Communicating the value of technology is critical for any CIO seeking to curry favor for their digital business initiatives. So it follows that engaging fellow leaders and the board of directors in buzzword bingo will sound the death knell for even the best laid tech plans.
Instead, when it comes to communicating the business value of technology, IT leaders must speak and think like their business peers, says Art Langer, academic director of Columbia University’s executive masters of science in technology management program.
“You need to think like the people around you think,” says Langer, who helps IT leaders learn how to communicate to board members. “Nobody is interested in talking about technology.”
Rather, CIOs must be conversant in business concepts that help them deliver, iterate on and measure efforts for augmenting operations and the customer experience (CX). Here CIO.com leans on the wisdom of consultants and analysts to define key business lingo — the lingua franca of corporate finance and MBA programs — with which CIOs should become familiar.
Digital business KPIs
As companies create new business models anchored in digital technologies, it behooves IT organizations to track digital business KPIs, which come in two types, according to research published by Gartner analysts James Anderson and Paul Proctor in April 2019.
The first set assesses the progress in digitalizing the current business model, spanning sales, marketing operations, supply chain, products and services and customer service. A second set of KPIs assesses the progress and opportunity of net-new revenue sources created by pursuing new digital business models and are clearly differentiated from nondigital sources.
It’s one thing to create KPIs, but another to discuss them. CIOs must be able to explain to their C-
suite peers and boards what these digital KPIs measure and why they matter to the business.
Customer journey map
Once mainly the domain of marketing, the customer journey map is something CIOs can no longer ignore, as more companies leverage technology to create new customer experiences.
Customer journey maps blend qualitative and quantitative data to understand customers' desired journeys and to identify gaps between their expectations throughout this journey and the experience delivered by the brand, according to Jane-Anne Mennella, a Gartner analyst. The main goal of journey mapping is to determine the challenges and opportunities a brand faces in improving its CX, as well as satisfaction, loyalty and advocacy.
Lean startup
It’s one thing to run scrums and deliver software in agile. CIOs should also learn how to operate in “lean startup” mode, which involves iterative testing, learning and improving on their product, Scott Snyder, a partner at consultancy Heidrick & Struggles who advises clients on digital innovation, tells CIO.com. Failure is expected as companies move fast, break things and iterate.
Lean startup mode is really about operating a “business model alongside a product or solution,” and “moving from experiments to insights really fast,” says Snyder, who is also a senior fellow in the management department at The Wharton School of the University of Pennsylvania and studies how emerging technologies facilitate new business models and ventures. The key to operating in lean startup mode is pairing technology with a business model in parallel.
Reverse income statement
Whereas the income statement starts with estimates of revenues and works down the income statement to derive profits, the reverse income statement starts with required profits, according to Rita Gunther McGrath and Ian MacMillan writing in Harvard Business Review (HBR). “We then work our way up the profit and loss to determine how much revenue it will take to deliver the level of profits we require and how much cost can be allowed,” write McGrath and MacMillan, adding that the reverse income statement is a key tenant of discovery-driven planning, or “planning for a new venture that involves envisioning the unknown.”
Snyder says that a tech chief would initiate expectations around a tech solution similarly, estimating ROI in terms of customer adoption. “You’re basically building a business model with imperfect information,” Snyder says. What would an attractive business case look like? What is a surface assumption that needs to be true to make the business case work, or for this new app to be successful and add a bump to revenue?”
Real options
Borrowed from finance, real options cover the right to undertake certain business initiatives, such as deferring, abandoning, expanding, staging or contracting a capital investment project. As applied to tech, real options include running a pilot with a startup and other forms of experimentation.
“If I invest a small amount in a startup pilot, I can learn faster and cheaper than cutting a big check to develop a project internally,” Snyder says.
Data balance sheet
Potentially an ultimate bridge builder between tech and business leaders, the data balance sheet provides an overview of data the organization holds; how it is used, including the information flows related to the organization's operations; and the risk management procedures related to data.
Ideally, a well-appointed data balance sheet will help you and your organization harvest data and turn it into business value, while taking care to acknowledge the potential liabilities in using certain types of data, Snyder says.
Between cloud computing and the availability of other digital services that automate functions for your organization, the “challenge is not as much on the tech as it is on human side,” says Snyder, referring to sweeping change that is often the toughest part of fulminating a new digital business model.
Regardless of what language they elect to use, IT leaders “must be able to put the vision into their own words so it is meaningful and relevant,” according to research Gartner analysts Suzanne Adnams and Elise Olding published in December 2018.
By Clint Boulton