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Land O'Lakes CIO: Old IT metrics hamper new transformation goals
The metrics by which business leaders typically measure IT may directly conflict with stated transformation goals. Here's how we fixed this problem
It became clear to me several years ago that the way IT was measured in large corporations was the primary barrier toward innovation and digital transformation. The metrics by which business leaders typically measure IT are diametrically opposed – and often in direct conflict – with a company’s articulated desires.
We execute IT projects for a variety of purposes, including to:
- Reduce costs within IT
- Reduce costs in a business function
- Embrace technology to drive business outcomes and revenue growth
- Provide consumer convenience and exceptional experiences
- Defend market share against digital natives, startups and venture-backed firms
Once I realized that ROI was not the primary measure of success in many of these instances and that these measures are fundamentally at odds with one another, with the support of Land O’ Lakes, Inc.s’ executive team, I separated the funding mechanisms, the teams, and the metrics – and I'd urge other CIOs to do the same.
[ Why is adaptability the new power skill? Read our new report from HBR Analytic Services: Transformation Masters: The New Rules of CIO Leadership ]
It's not all about cost
In IT operations, efficiency, quality, cost per unit and total cost reductions, along with consistently maintaining a superior service level agreement, are very important. That’s how we measure our IT operations group.
When it comes to IT projects, it’s all about delivering quality projects on-time, on-delivery, and on-budget. In our efforts to defend our market share and drive growth, it’s about customer satisfaction, conversion rates, market share, and gross margin.
Conversely, when your mission is innovation, the focus is all about developing new ideas, driving continuous improvement, and advancing our businesses objectives in new, unique ways.
If my team’s sole focus was on cost, we would never spend extra for the talent necessary to be creative and innovative. If we were always focused on efficiency, we would never go the extra mile in a project to deliver above and beyond what’s required – whether that’s meeting a deadline or exceeding the expectations of our internal and external consumers.
Make innovation the focus
In order to make innovation the focus, we had to designate a group within IT that didn't have to worry about cost or efficiency as a primary measure of success.
In six years, I’ve seen this grow from a nonexistent business to the largest distributor of ag-tech software to America’s farmers.
It’s still small in our larger business portfolio, but it’s growing at a significant clip on a year-over-year basis and has become the foundation for a transformed business.
We’ve seen huge benefits in the way we develop software and in the acceptance of agile practices across our entire enterprise. We’ve also seen tremendous benefit to the relationship between IT and all functional and business leadership, such that it’s creating a momentum for innovation and technology leadership across all business functions and in every process in the company.
Additionally, there are significant additional benefits that are transforming the culture and performance and it’s changing our company at its core.
We're now at a point where all processes and functions are becoming more innovative and we're incorporating technologies as competitive differentiators for our business and reducing our costs in other front-office and back-office operations.
Structure strategic IT business teams
Based on the success of these efforts, I'm always looking for additional opportunities to set up separate businesses around specific goals in IT. We’re up to seven of these separate IT “businesses;” some of which are extremely small. One business has only five employees and that’s because their goals and objectives are so differentiated from their peers in IT that they would have otherwise gotten lost in our larger organization.
This strategy has enabled me to successfully work within the constraints of a large company.
[ See our related story, Lessons from Land O’ Lakes CIO on how to organize IT for innovation. ]
Action steps for success
I'd encourage other CIOs to take a closer look at the metrics by which you are being evaluated.
If your firm is only focused on cost reductions and ROI, you’ll likely respond by being extremely frugal. That means you’ll likely execute only on the projects that have a clear return. While perhaps successful in the short term, over time you are putting your company at risk of being disrupted by digital natives and potentially inhibiting the competitiveness of the entire firm.
I'd also encourage CEOs to be better supporters of technology, R&D, and innovation.
CIOs need the leeway to take measured risks and focus on things greater than the next monthly number, which usually results in poor decision making, increased IT operating costs, and unnecessary complexity that inhibits a firms agility and progress.
At Land O’ Lakes, Inc., my ability to succeed has been enabled by the full support of our CEO, our board and their passion for continuous improvement and the long-term health of our company.
If businesses truly want to embrace technology and desire innovation to grow, we all must recognize that the evolution of IT metrics is key to that journey.
[ Leaders, do you want to give your team a greater sense of urgency? Get our free resource: Fast Start Guide: Creating a sense of urgency, with John Kotter. ]