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So many of us in IT have faced the daunting task of explaining why our projects are important and how they add value to the organization. Many years ago when I was with Coopers & Lybrand, I learned about a financial concept called Drivers and Supporters—and it became the basis of my recent book, "Information Technology and Organizational Learning: Managing Change through Technology and Education" (Routledge, 2005), in which I present a method of how CIOs can strengthen their value propositions to senior management. What follows is the first of a number of helpful ways you can better position your IT organization.
There are essentially two types of generic functions performed by departments in organizations: Driver functions and Supporter functions. These functions relate to the essential behavior and nature of what a department contributes to the goals of the organization.
Drivers are defined as those units that engage in front—line or direct revenue generating activities. Supporters are units that do not generate obvious direct revenues but are designed to support front—line activities. For example, operations such as internal accounting, purchasing, or office management are all classified as supporter departments.
Supporter departments, due to their very nature, are evaluated on their effectiveness and efficiency, or economies of scale. In contrast, driver organizations are expected to generate direct revenues and other ROI value for the firm. What interests me is that Drivers are expected to be more daring—since they must inevitably generate returns for the business. As such, Drivers engage in what Stephen P. Bradley and Richard L. Nolan coined "sense and respond" behaviors and activities in their book "Sense & Respond: Capturing Value in the Network Era" (Harvard Business School Press, 1998).
For instance, marketing departments often generate new business by investing or "sensing" an opportunity, quickly—due to competitive forces in the marketplace. They must sense an opportunity and respond to it in timely fashion. The process is a stage in a new technology cycle that organizations need to support. Failures in the cycle of sense and respond may be expected. Take, for example, the launching of new fall television shows. Each of the major stations goes through a process of "sensing" what shows might be interesting to the viewing audience. They "respond" after research and review with a number of new shows. Inevitably, only a few of these selected shows become successful; some fail almost immediately. While relatively few shows succeed, the process is accepted and is seen by management as the consequence of an appropriate set of steps for competing effectively—even though the percentage of successful new shows is very low. Therefore, it is safe to say that driver organizations sometimes engage in high—risk operations.
The example above raises two questions: 1) How does "sense and respond" relate to the world of technology organizations, and 2) why is it important?
Technology departments are unusual in that they may be regarded as both Driver and Supporter. The latter being the generally accepted view in most firms. Indeed, most information technology functions are established to support a myriad of internal functions such as accounting and finance, data—center infrastructure (e—mail, desktop, etc.), enterprise level application (ERP), customer support (CRM), and Web and e—commerce activities. As one would expect, these information technology functions are viewed as overhead related, as somewhat of a commodity, and thus constantly managed on an economy—of—scale basis—that is, how can we make this operation more efficient, with a particular focus on cost containment?
So what then are technology Driver functions? By definition they are those that engage in direct revenues and identifiable ROI. How do we define such functions in technology departments, as most activities are sheltered under the umbrella of marketing organization domains (excluding, of course, software application development firms that engage in marketing for their actual application products)? I define technology department Driver functions as those projects that if delivered would change the relationship between the organization and its customers, that is, those activities that directly affect the classic definition of a market: forces of supply and demand, which are governed by the customer (demand) and the vendor (supplier) relationship.
More to come.....
Columbia University's Dr. Arthur M. Langer is Senior Director of Technology, Innovation and Community Engagement, Fu Foundation School of Engineering and Applied Science; Associate Director, Instruction and Curricular Development, School of Continuing Education; and a faculty member in the Graduate School of Education (Teachers College) and Continuing Education. He also is a member of the CIOZone’s advisory board.
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in Member Introductions by Fiaz, 01-12-08 04:15
