Four growth phases every IT organization goes through....

Did you know that most IT organizations go through similar growth stages as they mature? And did you know there is a lot you can learn from other organizations that have already gone down the same road?  

Agility.nu has collected results from various case studies and research papers and assembled a road map that help you to lead your IT organization towards agility, innovation and high performance. 

Typically four stages can be recognized. To our experience every IT leader recognizes these stages and can also roughly plot his or her organization in one of these four stages. And most of them want to move as quickly as possible into the stage of high performance, as IT is a key enables for business innovation. But the reality is that most IT organizations are not there yet. And for those who are still in the responsive stage, the steps to High Performance are not quick and easy. And for those who are in the proactive stage, some fundamental changes are required to prepare for high performance, among which is the crucial capability of business leaders to manage the IT agenda. Managing IT at arm's length which is typical for the middle two stages is not sufficient in the fourth stage. Business leaders must take co-ownership of IT and together with the CIO drive the agenda for digitalization.

Let's take a closer look at the four stages and their main characteristics and try to draw some lessons and conclusions:

Reactive
IT organizations in this stage lack clear leadership and planning. They are defensive and try to justify the past. They fail to deliver value to the organization. Organizations caught in this state either dissolve or finally manage to revert back to the responsive state.
I assume that most IT organizations have already left this stage behind and have managed to at least move to the responsive stage (although some negativism and reactive behavior is no stranger to anyone). 

Responsive
IT organizations in this stage are driven by efficient delivery of IT services. IT is seen as a cost and therefore expenditures are managed by budgets. The IT department is primarily accountable for the reliable and timely delivery of IT services. In order to guarantee reliable and timely delivery these organizations rely on well developed in-house technical capabilities.
The main orientation is in-side-out, which means that technology and technically ‘perfect’ solutions are considered first. Structures are hierarchical and leadership style shifts from directional (enforcing) to coaching. Planning is targeted on short term goals and led by present activities and issues. The technical skills of the IT staff are well developed and people are rewarded for getting the job done and for the output they deliver. Sourcing relies mainly on in-house expertise with occasional buy-in of specialized technical expertise.
The organizational structure is based on hierarchical functional silos (teams). Team leaders are focused on the coordination of activities within their team. No clear governance structure exists between business (units) and IT for deciding on conflicting priorities. IT maintains an arms-length relationship with the business stakeholders, supported by formal SLAs and service tickets. And ITIL alike process frameworks are used to structure IT processes and to ensure reliability of services.

As this stage progresses business executives start to learn how IT can be applied effectively and they start to recognize the value of IT. The CIO starts advocating the further possibilities and builds on the image of IT. 

Central shared values are “delivered as promised” and “in-time/on budget” both with a strong orientation towards the technical possibilities. People are rewarded for their delivered output. Predictability, control and efficiency are seen as the key values and strengths.
Together with the predominant internal focus the typical culture fit for organizations in this stage will be with the Hierarchy culture (see whitepaper on culture archetypes).

Proactive
During the proactive stage the orientation shifts from supply to demand. The IT organization becomes proactive in leveraging IT strategically for the needs of the business. IT becomes more business critical and business managers regard IT as a strategic asset. IT leadership increasingly focuses on alignment of IT goals with business goals. Partnership - between business executives and IT - becomes an important concept during this stage. Relationships with business stakeholders are built on mutual trust and business stakeholders are actively involved in the definition and decision making with respect to solutions for their organization’s problems. Shared goals guide the IT teams in their day to day work.

The hierarchical organizational structure (functional silos) from the previous stage has been replaced by a matrix organization structure in which technical and business knowledge are interwoven (e.g. demand-supply organization model). Also IT processes have been adjusted and now incorporate also the demand responsibilities next to IT supply.
Employees have developed consulting and communication skills, and skills to manage relationships and contractual arrangements with external service providers. The scale of outsourcing is increasing.
Governance structures have been put in place in which business executives and IT leaders together steer the IT portfolio and conflicting priorities. The role of the CIO has been transformed into a strategic partner. (Read more about partnership in our whitepaper on effective partnership).

Shared values are built around “customer satisfaction”, “partnership” and “deliver outcome rather than output”. IT employees have a proactive attitude and are business orientated. They are motivated by solving other people’s problems, delivering added value and by innovating products and services. The culture for organizations in the pro-active stage contains a mix of characteristics from Clan and Market cultures.

High Performing
Once the proactive stage is accomplished, the IT organization can progress to the last stage. Here the IT function is fully integrated into the business strategic framework. Business leaders are aware of their responsibility and task to govern the IT function and act accordingly. IT is utilized to the advantage of business innovation and growth. The role of the CIO now is one of driving business innovations through unleashing the potential of IT. The CIO will actively take on (co-)responsibility for realizing business change as outcome of the IT investments.

During this fourth stage the classic IT organization has ceased to exist and is reorganized to a high performing core team and commodity services have been - or at least can be - largely outsourced through strategic sourcing arrangements. The retained internal IT organization has a high focus on innovation and seizing opportunities for further exploitation of the potential of IT.

To enable the agility that is necessary in this stage the organizational culture needs to shift towards an Adhocracy culture. The management style now focuses on empowerment. Team members are aware of the need for excellence and have an orientation towards continuous improvements, knowledge sharing and collaboration. Agility of the organization is 'programmed' in the organization’s culture and values. By satisfying the conditions for energy, creativity and innovation the organization is able to excel.

Lessons and conclusions
Though the above descriptions of the four growth stages will never be hundred procent applicable for every organization, the transitions IT organizations go through is unmistakable. There is lots to learn from analyzing case studies at companies that are at the forefront of such developments. I want to limit my conclusions to three main observations:

1. To make a transition from one stage to the next stage requires attention to and development of a broad range of organizational capabilities. It is not possible to make a transition to the next stage if one only develops one or a two aspects, such as "implementing standardized processes (ITIL)" or a "outsourcing IT tasks to qualified suppliers". All aspects must be viewed and developed in their mutual coherence. 
2. As organizations grow on their road towards High Performance a CIO's attention for aspects like organization culture, agility, creativity and organizational energy becomes increasingly important. Like a focus shift from technology to functionality to services to value creation (with new technology).
   
   

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Christiaan. Kooijman, Agility.nu