Technology per se is just a cost – it is how the business uses technology, and manages the change that technology both shapes and enables, that determines whether the technology contributes to business value. Over the last few decades, the way that we use technology – and who uses it, has changed dramatically. Yet one thing that has not changed is the on-going questioning of the value received from our investments involving technology. As we move into an increasingly digital universe, there has never been a more critical time to address this question.
As I discussed in a previous post – the “IT value” standoff, as long as boards, business executives and line of business (LOB) managers continue to view this as a technology issue, and fail to accept appropriate responsibility and accountability, and the CIO and the IT function either see their responsibility and accountability ending with the delivery of the technology capability, or are unwilling to “let go”, often because they have no confidence in the LOB managers to get the job done, we will continue to fall far short of realizing the full potential of the digital universe.
What has been lost in all this is the understanding of, and accountability for managing the increasing breadth and depth of business change that technology both shapes and enables, and which is required if value is to be created and sustained! We need to change the conversation – to change it from one largely about the cost of delivery of technology to one focused on creating and sustaining value from business change.
Business value will only be realized from our increasingly significant and complex investments in IT-enabled change when complementary changes are made in the business – including changes to the organizational culture, business and operating models, business processes and practices, people’s work, and the skills and competencies required to successfully get the work done, reward and incentive systems, organizational structures, physical facilities etc.
All this is blurring the roles and responsibilities of IT and the business functions, and giving rise to a fundamental rethinking of how IT, and it’s delivery and use is governed and managed, and the capabilities that are required to ensure and assure that the use of technology contributes to creating and sustaining business value.
In the 1998 edition of The Information Paradox, I introduced the “Four Ares” as the key questions that must be addressed by governance. Subsequently, in the 2008 update, I introduced the Strategic Governance Framework (SGF), relating it to the then emerging digital economy, and described the 10 key management domains that must be included in any governance framework. In the remainder of this post, I will reintroduce and briefly describe both the “Four Ares”, and the SGF (somewhat further evolved since 2008). I will then use a combination of both to illustrate the responsibilities of the board, executive management, LOB management and IT management related to value.
The four “ares”
As we said in The Information Paradox, “ Tough questioning is critical to get rid of silver bullet thinking about IT and lose the industrial-age mind-set that is proving extremely costly to organizations. Asking the four “ares,” in particular, helps to define the business and technical issues clearly, and thus to better define the distinctive roles of business executives and IT experts in the investment decision process. Are 1, Are we doing the right things? and Are 4, Are we getting the benefits? raise key business issues relating to both strategic direction and the organization’s ability to produce the targeted business benefits. Are 2, Are we doing them the right way? raises a mix of business and technology integration issues that must be answered to design successful [IT-enabled] change programs. Are 3, Are we getting them done well? directs attention to traditional IT project delivery issues, as well as to the ability of other business groups to deliver change projects.”
Strategic Governance Framework (SGF)
The first, and overarching element of the framework is Value Governance – governance being traditionally defined as the system by which enterprises are directed and controlled and as a set of relationships between a company’s management, its board, its shareholders and its other stakeholders. Value Governance establishes how direction and control is accomplished within and across the other 10 elements of the framework which I refer to here as “management domains”. This direction and control will have both compliance and performance aspects, both of which must be considered. From a performance standpoint (and to some extent compliance in the case of risk) I add the dimensions of cost, benefit and risk across the Strategic Governance framework to show that these factors are not independent, and have to be taken into consideration when decisions are being taken in or across the management domains. The ten “management domains” are:
- Strategy Management – Defining the business…mission, vision, values, principles, desired outcomes and strategic drivers to provide direction and focus for understanding, configuring and managing assets to deliver the greatest value.
- Architecture Management – Understanding, communicating and managing the fundamental underlying design of the components of the business system, the relationships between them and the manner in which they support the enterprise’s objectives.
- Portfolio Management – Managing the evaluation, selection, monitoring and on-going adjustment of a grouping of investment programmes and resulting assets to achieve defined business results while meeting clear risk/reward standards.
- Investment Management – Managing the full life cycle of an investment decision, using the business case throughout the life cycle to ensure a continued focus on value from the initial idea/concept (ideation) through to the retirement of the resulting new or improved assets.
