“The Real Business of IT: How CIOs Create and Communicate Value” by Richard Hunter and George Westerman (2009) is an authoritative guide designed to help Chief Information Officers (CIOs) and other IT leaders demonstrate and enhance the value of IT to their organizations. This book combines real-world scenarios, rigorous analysis, and actionable insights to emphasize the importance of IT’s strategic role in the business. Below is a detailed summary of the book, focusing on key points and actionable advice.

Point: The book starts by dissecting the concept of IT value, which encompasses not just the cost of IT services but also its impact on enabling and transforming business operations.

Example: It discusses the difference between running IT as a cost center and a value center. The authors assert that IT’s value should be evaluated based on its ability to improve efficiency, support business capabilities, and drive innovation.

Action: Evaluate ROI on IT Projects
– Establish clear metrics and KPIs to measure the return on investment (ROI) for IT initiatives.
– Regularly review these metrics with business stakeholders to ensure alignment with overall business goals.

Point: IT must be inextricably linked with the organization’s strategic goals. CIOs should ensure IT initiatives support the broader business strategy rather than operating in isolation.

Example: The book mentions how companies like FedEx leverage IT to enhance customer service and operational efficiency. FedEx uses IT to provide real-time package tracking, thereby improving customer satisfaction and trust.

Action: Integrate IT Strategy with Business Strategy
– Schedule regular strategic planning sessions with executive leadership.
– Develop an IT roadmap that mirrors the company’s five-year business plan, ensuring IT projects support key business objectives.

Point: Effective communication about IT’s contributions is crucial. The authors highlight the need for CIOs to articulate the value of IT in business terms that resonate with non-technical executives.

Example: The book discusses the use of metrics like Net Present Value (NPV), internal rate of return (IRR), and business value realization (BVR) to frame IT’s contributions in familiar financial terms.

Action: Develop a Communication Plan
– Create regular reports and dashboards that translate IT metrics into business outcomes.
– Use storytelling techniques to present IT success stories in a compelling way that highlights benefits to the business.

Point: Strong, trust-based relationships between IT and business units are essential for IT to be seen as a strategic partner.

Example: The authors provide examples of CIOs who have successfully embedded IT staff within business units to facilitate better understanding and collaboration, leading to more successful IT projects.

Action: Embed IT Staff in Business Units
– Assign IT liaisons to work directly with different business units.
– Encourage regular cross-functional meetings to foster communication and collaboration.

Point: Managing the risks associated with IT is vital. The book stresses the importance of identifying, communicating, and mitigating IT-related risks.

Example: It refers to the practices of companies like Boeing, where risk management in IT projects involves rigorous testing and contingency planning to avoid project overruns and failures.

Action: Implement a Risk Management Framework
– Conduct regular risk assessments for IT projects.
– Develop a risk mitigation plan and communicate it to all stakeholders.

Point: The authors emphasize the importance of effective IT governance frameworks to ensure that IT investments are aligned with business priorities and that they deliver value.

Example: The book mentions the success of companies using frameworks like COBIT (Control Objectives for Information and Related Technologies) to improve IT governance and ensure accountability.

Action: Adopt an IT Governance Framework
– Implement a recognized IT governance framework to structure decision-making.
– Establish a Governance Council to oversee IT project approvals and performance reviews.

Point: Cost management remains a critical aspect of the CIO’s role. The book suggests that CIOs should understand and optimize IT spending without compromising on value delivery.

Example: The authors refer to Procter & Gamble’s approach of leveraging outsourcing to manage costs efficiently while focusing internal resources on strategic initiatives.

Action: Optimize IT Budget Allocation
– Analyze IT spending to identify areas for cost savings.
– Consider outsourcing non-core functions to reduce operational costs.

Point: CIOs should not only manage current IT operations but also drive innovation and business transformation. IT should be a catalyst for change in the organization.

Example: General Electric (GE) is cited as an example where the CIOs have led significant digital transformation initiatives, such as the development of the Predix platform for industrial internet applications.

Action: Lead Digital Transformation Initiatives
– Identify and prioritize digital transformation opportunities.
– Allocate resources towards projects that have the potential to transform business models and drive competitive advantage.

Point: The success of IT initiatives largely depends on the talent within the IT department. CIOs need to focus on recruiting, retaining, and developing skilled IT professionals.

Example: Google’s approach to talent management is highlighted, focusing on creating an innovative and engaging work environment that attracts top talent.

Action: Invest in IT Talent Development
– Implement continuous learning programs and professional development opportunities for IT staff.
– Establish a culture of innovation and recognition to retain top talent.

Point: Data and analytics are central to extracting actionable insights that drive business value. The authors advocate for the strategic use of data to make informed decisions.

Example: Amazon’s use of data analytics to personalize customer experiences and optimize supply chain operations serves as a prime example of leveraging data to gain a competitive advantage.

Action: Implement Advanced Analytics Tools
– Invest in data analytics platforms and train staff to use them effectively.
– Create a data-driven culture where data insights inform decision-making processes.

Point: IT should focus on enhancing customer experiences both within the organization (internal customers) and for external customers.

Example: The book talks about how USAA integrates IT with customer service operations to deliver superior customer experiences, such as mobile banking and instant claims processing.

Action: Enhance Customer Experience through IT
– Develop IT solutions that directly improve customer interaction points.
– Establish feedback loops to continually refine and enhance IT services based on customer input.

Point: Measuring the performance of IT services is crucial for demonstrating value. The authors stress using a comprehensive set of metrics that align with business objectives.

Example: The Balanced Scorecard approach is recommended, which includes financial, customer, internal process, and learning/growth perspectives.

Action: Implement a Balanced Scorecard
– Develop and monitor a balanced scorecard that includes key IT performance indicators.
– Regularly review performance metrics with business stakeholders to ensure continuous improvement.

“The Real Business of IT” presents a compelling case for the strategic role of IT in modern organizations. By understanding and communicating IT value, integrating IT strategy with business goals, managing risks, and fostering innovation, CIOs can significantly enhance their organization’s performance and competitiveness. The actionable steps provided in each section of the book guide CIOs and IT leaders in making informed decisions that align IT initiatives with business strategy, ultimately driving greater value and success.

This summary provides a structured overview of the book’s key points and practical actions CIOs can take to apply these insights in their day-to-day roles. The examples cited offer real-world context to the concepts discussed, making the book a valuable resource for anyone in IT management.