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June 16, 2005

Linking Business Performance and IT Performance

Usually this subject starts off with the word "alignment" in the banner, which amounts to a freebie in getting folks' attention. Why resist here?

The idea of "linking" instead of aligning comes from the sense of correlating Business results and IT results, just as we would say "evidence shows that the consumption of lots of butter is linked to weight gains" or that "drug abuse is linked to higher crime rates".

Correlation generates something we can call the tension of implied causality. The challenge is to see through the implication and find out where the correlation is coming from.

If we take the word "performance" to mean "the degree to which functional outcomes have achieved targeted levels", right away it becomes important to see what distinguishes the IT targets from the business targets.

The business-side follow-up to that step is to ask, "in what way are the targets of the IT functions relevant to the business?"

Examining relevancy turns out to be the breakthrough. For any business, there is a general way to describe its functional ambitions.
- Every business needs opportunity, and operations with which to pursue them.
- In the face of market forces, the business must be concerned with supporting both the operations and opportunity, and also with transforming them as necessary.

The key business question is, given those two facts, what does IT do that matters?

As shown here, IT contributes to establishing and protecting the ability of the business to leverage the environment that it is in. With IT's contributions, the business can develop itself against requirements at an acceptable level of risk. The business has four really big stories to tell.

Each of the four stories -- Agility, Effectiveness, Deployment and Availability -- represents a major capability of the business functionality that responds to a critical requirement. IT's role is to "provide for" (not simply to supply or deliver) the capability. For the tactical capability to support business operation, the business looks at IT's contributions to Availability, such as through service management. A strategic capability, such as for transforming opportunity by exercising a competitive competency, tells the business to look at IT's contributions to Effectiveness, such as through BPM. IT would likely bring Change Management contributions to Deployment, allowing risk-controlled reconfigurations of workgroups and systems to enable transformation of operations. And so forth.

The punchline of this picture is that, seen through targeted contributions to business capability, IT performance is "linked" to business performance in a way that is best discussed as IT's business value.

IT's strategy for making those contributions is not the same thing as the business strategy, but the business strategy will impose priorities and weights on the four general capabilities, and IT will then strategically respond to that. By understanding how those business weights and priorities originate, IT managers can be more proactive in foreseeing and recommending IT contributions that are strategically sustainable and valuable.

Posted by Malcolm Ryder at June 16, 2005 4:00 PM

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