Friday, March 23, 2012

The Executive Relationship (Part 2 of 3)

Recap

In the first part of this topic, I described my views on the impact you can have on your ability to successfully communicate value to a CIO if you approach it from an IT strategy perspective rather than a feature / functionality perspective.  This is the way a CIO thinks (and has staff that is responsible for making their vision become reality) so matching this modus operandi allows you to get past the barriers that they naturally have because they feel you cannot empathize with what they feel is important to their success.

Before we can begin to understand IT strategy, however, a few concepts need to be defined.  Most of this is common sense, but you'll see how we build upon these later.

The Real Purpose of IT

A common, humorous statement goes something like this:  if you ask 10 [insert profession] the same question you'll get 10 different answers. This is especially true if you ask them what the role of IT is in the business - some will say "keep the lights on" while others will say "ensure that the company stays ahead of its competition through the use of technology."  In reality, few people truly understand that the purpose of IT is singular:

The purpose of IT is to design and implement a technology strategy that allows the lines of business to meet their goals.

That's it.  Nothing more, and nothing less.  And the reason for this is simple:  IT is still viewed as a cost center rather than a revenue generating center because companies are reluctant to implement chargeback policies.  The means by which it accomplishes this purpose include many of the answers you'll hear:  keep the lights on; provide technology that prevents a company from lagging behind its competitors; etc. but this is the driving force behind it all.

Similar to this is the purpose of each line of business.

The purpose of each line of business is to design and implement a set of initiatives that do one thing:  make the company money.

Given both of these purposes, IT strategy can then be subdivided into two halves:  business strategy and operational strategy.

Business Strategy

Over the decades the role of the CIO has evolved:  "in the beginning" CIO meant Chief Information Officer. In those days they had to justify their existence by clinging onto any business matter that had an iota of relevance to technology.  (I'm exaggerating for the sake of illustration, but I'm sure you get the point.)

Revenue vs. Budget
Now, the (successful) CIO is the Chief Innovation Officer, and they are business partners that have the same goal as each of the lines of business - make money - using technology as an enabler, a means to an end.

From where does the money come for the technology?  Look at the graph on the left, which conceptually illustrates the relationship between revenues and budget.  Total budget has always been a function of total revenues.  Subtract "typical" business costs like building maintenance / upkeep, etc. and you derive the (lines of) business budget. (We'll discuss Operational budget in part 3.)

You'll see that, in spite of the global financial crash in 2007, business budgets resumed their upward climb when total revenues did as well.  Why shouldn't they?  If the head of business tells the board that it needs $1mm to make $10mm with a high degree of certainty of success, who wouldn't approve the investment of funds?  This is emphasized even more when you recall that the sole purpose of the lines of business is to make money.

The catch here is that, after business initiatives A, B and C are implemented and the technology has been rolled out into the production environment the business is able to essentially walk away.  At this point, the infrastructure needed to support those initiatives becomes the responsibility of the KTLO - Keep the Lights On - role, and it is here that Operational Strategy becomes so important.

The final part of this blog entry will conclude this topic by examining what Operational Strategy is, why it is important, and then summarize in a very high level fashion how the CIO takes both types of business activity into consideration when developing their 18-24 month plan.

Friday, March 16, 2012

The Executive Relationship (Part 1 of 3)

Introduction

When I made the transition to a sales role in 2005 after 18 years of sitting on "the other side of the table," I was part of a team that sold a single, highly technical product.  After some time had elapsed, I had a lot of trouble comprehending how a product that had immediately recognized value by the target user community also had such a high degree of difficulty getting a check to be signed.

What I discovered started me on the journey from technologist looking at the business and trying to attach myself to anything that would allow me to demonstrate value to a businessman looking at technology as a means to accomplish one or more strategic goals.  Along the way, I began to understand that if you want to catch the ear of the person signing the check, you have to be able to demonstrate financial relevance.  After all, if they are going to spend $500,000 on your solution they are going to need to believe that they will get an equal or greater amount of quantifiable value in a one year period.

Fast Forward

Some time after that initial epiphany occurred I completed the circle by amplifying what I had learned during the previous years in sales with what I knew as a technologist.  This marriage of concepts helped me to understand why so many technology sales professionals struggle to articulate the value of their offerings without the resorting to a feature / functionality "fire hose" of information (with the assistance of a pre-sales engineer).  The reason is this: while technology pitched in this fashion can gain you the agreement that your solution adds value, without the ability to tie the technology into the overall IT strategy you will face an uphill battle every time.

Let me reiterate by rephrasing: I am not saying that it is impossible to sell based on feature / functionality.  What I am saying is that, when I was in my first sales position, we were constantly chasing budget to make a purchase.  We did close deals, small and big, but the amount of effort that we expended was exorbitant.  This was due to the fact that feature / functionality sales is an uphill battle save for the most highly commoditized solutions (e.g. email) simply due to the fact that the people responsible for signing the purchase order are going to keep their defenses up longer than they should.

IT Strategy

Why is that?  The problem, essentially, is that sales people are notorious for trying to close the deal.  After all, their ability to pay their bills is dependent on them reaching their quota.  But instead of trying to understand how the executives at their accounts approach their jobs, they instead go for this feature / functionality sales play under the incorrect assumption that it is the easiest route to closing a deal.

The faster route to value happens when the salesperson starts to think like the CIO rather than expect the CIO to think like they do.  And this begins by understanding how IT strategy is devised - this helps the salesperson understand and appreciate what the CIO considers to be important and more rapidly establishes credibility in the relationship.  When this occurs, the defensive barriers that were previously raised get lowered more quickly allowing a true partnership to be formed.

It should be noted that the ability to close the deal still depends on the ability to demonstrate a quantifiable return on investment with a payback period of less than 12 months.  Additionally, financial metrics such as Net Present Value (NPV) and/or Internal Rate of Return (IRR) may be required.  But without the establishing of the senior level relationship, you will never be invited to the table to pitch these figures in the first place.

Part 2 of this blog entry will continue this topic by examining how IT strategy is devised and implemented.