The Right Shape for your IT Department

Blogger: Lyn Robison

IT departments are not one-shape-fits-all. The IT needs of a broadcast media company, for example, are not the same as those of a consumer product manufacturer. A government agency needs a different set of IT services than a retail bank. And the IT department of an insurance company will perform fundamentally different work than the IT department of a large law firm. The IT departments in these enterprises all have different “shapes”.

The shape of an IT department ultimately determines how well it fits within its enterprise. An IT department is shaped by the CIO’s decisions regarding priorities, leadership structure, initiatives, staff composition, physical locations, and metrics. Mistakes on these decisions will give the IT department a shape that does not match the type of organization it serves.

There are common characteristics, even among diverse enterprises, that can inform a CIO’s decisions about the ideal shape of the IT department. This blog post (which is kinda long) explores those common characteristics.

You’re not my Type

An understanding of the similarities between your company’s IT needs and the IT needs of other organizations can give you valuable insights into the decisions that you must make about the shape of your IT department. Dissimilar companies often have IT needs that are surprisingly similar – even if those companies use divergent business models or operate in unrelated industries. The IT experience of companies that are seemingly far removed from yours can often yield greater insights to you than the companies that are directly related to yours.

So the question becomes, how do you measure the similarity of your enterprise’s IT needs with those of other companies, particularly those that are outside of your industry and that appear unrelated?

One approach is to identify the dimensions along which IT requirements tend to vary between companies. I have identified 16 dimensions for measuring the shape of IT services in disparate types of organizations. Any two companies that score similarly along these 16 dimensions will have IT needs that are similar, even if the organizations differ from one another in other respects.

When performing your own analysis, you are free to adopt the dimensions that I have identified, or you can merely use mine as a point of departure to create your own dimensions. The dimensions that I have identified are:

1. World-wide scope – What is the scope of the organization’s work? Are they undertaking a truly a world-wide effort?
2. Broadcast the news – Do they broadcast messages or information?
3. Create content – Do they create their own content that they publish or broadcast?
4. Publish books and magazines – Do they do printing and publishing?
5. Develop products for sale – Do they create products and bring those products to market?
6. Research and development – Do they engage in R&D efforts to create new products?
7. Supply chain and ERP – Do they have a supply chain where they purchase raw materials, manage inventory, and distribute goods?
8. Manufacturing – Do they manufacture physical goods and products?
9. Professional services – Do they engage in professional services (such as a law firm might)?
10. Finance – Do their financial needs require them to function as a financial institution?
11. Field organization – Do they have a field organization that must be trained and managed from headquarters?
12. Big data – Do they have to manage large quantities of data?
13. Analysis of big data – Do they analyze large quantities of data?
14. Track membership – Do they have a concept of membership and do they track the levels of membership of their constituents?
15. Find individuals – How much are they interested in individuals, and not just in the mass market?
16. Win hearts and minds – To what degree do they try to convert people’s hearts or change people’s minds, as opposed to merely informing people of facts?

To assess how the IT needs of various organizations might compare, you will need to establish for each dimension a maximum, a minimum, and some points in between. For example, an organization whose very existence depends on the products it brings to market will be placed at the maximum of the Develop products for sale dimension. An organization that brings products to market merely to enhance its other activities will fall somewhere in the middle of the scale. And an organization that develops no products for sale will of course be at the bottom of that dimension.

Let’s look at some examples to see how the IT needs of different types of organizations compare. Following are some Kiviat diagrams (also known as Radar Charts), which show how different organizations might score along these 16 dimensions.

    
Figure 1: Broadcast Media Company

As you can see in Figure 1, a broadcast media company has heavy IT needs for content management and for broadcasting. By contrast, Figure 2 below illustrates the IT needs of an independent software vendor.

 
Figure 2: Independent Software Vendor

A commercial software company’s IT needs will look like those shown in Figure 2. Figure 3 below shows what a government intelligence agency’s IT needs are.

 
Figure 3: Government Intelligence Agency

In these three figures, you can see that a broadcast media company will have greater need for content management systems than a commercial software company. On the other hand, a commercial software company will have a greater need for a customer relationship management system than a broadcast media company will.

More than merely showing what types of systems a company will need, however, these 16 dimensions determine the shape of a company’s overall IT needs. That shape indicates what the IT department’s priorities should be, how the IT leadership team should be structured, what types of talent the IT department should hire, which IT groups need to be physically co-located, which IT functions must be located close to stakeholders and users, what IT initiatives the IT leadership and staff should pursue, and what metrics are truly indicative of success in IT.

