Aligning IT capabilities to business needs

Business - IT Alignment Series

In a previous post, we noted that it becomes easier to craft a technology strategy to enable and support the business when there is a business strategy in place. And in the last post on Business - IT Alignment, we defined a technology strategy as a document that articulates how the IT function will enable the realization of business objectives, inform business - IT alignment, and provide value to the business. Clearly, the IT strategy is largely informed by the business strategy.

Despite many organizations being very clear on their business strategy and objectives however, there is still significant misalignment between business and IT today. One factor responsible for this misalignment is the communication gap between business and IT. People in business and IT use different terminologies and tend not to understand each other easily. For instance, while the business may have defined a goal to increase market share by 25% over the next 3 years, IT may think of this in terms of capacity i.e. if we increase market share by 25%, how much more capacity do we need to be able to handle the increased load on the system?

Another reason for business-IT misalignment is that business strategies and goals may not be properly translated into an IT strategy. For instance, the IT function’s strategy and plans may be focused on keeping the lights on instead of enabling innovation or digital transformation. This results in a situation where there is no significant connection between business and technology goals, limiting the amount of value that IT can add to the business.

For the IT function to be aligned to the business and to be a provider of value, one of the things the IT function must get right is the identification of technology capabilities required to support the business. This is a foundational step in defining a business-aligned IT strategy.

The BA Institute defines a business capability as what a business does at its core. The same is true for IT. The IT capability defines what IT does to support the business.

How does an organization go about identifying the IT capabilities required to enable the business?

An organization’s IT capability is derived through capability mapping. The capability mapping process is discussed below:

• Identify business capabilities: one of the key outcomes of the business strategy articulation process is that business capabilities (i.e. what the business needs to be able to do to deliver on the strategy) are identified. For example:

  • Business Imperative: define an innovative approach to measuring credit worthiness and implement a market-relevant credit risk assessment matrix

  • Business Capability: Risk Management

• Map technology capabilities to business capabilities: following the identification of business capabilities required to deliver on the business imperatives, technology capabilities required to enable or support these businesses capabilities are defined and mapped to them. Ideally, the mapping process should include sub-capabilities up to Level 3. Following the example above, this could be:

  • Business Capability: Risk Management

  • L1 Technology Capability: Service Development

    • L2 Technology Capability: Solution Development

      • L3 Technology Capability: Business Analysis

      • L3 Technology Capability: Software Development

    • L2 Technology Capability: Program Management

      • L3 Technology Capability: Planning and Scheduling

      • L3 Technology Capability: Project Management

• Identify capability gaps: for IT to effectively support the business, identified capabilities should be at the level of maturity required to provide value to the business. A review of the identified technology capabilities would typically reveal that capabilities fall into 3 broad categories:

  • The capabilities that don’t exist within the organization

  • Those that exist but are sub-optimal

  • Those that are at the required level of maturity

A key part of the IT Strategy will focus on closing identified capability gaps.

IT capabilities do not change frequently. It is however advisable to review IT capabilities annually in order to ensure ongoing alignment with the business. Having IT capabilities that serve the business will ensure that IT is best positioned to support the business. It also helps the IT function prioritize investments.

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A technology capability map helps bridge the gap between business and IT, and ensures IT is positioned to enable the realization of business objectives.

Virtro enables digital transformation by helping organizations develop strategy-aligned IT capability maps and IT Strategy documents. Contact us to discuss or schedule a free consultation.

If you are wondering about how well your business and IT are aligned, consider taking Virtro's free, high-level Business - IT Alignment Assessment.

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