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ILP Institute Insider

April 28, 2014

Syncing IT with Executive Vision

George Westerman develops executive-level strategies for maximizing business value through digital technology.

Alice McCarthy

Many companies struggle with the best way to manage their IT functions, and few understand the best ways to transform their companies using IT. This is where George Westerman and his colleagues at the MIT Center for Digital Business (CDB) excel. His work and that of the CDB focuses broadly on two themes: (1) teaching senior executives to maximize value from using digital technology within their companies and (2) using new digital technologies to drive new growth.

George Westerman
Research Scientist
MIT Center for Digital Business
“The biggest challenge in IT is that business executives don’t feel they are getting the value they want, the responsiveness they want,” says Westerman. But his research finds that getting value out of technology is not an IT problem. Instead, it’s a management, leadership, and communication problem. “The way to solve IT problems is not to get new technology or even to get a new IT function leader,” he says. “It is to find a better way to communicate.”

Transparency Drives Communication
“When we see companies that are transforming their IT function well, the best process involves transparency,” Westerman explains. “Companies need to be clear on what performance is, what costs are and how they compare to one’s industry, and then be really clear on why you are investing in things and then go back and see if you have what you expected.” Though it can be painful to insist on transparency, Westerman assures executives that creating transparency helps everyone know what is going on so they can have the conversations that drive positive change.

Westerman notes that companies with perceived-as-broken IT functions often suffer from one of three major things business executives do. Number one is to ask IT to be all things to all people. “But there is real value in having a standardized platform you work on and then building some changes on top of that instead of adopting varied technologies desired by different groups in a company,” he says. The second offense is asking IT to do it alone without the business people being involved. “Instead, the real value is how you change your business because technology is there. It is reworking the way your processes go and that is the business executives’ responsibility,” Westerman adds. The third major problem is asking IT to be effective on a shoestring. “If you are skimping on digital technology you are skimping on a critical tool that everyone else is already using to go forward. It will only let your competitors get ahead of you.” In fact, if IT is going well, Westerman suggests adding a little extra spending since IT is a highly scalable investment.

Learning from the Digital Masters
Westerman and colleagues have identified a group of companies – the digital masters – that are getting 26% more profitability from their operations largely because they are managing their digital technology better. These aren’t just smaller-sized technology and software companies. They are large companies that are creating a lot more value from digital technology including new technologies like social media, mobile, and data analytics.

Digital masters successfully perform two key essentials. They invest in technology and increasingly do more with digital technology. The other is more important, according to Westerman. They are leading the technology by having a strong vision, strong company governance, and making the organization ready to change and then driving that change through. Digital masters excel in investing in digital technology paired with strong vision and leadership.

Westerman cites Nike as a clear digital master. The company is end-to-end digital, from supply chain to design and marketing. They combine custom-designed social media with a digital supply chain. By creating their Nike Digital Sport group, they linked all of these functions together, and they’re able to launch more products, customize products, test new designs and truly customize advertising to a highly personal level.

Caesars Entertainment is another digital master. Within a Caesars venue, customers are supplied with a concierge on their personal phones that immediately responds to any need – perceived or actual. And the largest copper company in the world, Codelco, is using digital technology internally to track production in its copper mines and simultaneously update customers about orders. Digital technology also allows them to use driver-less mining trucks and may even open the door to increasing production while minimizing the volume of human activity underground and corresponding safety concerns.

Sponsored Research and Executive Workshops
Companies come to the CDB with an interesting research question that translates into sponsored research activities. “The key reason people come to the Center and work with us is to put world-class management research from the Sloan School together with practical problem-solving,” he says. “We approach it in a way to get some really great academic work done and the sponsors get real value for their question or problem.” Nearly 20 companies across multiple industries have chosen to sponsor CDB research.

Research within the CDB involves both the IT professional who has a problem to solve and the non-IT executive who often feels the company is not getting enough value out of IT but doesn’t know what to do. “Companies sponsor our research center to look at some of these challenges,” says Westerman who personally leads a popular course at the MIT Sloan School of Management, “Essential IT for Non-IT Executives.” There presidents, CFOs, and business unit leaders learn how to perform their roles better, and work more effectively as a team with their CIOs. Additionally, Westerman provides senior executive workshops where people can learn to drive technology value in their company, understand what digital can mean for them, and more effectively play their role.

“These executive workshops are fantastic because it brings everybody in a large company up to the same speed,” he adds. “They walk away empowered to drive change through the organization.” Westerman has also summarized his years of research on the topic in a book, The Real Business of IT: How CIOs Create and Communicate Value.