- Asset management – Managing the acquisition, use and disposal of assets to make the most of their service delivery potential and manage the related risks and costs over their entire life (source: Vicnet, State of Victoria, Australia).
- Programme Management – Managing the delivery of change around business outcomes through a structured grouping of activities (projects) designed to produce clearly identified business results or other end benefits.
- Project Management – Managing a group of activities concerned with delivering a defined capability required to achieve business outcomes based upon an agreed schedule and budget.
- Management of Change – A holistic and proactive approach to managing the transition from a current state to a desired state
- Operations Management – Managing the production of goods and/or services efficiently – in terms of converting inputs (in the forms of materials, labor, and energy) into outputs (in the form of goods and/or services) using as little resources as needed, and effectively – in terms of meeting customer requirements.
- Performance Management – The definition, collection, analysis and distribution of information relevant to the management of investment programmes and assets so as to maximize their contribution to business outcomes.
While the framework may at first look intimidating, it should not be seen as such. Many, if not all functions within these domains are already being done to a greater or lesser extent in enterprises today, often in many different ways, with little communication or interraction between them. It is the management of the critical relationships between these “management domains” which, if managed well, can provide tremendous strategic advantage to enterprises, but which, if not managed well, can have serious, if not catastrophic consequences. If enterprises are to maximize the value from their investments in IT-enabled change, or any form of change, these relationships need to be understood, and managed within a dynamic, “sense and respond” governance framework.
The four “ares” and the SGF
The figure above summarizes the primary areas of focus for each of the four “are” questions, indicating where accountabilities lie, and highlights the relevant SGF domains. The key elements of this include:
- Managing IT investments through a portfolio of business change programmes;
- Developing comprehensive and consistent business cases describing: the expected outcomes; ownership of, and accountability for, the outcomes; the full scope of the change required to achieve the outcomes; the expected contribution of each change to the outcome(s); risks to the achievement of outcomes; and metrics.
- Objective evaluation criteria enabling prioritization and selection of investments.
- Inclusive and on-going engagement of all the stakeholders affected by the change.
- On-going Management of the “journey”, including:
- Using the updated business case as the key management tool; and
- A strong gating process for progressive commitment of resources to ensure that, when thing are not going to plan, timely corrective action can be taken, including changing course, revisiting/changing the outcomes, or cancelling the program.
- Capturing, reviewing and acting upon lessons learned so that mistakes are not repeated, and value continues to be maximised.
A call to action
I don’t want to imply that all this is easy. Working with CEOs and leadership teams I invariably get pushback when I present a way forward as it is seen as complex and time consuming. Well, getting IT right is difficult! But what is the alternative? Highly visible failed investments (that can increasingly put the very existence of the enterprise in jeopardy), with even more time and resources spent trying to find what went wrong (and often where to lay blame), and the loss of potential competitive opportunities? It is imperative that the accountabilities, roles and responsibilities of the board, executive management, LOB management, and IT management are clearly defined, understood and accepted. The impact of not doing so was relatively minor when we were merely automating well-defined tasks, became more serious, sometimes disastrous, as we moved into integrating and using information across enterprises, and will be catastrophic as we move into the digital universe. A universe where technology is embedded in everything we do – indeed, one in which we are becoming increasingly embedded in everything technology does, and in which everything and everyone will be connected anywhere, any time, and there will be data about everything and analytics for anyone.
The CFO of a Fortune 100 company that I worked with once confided: “I know the way we are doing things isn’t working, but I don’t know a better way.” Well, there is a better way! A better way that is not simply about thinking differently about IT, although that is a necessary pre-condition, but about doing things differently. A better way that is about boards, the C-suite, LOB and functional management, including IT recognizing, understanding and accepting their accountability for creating and sustaining value from investments in IT-enabled change and driving that accountability down through their organisations. If enterprises are to survive, let alone thrive in the rapidly evolving digital economy, the status quo is not an option. The cost of resources wasted and, more importantly, benefits and value lost, eroded or destroyed is appalling – its way past time for all business leaders to move beyond words to action!