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value of intangibles. Customers get to enjoy intangibles even when they cannot articulate them; CIOs need to learn how to measure and manage them to allow the IT organization to more successfully enable enterprise value. The next section presents a framework for measuring and managing intangible IT assets that enable enterprise strategy and thereby carry significant weight in the ROI calculation for new IT proposals.
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a framework for measuring and managing it intangibles
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As discussed in s 1 and 2, strategy and IT architecture establish the platform from which the IT organization accomplishes all its work. Strategies and architectures give people throughout the enterprise a conceptually tangible framework for understanding how their individual activities contribute to the achievement of common goals. To help enterprise leadership understand ways to measure, manage, and achieve a return on intangible investments and resources, HR researchers Dave Ulrich and Norm Smallwood have developed an Architecture for Intangibles.2 Their architecture builds progressively from basic leadership competencies up through concepts of increasing complexity (see Exhibit 8.2). Each level of this architecture carries a unique set of leadership responsibilities that build on the success of previous levels. The CIO who succeeds building level 1 establishes and defends the IT organization s reputation in terms of its ability to deliver products and services as promised to internal and external stakeholders. Having established trust and the authority that accompanies trustworthy behavior and performance by the IT organization, the CIO works to define and communicate a compelling vision of the future with a growth strategy in terms of customer intimacy, system and service innovation, and expanded services at level 2 of this architecture. Building level 3 upon the trust, authority, and vision of levels 1 and 2, the CIO then supplies the support that the IT organization needs to build its core competencies and the intangible value those core competencies in turn pass along to the enterprise. Then and only then can the CIO work to further develop the IT organization s capabilities and create enduring value for the entire enterprise. Ulrich and Smallwood make this architecture work because of the measures they choose to capture intangible value in the IT organization:
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Building Value through IT Organization Capabilities
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Aligning Technical Competencies
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Compelling Strategy
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EXHIBIT 8.2
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Architecture for Intangibles
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These capabilities the collective skills, abilities, and expertise of an organization They represent the ways that people and resources are brought together to accomplish work. They form the identity and personality of the organization by defining what it is good at doing and, in the end, what it is.3
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Identifying Intangibles Worth Managing The CIO s first step when designing an architecture for measuring and managing IT intangibles is to select measures consistent with enterprise strategy. Fortunately, Ulrich and Smallwood have already established a starter set from researching well-managed companies that usually surpass
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chapter 8
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their competitors in several measures and remain at least on par with industry performance for the others:4 Talent: Attract, motivate, and retain competent and committed people. Speed: Make important changes rapidly. Shared Mind-Set and Coherent Brand Identity: Ensure that employees and customers have positive and consistent images of and experiences with our organization. Accountability: Obtain high performance from employees. Collaboration: Work across boundaries to ensure both efficiency and leverage. Learning: Generate and generalize ideas with impact. Leadership: Embed leaders throughout the organization. Customer Connectivity: Build enduring relationships of trust with targeted customers. Strategic Unity: Articulate and share a strategic point of view. Innovation: Perform well with new projects in terms of both content and process. Efficiency: Manage costs. These measures of capability reflect the ways that intangible value surfaces from within the IT organization as it delivers on the competencies and abilities of its individuals. The art of designing a strategically aligned architecture of IT organization intangibles lies in selecting and customizing the measures that enable the strategic objectives of the enterprise by building and leveraging IT capabilities. The preceding chapters have already discussed ways the CIO can customize these measures of capability to fit the demands placed on the IT organization as it works to enable enterprise strategy. With its strategic focus, 1 describes concrete ways that CIOs can achieve accountability, collaboration, leadership, and strategic unity. 2 addresses the many ways IT architecture enables the work of IT governance, portfolio management, and building the IT organization so that the CIO can manage talent, shared mind-set and coherent brand identity, collaboration, leadership, and strategic unity. The third chapter s focus on tactical agility shows how CIOs build speed, shared mind-set, accountability, collaboration,
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