awareness

Business alignment is in nearly every CIO’s strategic plan, but it is business awareness that makes business alignment work.

This awareness might come in the form of understanding what the competition is doing with its products and services, and even with the introduction of new technologies such as AI. Awareness also grows by understanding key corporate financial indicators, pain points and metrics, and talking about them with others.

The more IT and CIOs dial themselves into these critical business elements and conversations, and present compelling technology use cases that contribute to bottom-line business success, the greater the role IT and CIOs will play in corporate decision-making.