Thrasher’s Hierarchy of Business IT Needs

I recently attended an IT panel discussion where one of the attendees asked the panel what IT initiatives are strategic to the business. There was a brief debate about what “strategic” means, and I came to the conclusion that it’s impossible to tell whether or not a specific IT initiative is strategic to a particular business without understanding what’s going on at that company.

In thinking about this further, I remembered Maslow’s Hierarchy of Needs, and I decided that there must be an equivalent Hierarchy of Business IT Needs that determine an IT organization’s strategic focus at any point in time. This article describes such a hierarchy.

First, A Refresher: Maslow’s Hierarchy of [Human] Needs

If you ever took a psychology course, then you probably ran across Maslow’s Hierarchy of Needs. The concept is that people focus on the important things that we lack, but once certain levels of these things are achieved, then our focus shifts. For example, if we don’t have food and water then that’s our focus. Once we have food and water and everything else we need for our bodies, then we begin to think about our next level of concern: safety. Once our safety needs are taken care of, then we focus on love, belonging and social needs. Satisfy those needs and we focus on self-esteem. And so on and so on. Here’s a diagram that shows Maslow’s Hierarchy of Needs represented as a pyramid, with the more primitive needs at the bottom.



Thrasher’s Hierarchy of Business IT Needs

Now think about a business instead of a human being. In a sense, the business has the same sort of hierarchy, and depending on the maturity of IT use within the business, the “strategic” IT needs of the business will vary. Here’s a diagram that shows my Hierarchy of Business IT Needs.



Level 1: Business Survival

At the lowest level, there is a need for the business itself to survive. So at the lowest level of business IT need, there is a requirement for the processes in a business to work well enough to support the basic needs of that business. I’m using the word “processes” because technology is not required to fulfill this level of business need; the business may be able to use manual processes that don’t require technology at all. A business achieves its Level 1 needs when processes are working well enough that the business can deal with all of the basic requirements of being in business. This doesn’t mean that everything works well – it just means that there are manual workarounds and fallback plans in place to deal with any system issues, and manual processes in place to replace IT systems that are missing or don’t work.

Level 2: Safety and Stability

After a business’s Level 1 survival needs are met, the focus shifts to the next level to ensure continued survival, just as it does in Maslow’s Hierarchy. Level 2 provides safety and stability for a business; this means that processes and systems work consistently and reliably, and that there is a basic level of data security.

In Level 2 the business builds solid processes around the systems that it can count on, and makes an effort to replace or repair those systems that are unreliable. Data security is also a consideration in Level 2; no one should be able to get access to data that they shouldn’t look at. This doesn’t initially require any level of sophistication – data might be confined to a PC behind a locked door, or if the system is attached to a network then the network offers at least rudimentary protection against intrusion. Then as systems grow in importance and complexity, data security should increase to meet the expanding need.

Level 3: Systems Integration

Once a business has systems that are good enough to ensure continued survival, the focus shifts toward reducing unnecessary work caused by systems duplication and overlap. Up until this point, business IT effort has been applied to build or acquire individual systems. Now there’s a realization that systems must be integrated to provide the business with accurate, up-to-date and consistent data and information. In Level 3, IT resource is used to connect different systems together, move data among various databases, and eliminate redundant data entry.

Level 4: Simplification through Standardization

After the systems integration efforts of Level 3, the business begins to recognize that not all of the systems duplication comes from data overlaps. Many systems are too complicated, and there is often inconsistency in user interfaces, leading to unnecessary confusion and wasted effort. The same thing is true within the IT organization itself, where there is wasted effort because of the need to maintain and support many different technology platforms.

In Level 4, there is a move toward simplification. This is accomplished by implementing standards for technologies and methods, and using those standards to reduce the number of different software and hardware platforms used by the business, while providing a user interface that is more consistent and much simpler. Standards and simplification also lead to better controlled and tighter data security.

Level 5: Business Effectiveness/Efficiency/Speed

Once Level 4 is achieved, the focus goes beyond optimization of existing processes and systems, and the IT organization actively contributes to making the business better in new ways that are tied to overall business objectives. In Levels 3 and 4, we optimized the systems we built in Levels 1 and 2. Now in Level 5, technology is applied to make the business more effective, more efficient and faster.

Must Levels Be Achieved One at a Time?

A typical business starts at Level 1 and moves upwards from level to level after the needs of the current level are satisfied. Once a higher level is achieved, the needs of a lower level are no longer prioritized and are often forgotten. But if the business regresses – finds that the needs of a lower level are no longer being met – then the business will temporarily reprioritize to focus attention on the unfulfilled needs of a lower level (a data security breach is an example).

