After more than two decades of discussing what business-IT alignment is, it is time to move on.

Three major intertwined trends are driving the change: the age of the customer, smart computing and business technology (BT).

In the age of the customer, successful companies employ smart computing technologies such as mobile, social, business process management applications, and analytics as sources of competitive advantage to win new customers and better serve existing ones.

BT is a management trend that addresses the pervasiveness of these smart technologies; IT-savvy business executives can contract for and use them as a service from the cloud without even asking IT.

Figure: Business technology addresses the pervasiveness of technology in the age of the customer

Arguably, the advent of BT will reduce the prominence of IT's role as technology supplier to the firm.

But does this new model of business empowerment and engagement also make the CIO's job less relevant and differentiating?

We don't think so. Forrester data from client inquires and advisory projects shows that CIOs who can drive business change through the deployment of smart technologies are in high demand.

This is particularly true for organizations where technology innovation is viewed as a source of competitive advantage.

Based on insights from Forrester customers, we have developed four basic recommendations for CIOs that want to make

a difference in their organizations in the age of the customer:

1 Create a digital business strategy for the organization instead of just planning its IT
CIOs need to revisit their traditional approach to IT planning.

For example, at a large museum, the yearly effort to create an IT plan metamorphosed into the development of a new digital business strategy.

How did this come about?

Rather than gathering routine departmental requirements, the IT director decided to focus on the processes that the museum needed to change in order to improve the entire visitor experience — before, during, and after the museum visit, both online and in the gallery.

He managed the shift by opening and sustaining a constructive dialogue with the museum's senior executive team that focused on how to use smart technologies to improve the customer experience.

2 Build technical and financial know-how inside the organization
Technology projects that aim to support business change rarely succeed unless business stakeholders understand the limitations, risks, and life-cycle costs of the technology.

For example, a European governmental agency contracted the redesign of its core application platform to an external supplier.

The agency, which didn't have a senior IT executive driving it, audited the initiative a few years later to find out that customer satisfaction with the performance of the new processes decreased slightly, even as the operational costs increased by a factor of three.

3 Deliberately govern the execution of technology change initiatives
Business executives at a European universal bank learned the difference between good and bad governance when the bank renewed its core banking operations.

The bank first tried to let its IT shared services organization manage the change — which failed. For the second attempt, the CIO created a deliberate governance framework, which

1) actively involved the executive team responsible for customer-facing processes in all budgeting and sourcing-related decisions
2) empowered a team of process experts to manage the technology-driven changes from inside business operations

The latter approach worked significantly better.

4 Structure IT for cross-functional collaboration and best-practice sharing
"Form follows function" remains the foundational principle when designing business process-oriented IT organizations in the age of the customer.

For example, the CIO of a life science company deployed four centers of expertise to support the company's core business processes across its 14 regional business units.

Their mandate? Enable the collaboration between business stakeholders; enable smart technology innovation; and develop, optimize, broadcast, and maintain best practices across the entire organization.

For their firms to thrive in the age of the customer, the CIO needs to work together with executives such as the CMO, COO, and CFO to develop new digital business strategies for increased efficiency and differentiation.

To achieve sustainable results, these CIOs also need to drive the deployment of business-driven BT governance and management processes; this will position business executives — not IT supply functions — to make decisions about the budgeting, sourcing, quality, and risks associated with technology deployment.

Last, but not least, these CIOs need to drive IT's transition from a traditional IT supply function needing alignment to a cluster of pervasive technology centers driving business change at all levels of the organization.

This is a preview of a speech, "Optimizing IT's Engagement Model In The Age Of The Customer," that Principal Analysts Alexander Peters and Chip Gliedman will present at Forrester's upcoming CIO Forums 2012, which are taking place in Las Vegas (May 3-4) and in Paris (June 19-20).

Alexander Peters, Ph.D., Principal Analyst, Forrester Research

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