Improvements in strategy can free IT organizations to spend more time on value-creating activities
By better understanding the business needs, organizations can eliminate some of the demand on IT products and services, freeing up availability and reversing the allocation ratio so the majority of IT resources can focus on tasks that contribute to business profits.
IT organizations are often seen as nothing more than service providers and barriers to business profits. And it’s hardly surprising when research shows that 90% of IT resources are focused on support and administrative tasks that are often manual and inefficient such as code fixing and maintenance work. This means just 10% is allocated to other business priorities and tasks that generate new business value. But what if we flipped this ratio so that the majority of IT resources work on products and services that build value for the business? What if we approach IT with an investor mindset and place greater focus on outcomes and results?
A recent article from the McKinsey Global Institute (MGI), Flip the ratio: Taking IT from bottleneck to battle ready, asks these questions and reveals some interesting insights. By following a specific approach, organizations have managed to flip this ratio to free up as much as 40% of their IT labor costs, with payback typically occurring within 18 to 24 months. Not only can flipping the ratio improve time to market and quality, it also allows organizations to quickly evaluate the business value of new technologies.
Get agile in back-end IT
Today, too few IT resources are spent on business-differentiating activities but by better understanding the demands on IT products and services and how they fit into the end-to-end value chain, organizations can determine what’s relevant and what areas to focus on. And, once the demands are understood, true agile methods can be introduced. With small, cross-functional, self-sufficient teams working in rapid iterations on the relevant products and service, you can dramatically reduce the resources needed. Additionally, it’s possible to further reduce demand by introducing more self-service options.
You are what you measure
The best metrics are specific, measurable and useful enough to track progress daily so you can quickly identify what changes are needed and act accordingly. And to flip the ratio, the right metrics can be measured at all levels of the organization and ensure everyone is working towards a common set of objectives and key results that build value for the business. By asking strategic questions that focus on the outcomes and results of IT projects, it’s possible to evaluate the success of a project based on whether or not it increases the overall performance and health of the organization.
‘IT for IT’ solutions that build business value
“IT for IT” solutions are cross-team or cross-product improvement opportunities that standardize processes and help teams work more efficiently and effectively. However, all too often, IT-for-IT solutions go unused or don’t work as expected. A better solution is to allocate resources based on the demand within the organization. In this setup, anyone in the back-end IT can suggest implementing a new technology and present it to an oversight team for review. If initial funding for the project is approved, an enablement team is established with cross-functional team members who have the different skills needed to not only deliver the product but also ensure it works as expected and is fully adopted. Quarterly reviews can then be used to determine whether the organization should allocate another round of funding. This strategy allows leadership teams to act as venture capitalist and enablement teams acts as start-up companies and quickly learn to demonstrate progress and the value of their work.
Focus, focus, focus
The right leadership support is vital to achieving these changes and flipping the ratio. Too much leadership control can curb enthusiasm, but a lack of focus often leads to the organization returning to their old ways of working. To prevent this, enablement teams can share progress with IT leaders at quarterly IT reviews and get assistance to quickly resolve issues, reallocate budgets, and confirm the next quarter’s priorities. This can also help ensure organizations only develop tools and solutions that solve problems and are easy to use and deploy.
Are you ready to make the change and flip the ratio for a more strategic back-end IT? To find out how we can help improve your organization’s productivity, get in touch today.