A business doesn’t have to accomplish everything required by one level before doing any work on a higher level. This is the same as in Maslow’s Hierarchy, in which human beings are free to make improvements at higher levels while they’re still working on fulfilling the needs of lower levels.

But as with Maslow’s Hierarchy, there is less payback from work done at higher levels until you have fulfilled all of the requirements from the preceding level. For example, security is nice, and you can lock your doors at night, but if you don’t have enough to eat then your focus is going to be primarily on getting food; it doesn’t do you any good to starve behind a locked door. The same thing is true for the Hierarchy of Business IT Needs: it doesn’t do you a lot of good to focus on IT’s strategic contribution to new revenue if your basic systems aren’t meeting the needs of the business. Your credibility will be questioned, and you’ll probably be building those new systems on a shaky foundation.

A Typical Progression

If a business follows the typical level to level progression then the work at Level 2 will include rework of some of the things done in Level 1, Level 3 will include rework of some Level 2 work, and Level 4 will have rework of some of the work done in Level 3. This is unfortunate, but it reflects the difference in priorities at the different levels. In theory you might be able to convince the business that all of your systems ought to be standardized and integrated from the start. But reality says that you’re not likely to be able to deliver a standardized and integrated solution in the timeframe required by your business, nor are you likely to be able to convince anyone that you should do so.

Once a business reaches Level 5 and IT goes into new areas, each of these new areas will tend to regress a bit in the Hierarchy. Initial focus in a new area may be on a standalone system. After the standalone system works, then there will be an effort to integrate the standalone system with other IT systems. Eventually standards and simplification will be applied in the new area. This cycle will be repeated again and again as IT broadens its focus on new and different benefits to the business.

More than One Hierarchy at a Time

In large companies it’s possible for different parts of a company – for example, different divisions – to be at different levels in the Hierarchy, just as different members of a family may be at different levels on the Maslow Hierarchy. In such a case, each part of the business should be addressed separately at its own level, with perhaps an overall focus on bringing the entire company up to certain standards.

However, too strong a corporate emphasis on standards – a Level 4 concern – will cause a conflict with a division which is still struggling to meet lower level needs. It’s important for each party in such a dispute to understand the motivation of the other party, and to reach a compromise which helps the division go through the lower levels more quickly. Otherwise a premature emphasis on standards for the division will cause the division IT organization to be perceived as failing by the business when it’s caught in the middle between corporate and divisional needs.

Conclusion

The word “strategic” is thrown around a lot in IT; everyone wants to be strategic or to be doing strategic things. But it’s important to recognize that what’s strategic to one business is not necessarily what’s strategic to another business because they may be at different levels on the Hierarchy of Business IT Needs. And even for a single business, what’s strategic one year probably won’t be strategic the next year when some of those strategic goals have been accomplished.

Just as human beings have a hierarchy of needs that causes us to focus on different needs at different points in our lives, so too does a business have a hierarchy of needs that causes the business to have different IT needs at different points in time. Success in IT comes from recognizing the level of your business in the hierarchy, and focusing on the things that are most important to your business in its current hierarchy level. Being strategic means doing the best thing for your business in its current state. Remember that and it will be much easier for you to focus on strategic goals for IT.

Notes:

1. Right after I wrote this newsletter, I happened to read an article in the Fall, 2007 issue of the MIT Sloan Management Review (SMR) entitled, “Avoiding the Alignment Trap in IT” (for full text of the article, click here) The “Alignment Trap” mentioned in the title of the SMR article refers to the problem that businesses have when an ineffective IT organization tries to tackle the most important business priorities of a business. The article recommends that IT organizations focus on their own effectiveness before going after the toughest business problems. Sound familiar? Using the terminology of my Hierarchy of Business IT Needs, businesses with an Alignment Trap are going after Level 5 priorities before they’ve mastered Levels 3 and 4.

2. Some of you may be comparing the Hierarchy to the Capability Maturity Model (CMM) that was used a few years ago to describe the levels of maturity of software development organizations. But the only thing that the Hierarchy of Business IT Needs and CMM have in common is the number 5: each has five levels. CMM refers to measurement of a software development organization from the inside out, and the Hierarchy of Business IT Needs refers to an assessment of Business IT from the outside in (i.e., from the business viewpoint). The Hierarchy of Business IT Needs is intended to explain why different people in different businesses disagree on what’s strategic for IT at any point in time – not to comment on the way that software is being developed.

3. For more information on Maslow’s Hierarchy of Needs, click here. For more information on CMM, click here, or on CMMI (which replaced CMM), click here.