By assessing your company’s IT needs alongside a wide variety of other organizations, you can find those enterprises that have IT requirements that are like yours and that are unlike yours. This analysis can tell you which organizations you should ignore from an IT standpoint, and which ones you should watch and learn from. This can help you avoid best practices from companies that would actually lead you in the wrong direction, and can also give you valuable insights from unexpected companies and industries.

To illustrate this point, Figure 4 below compares and contrasts the IT needs of a group of hospitals with the IT needs of an Intelligence Agency.

 
Figure 4: Government Intelligence Agency and Hospital Group

As you can see in Figure 4, there is a surprising amount of overlap between the hospital group and the government intelligence agency.  It is apparent that the hospital group could potentially learn valuable IT lessons from the government intelligence agency regarding data handling and information management. By contrast, the IT needs of the hospital group would have only a small overlap with the IT needs of a broadcast media company or a commercial software company.

Clearly, if you were to fail to accurately assess the IT needs of your enterprise, your decisions regarding the shape of your IT department will be flawed. You might emphasize the wrong concepts, you could create the wrong organizational structures, you may well watch the wrong metrics, and you likely will take your IT department in a direction that will not fulfill the IT needs of the enterprise.

Shapes that never Fit

One shape that never fits any IT department is that of a commercial software company. The assumption by some CIOs and IT leaders is that because IT departments and commercial software companies both produce software, they should be structured similarly. However, as you can see in Figure 2, the IT needs of a software company are quite unlike those of the other types of companies illustrated in Figures 1, 3, and 4.

An even greater sin is to attempt to structure an enterprise IT department like a product development group within a commercial software company. Product development groups have so little in common with enterprise IT that this shape will never fit the needs of an enterprise. While it is true that product development groups and IT departments both produce software, enterprise IT departments often buy more software than they build. Enterprise IT departments must also integrate, deploy, secure, operate, monitor, backup, and upgrade software within an operational environment – something that software product groups never do. In addition, enterprise IT departments must ensure that software is managed properly for data retention, prepared for disasters, regularly evaluated, and retired at the appropriate time. An enterprise IT department that is structured like a product development group will be at a disadvantage when its staff is called upon to perform these vital IT functions.

Another common misstep is to structure the IT department so that it merely manages technology, and not the information that the technology systems produce. To be effective, enterprise IT departments must concern themselves more with managing information than with managing technology. CIOs find that they can spend millions to upgrade their systems, only to end up with no net gain in information availability for their users. Instead, they just get bad information faster. Or, they end up with more unstructured content with no way to apply that information to reach better business decisions. To be effective, CIOs must function as CIOs, not as CTOs.

Shapes that always Fit

Information systems exist to do just two jobs: they automate processes and they provide information. Unless an IT system does at least one of those two jobs effectively, it is as useless as an automobile factory that manufactures un-drivable cars or a slushy machine that produces unpalatable slushies. Therefore, two initiatives that always improve the fit of an IT department are business process improvement and information quality.

Every enterprise has a set of software applications that are core to the business, that automate important process, and that have large numbers of users. The processes embodied in these enterprise applications and the information they provide are prime targets for business process improvement and information quality initiatives. These business processes are static enough that they can be documented, measured, and improved over time. The information that goes into and comes out of these processes often is not as reliable, accessible or clear as users need, and an information quality initiative can fix that.

Every enterprise also has a large number of ill-defined or dynamic processes that tend to be done a little differently every time, depending on the immediate situation.  These dynamic processes are the type that Accenture unearthed in a survey they conducted last year.  They found that middle managers spend more than a quarter of their time searching for information necessary to their jobs, and when they do find it, it is often wrong. (See “Managers Say the Majority of Information Obtained for Their Work Is Useless”, 4 January 2007) These dynamic processes require a large number of software applications and data sources, and involve a relatively small number of users. As a result, business process improvement is not practical here, but information quality can be highly valuable.

Shaping Up

Comparing your enterprise’s IT needs with those of other enterprises can help you identify the ideal shape of your IT department. Your enterprise architecture group should be able to perform this type of analysis for you. When completed, this analysis can show you where your department is out of shape and perhaps does not fit as well as it should within your enterprise. It can also provide you with some valuable examples in unexpected places.

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