CIOs Must Communicate Risk & Return In Business Terms: Gartner

Highly successful IT organisations follow a remarkably similar path to creating and communicating business value, of which risk and return are inseparable elements, according to Gartner. Gartner said that as the IT profession matures, the pattern for success is being increasingly refined and demands communication of both risk and return in business terms.

In the recently released book ‘The Real Business of IT: How CIOs Create and Communicate Value’, published by Harvard Business School Press, Richard Hunter, group vice president and Gartner fellow and George Westerman, research scientist at MIT Sloan’s School of Management’s Center for Information Systems Research (MIT CISR), examine how businesses can balance IT risk and IT return.

“If the economic meltdown of 2008 shows us anything, it’s that you can’t talk about return without talking about risk,” said Hunter. “Over five years of joint research have shown us three things: firstly, companies that communicate effectively about IT value create more value; secondly, companies that communicate effectively about IT risk reduce enterprise risks; and thirdly, CIOs, who communicate about risk and return in terms of business outcomes and performance, find it easier to achieve an effective balance.”

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Westerman said that IT professionals are often unaware how deeply IT is embedded in their thoughts and words, but said that many are now finding that colleagues respond far better when ideas are framed in terms of business performance.

“Many general managers and CFOs believe that their organisations spend too much on IT or wish that they could get better returns from their IT investments,” he explained.

“However, more often than not, this ‘cost-mind-set’ results, at least in part, from the IT leaders’ inability to communicate about the business value they create.”

Hunter maintains that IT leaders can turn this situation around. They show how the CIO can use information technology to create three forms of value that are vitally important to leaders throughout their organisation:

• Value for money when the IT department operates efficiently and effectively
• An investment in business performance evidenced when IT helps divisions, units and departments boost profitability
• Personal value of CIOs as leaders whose contributions to their enterprises go well beyond their area of specialisation

CIOs need to more effectively communicate these forms of value with non-IT leaders. In this way, peer executives have a better grasp of how their organisation is benefiting from IT.

The book’s authors have devised four next steps, designed to set CIOs on the path to value by enabling them to communicate both risk and return in business terms:

Monday Morning: Begin training yourself and the rest of the IT organisation to communicate risks and returns in terms of business outcomes and business performances.

Next Week: Examine the value for money provided by the IT organisation. Identify opportunities to improve risks and returns alike by improving the foundation: infrastructure, applications, skills and IT management processes.

Next Month: Assess your ability to execute the steps of the virtuous cycle. Focus on those parts of the cycle that are least capable in order to improve solutions.

Next Year: Take advantage of high-risk, high-return opportunities that your highly capable organisation can handle, and competitors can’t.