I recently spoke with Robert Kaplan, author of the Balanced Scorecard, about how he would revise his framework given the economic meltdown in the last few years.
The addition he would make is a risk scorecard that is equally important as the business strategy scorecard, and he would advise companies to stress test their IT strategies.
This made me wonder how CIOs should be stress testing their IT strategies, and if they have people in place paying attention to market shifts that could impact the ability of IT to support changing business needs.
There are a lot of what-if scenarios that financial institutions failed to consider. For example, many banks didn’t have a what-if scenario in place for declining housing prices, or a flat-out housing market bust, and the impact that would have on their asset holdings, Kaplan said. It’s not that they didn’t see the signs that the housing market was heading south — they just didn’t have a plan in place to account for that scenario.
And the banks had plenty of models and software in place, but they didn’t have people dedicated to identifying what-if scenarios as the markets began to shift and customer needs changed.
“I don’t think it was a lack so much in software, but a lack of imagination. Maybe [the banks] didn’t want to think that the good times had a possibility of ending,” Kaplan said.
CIOs have seen their share of good times coming to a close, between this recession and the dot-com bubble bursting. But I don’t really hear much about CIOs stress testing IT strategies. What you mostly hear about is stress testing as it applies to security or network and application performance.
What if your outsourcing provider goes out of business? What if the business decides to discontinue a product line or introduce a new supply channel? What if you have to cut your staff in half — what happens then to your project queue? These are but a few what-if scenarios that could derail IT strategies.
Kaplan also shared his thoughts on how IT can help the business measure the value of IT investments and how CIOs can make IT more valuable to the business. A key way to elevate IT strategies with the business is to embed IT in a business product or service, akin to the FedEx tracking model, he said.