It can be stated that the role of the Chief Information Officer (CIO) is about managing the technology for organizations. COI’s role is obviously being evolved into a more strategic, in light of the maturity of Information Technology in organizations. In that regard, such evolving role focuses on supporting and influencing the strategic direction of the company, carefully aligning the business goals and the IT. The role of the CIO in that matter can be seen through the statement that there is no element of the IT that can be considered as strategically important for the organizations; “None of the pieces are strategic by themselves. None.
IT has too many parts” (Stenzel, 2007). Accordingly, the future outlook for the CIO role in organizations is better explained as an executive of a separate enterprise, which cooperation with the main company is viewed as business functions consuming the services of the IT enterprise. Such view enables better alignment with the strategic direction of the company, and at the same time, it enables better performance management.
Such view of IT in the organization provides a better explanation of the way the CIO will be able to better harmonize each part of the department-enterprise, deliver better value for the organization, and what is most important, the CIO will be capable to develop the assets of the enterprise. Accordingly, it is a better way of building an influence over business. As stated in Fortune 500 CIO, the CIO’s influence is about building the right relationships.
IT as a service for which the organization will be an internal customer will better suit the strategic direction of the company, where on the one hand, the application will be developed to suit to solve specific tasks, for which accordingly a market price will be paid, rather than price driven by costs. Although, the prices set might not go in the accounting system of the company, they will provide a truthful representation of a performance and “drive better decision making” (Stenzel, 2007, p. 154).
On the contrary to what it might be assumed, such cooperation will enable closer relationships between the IT and the organization, in meeting the company’s strategic objectives. At the same time, the IT will be able to develop its capacity. External collaboration was found to be an important priority for the world’s chief executives, in which such collaboration will be capable of building the company’s innovative capacity (Center for CIO leadership, 2007).
The qualities required to for the CIO are numerous and might include a leadership role, building IT staff potential, contribution to strategic planning, being able of identifying opportunities for business processes, resourcefulness, and good relationship managers (Center for CIO leadership, 2007). Such skills and qualities are found to be important in taking a higher strategic role in the company. Accordingly, the involvement of the CIOs in the strategy of the company will lead to them marketing their services to the organizations, in the way IT can be strategically important for the organization. On the other hand, the company will not be concerned with questions such as the costs of a service or an application, and/or its purpose. They will have problems to solve, for which IT capacity will not be developed for the sake of IT, rather than for solving those tasks.
In such way CIO will orchestrate IT’s sections to “play harmoniously together to deliver strategic value “(Stenzel, 2007). Using such finance model as Activity-Based-Cost Management (ABC/M), the CIO will be able to look at the work performed rather than the resources used to produce such work. In that regard, such model allows identifying a particular symphony, due to the difficulty to identify the contribution of each instrument, and accordingly, its cost. ABC/M, on the other hand, will look on the result, and calculate the costs that led to such results, rather than the costs of each resource used separately “(Stenzel, 2007).
Accordingly, capacity management will allow identifying the resources within the orchestra which are attributed to the symphony played, and thus, customers will be charged for them. Customers will not pay for resources just because they are there; “[c]apacity that is not usable due to obsolescence or that is otherwise usable for other services and customers is not a cost properly attributable to current services and customers” (Stenzel, 2007).
Soft Assets and Scorecards
Explaining the relationship between intangible assets and Balanced Scorecards (BSC), it can be stated that it is all about metrics. Many of the company’s value generating assets are not tangible, but rather rest “in the ideas of people scattered throughout the firm, in customer and supplier relationships, in databases of key information supplied by IT, and cultures capable of innovation and quality” (Stenzel, 2007, p. 188). All of those aspects are hard to measure through standard performance measurements, i.e. taking a standard metric and comparing two periods. BSC, in that matter, might come in handy. The absence of metrics is not the only characteristics of intangible assets, for which BSC can be used to solve.
One aspect characteristic of intangible assets is their prevalence in the today’s business world, and accordingly with such prevalence, they account almost 75% of the sources of value in the company, which are not measured or reported (Stenzel, 2007, p. 192). The elusiveness of soft assets is translated into difficulties with implementing a strategy, mainly due to the challenges in producing a document that will reflect a strategy.
Such barriers to the implementation of strategy as vision barriers, resource barriers, management barriers, and others, are mainly caused by the omission of soft metrics. There is missing link outlined in each of the barriers, a link between short-term actions and long-term goals, budget and strategy, management direct responsibilities and strategy discussion. Balance scorecards introduce soft metrics which can measure soft assets, and might contribute to filling in the gaps in formulating the strategy of a company.
Using BSC with intangible assets can be helpful in measuring the performance of a company, which is now based mostly on such assets. The barriers to implementing a strategy merely outline the inability of people to incorporate intangibles into their performance measurement. BSC seems to allow bypassing such barriers, by introducing a framework that allows measuring those intangibles. For CIOs, the latter is especially important, considering the majority of their assets are soft, and accordingly, the traditional measurements might allow tracking only the financial indicators.
Through incorporating BSC, CIO simply follow a framework which allow putting into measurable plane what the company already knows. The simplicity of such advantage of the BSC can be seen through the example of a strategy workshop, which participants are aware of what their strategy is about, but they are unable to put into clear form. Such clear form is not only about writing them down. It is about following a particular lexicon, and fitting the measurable criteria into predefined, although general, categories, e.g. financial, customer, internal business processes, and learning and growth. CIOS are aware of the value of the skills and knowledge the employee’s possess, and knowledge on customers, where BSCs allow incorporating them into a measurable context.
Such context can be used to formulate a strategy, and store and report performance data (Myles & Jackson, 2004). Accordingly, unlike financial metrics, BSC can be adapted, modified, and changed easily, according to the specific requirements of CIOs. Thus, it can be stated that for the business in general, the majority of which assets are intangible, and Information Technology in particular such tool as BSC can be helpful in overcoming the limitations of traditional performance measurement systems.
References
Center for CIO leadership. (2007). The CIO Profession: driving innovation and competitive advantage. The IBM Center for CIO Leadership. Web.
Myles, J., & Jackson, P. (2004). Managing Intellectual Capital through the Balanced Scorecard. Web.
Stenzel, J. (2007). CIO best practices : enabling strategic value with information technology. Hoboken, N.J.: John Wiley & Sons.