What is functional alignment in an operating model

I have cut and pasted below a bit of an interview by Martha Heller of CIO with Jim BuBois, CIO Microsoft.  I hope I am not transgressing copyright!   But what Jim says is such a good example of IT being fully linked into the business operating model I could not miss the opportunity of adding to my blog.  Apologies for edits and comments.

“Martha Heller: How has your IT operating model changed during the last five years?

Jim DuBois: We used to think in terms of projects and applications, and now we think in terms of service offerings. Each service offering represents all of the technology investments that support an end-to-end business process, like lead generation or customer support. Conversations about IT used to be disconnected from conversations about our business. Now, we are able to talk about which investments will improve our service offerings.

Take marketing, [for example]. Marketing manages a lot of activities that generate demand for our products. Whether they are campaigns, events, or different ways to engage with customers, we can track those activities to learn which drive legitimate sales opportunities. All of the investments we make in marketing automation should, in some way, increase the volume or quality of (our marketing) leads.

We no longer ask, “How available is a particular application?” or “Was the project on time?” Now we measure, “Did we add capabilities that made the service offering better?” (Meaning, I think, did we add capabilities that made our marketing more effective?)

Heller: Moving from traditional IT to a service offering model requires a major mindset shift in IT. How did you make that happen?

DuBois: Historically, IT did what the business wanted (it) to do. But with analytics tools, and especially with big data, IT now sees end-to-end across the company more cleanly than most departments, so we are able to say, “I understand that you want to make this technology investment to make a process better, but this investment actually won’t help because of bottlenecks that are happening elsewhere in the company.” (Great example of IT seeing the whole operating model and help identify where investment will make a difference, rather than just serving its different functional customers.)

Because IT can see so much, it is our responsibility to influence investment priorities, not just execute on priorities set by our internal business partners. We used to reward IT employees based on whether they delivered a project on time and whether the business was happy with what IT did. But we found that making business partners happy did not always mean that we were doing the right thing at the company level (meaning the right thing at the level of the company’s overall operating model).

Back to the marketing example, my team now gets measured on whether they increased the volume and the quality of leads, not on whether they delivered what marketing asked them to do. That has been a real cultural change.”

These comments by DuBois provide a perfect illustration of the benefit of having an operating model that is shared by all the functions.  IT can then help decide what is most likely to improve the overall operating model.  HR and Finance can do the same.  Rather than each function working in its silo, responding to others so that it meets its own internal performance metrics.  All functions should be working off the same set of operating metrics for the overall operating model and trying to figure out what they can contribute to achieve these higher level metrics.

So IT should be thinking about what we can do to help generate more and better quality sales leads – maybe a new application for marketing, maybe a better link between sales and marketing or maybe a better way of measuring quality of sales lead or …   But HR should also be thinking about how to help generate more and better quality sales leads – maybe better training for marketing staff, maybe enabling career moves from sales to marketing and back, maybe changes to the recruitment processes for marketing staff or …   And Finance should also be thinking about how to help generate more and better quality sales leads – maybe supporting an increase in the budget of the marketing function, maybe changing the comparative benchmarks used to assess marketing effectiveness,  maybe providing marketing with more analytical support or …

If all functions understand the process for developing sales leads and its importance in the overall operating model, they can focus on their role in helping make this process effective …. then you really have a shared operating model and the sort of functional alignment that is missing in most organizations.

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About andrew campbell

Ashridge Strategic Management Centre Focus on strategy and organisation Currently working on group-level functions and group-level strategy
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