When I ask individuals or groups around the world what their greatest challenge is related to implementing effective enterprise governance of IT, the answer is consistently “getting the business appropriately engaged”. Conversely, where they have made progress, the “tipping point” has also consistently been when the business accepted ownership of, and accountability for the use of IT to create and sustain business value. We will continue to come nowhere near to realizing the potential value of IT-enabled investments until we address the challenge of business engagement and ownership.
A number of years ago, my wife and I built a house – or, more accurately, signed a lot of cheques to get the house built. We spend an enormous amount of time up front – first with our architects, then with Mike, our builder and the architects – and once actual construction started, were on-site almost every day – often more than once. Despite all the time we had spent up front, there were many decisions to be made – decisions that often cost little or nothing, even saved money, but – if they had not been made – would have resulted in livability issues and/or increased costs down the road. We were, and still are very pleased with our house.
Now, if we had built our house the way most organizations acquire/develop IT systems, what would we have done. We would have spent some time sketching out what we thought we wanted, probably bypassed the architects because we didn’t need them, and then told Mike what we wanted, what we wanted to spend and left it at that. After all,we weren’t in the house building business – we had other more important things to do. When Mike would have called to tell us the house was ready, we wouldn’t have liked it – we might even have hated it! We would have fired Mike – if we lived south of the 49th parallel probably sued him. We would then have hired someone else to “fix it” and/or sold it and started again. Sound familiar? While it was certainly true that we weren’t in the house building business – we were in the house living business, and – as the owners – the house was being built with our money. What we would have done was abdicate our responsibility as owners – the ones who would have to live in that house for the next 10 – 15 or more years – to Mike. It wouldn’t have been Mike’s fault – it would clearly have been ours!
As long as the business continues to see anything to do with IT as an IT problem (“we’re not in the IT business”) and abdicates their responsibility as the owners and ultimate users of the technology to the IT function, we will continue to have significant challenges around realizing value from IT. Putting it in the governance context, only when IT is seen as an integral part of enterprise governance will the issues around realizing value from IT investments be addressed. A 2007 report from the BTM Institute confirms that enterprises focused on converging their business and technology disciplines exhibited superior revenue growth and net margins relative to their industry groups and exhibited consistently greater rates of return than those of their competitors.
Boards and executives need to understand that they can no longer treat IT as a “black box” – something distinct and separate from their core business.Today, the box is empty; its contents distributed and embedded throughout the enterprise as electronic bits of business processes that run up, down, across and among enterprises and their customers, suppliers and other stakeholders. In The IT Value Stack, Ade McCormack says “Information technology isn’t an optional extra, it is a condition of entry to most markets. It is the enabler of business sustainability. The CEOs who don’t get that are either in the wrong job or have done some calculations in respect of their retirement date and this reality dawning on the shareholders.”
The need for dialogue
A number of years ago, a senior Australian public sector executive said to me “I need to get the right people in a room having the right discussion.” His statement captures the essence of the problem. We need to break down the current siloed view of IT and the business – the “two solitudes” as I often describe them. We need to create and sustain an on-going dialogue between the business and IT leaders. Whilst an important part of this will be informal, this is necessary but not sufficient. We need a formal governance framework which promotes and supports such a dialogue.
Depending on the current maturity of an enterprise, this dialogue needs to include a number of key elements:
- Understanding the role of IT in an enterprise – a role that has evolved over the last few decades from automating transactions to fundamentally transforming the nature of the enterprise;
- Understanding what constitutes value for the enterprise, how value is created and sustained, and how IT contributes, or can contribute to creating and sustaining value. We need to get away from trying to measure IT’s precise value which is a meaningless exercise guaranteed to keep ranks of MBA toting consultants busy, to understanding how IT contributes to value;
- Understanding the roles, responsibilities and accountabilities of the board, executive management, business unit and IT function management in maximizing the contribution of IT to business value;
- Developing a comprehensive program of change to implement or improve governance processes and practices around value management, focused initially on key “pain points” where early results can be achieved;
- Managing the journey – learning by doing, leveraging successes and continually improving the processes and practices.
Enterprises do not have to start from scratch when undertaking such a program. There is a growing body of knowledge in this space. Since The Information Paradox was first published some 10 years ago in 1998, many more books and articles have been written on this subject and many organisations such as the IT Governance Institute (ITGI), the Office of Government Commerce (OGC) and the Project Management Institute (PMI), as well as academic institutions such as Cranfield and UAMS, and vendors such as Fujitsu have developed frameworks and methodologies to assist enterprises on this journey.
The need for effective enterprise governance of IT is real – the on-going cost of not doing so is huge – the resources are available to make it happen – it is time to act!
 Business Technology Convergence Index, The Role of Business Technology Convergence in Innovation and Adaptability and its Effect on Financial Performance, BTM Institute, June 2007