IT and Digital Failures – the Time for Study is Over – it’s Way Past Time for Action!

A recent article in diginomica, “Senate agrees to launch inquiry into Australia’s digital government failures” caught my eye. My immediate reaction was “Here we go again”, quickly followed by a somewhat more lyrical “When will they ever learn?”
The challenges of IT projects have been analyzed extensively over many decades. Most of us are familiar with The Standish Chaos Survey, the 2015 results of which reported successful projects constantly representing only ~30% of the 50,000 surveyed projects (where success is defined as on time, on budget and with a satisfactory result).

A 2012 Mckinsey article, based on research conducted on more than 5,400 IT projects by Mckinsey and the University of Oxford, found that half of large IT projects (costing >$ 15 million) massively blew their budgets. On average, large IT projects ran 45% over budget and 7% over time, while delivering 56% less value than predicted. The projects in total had a cost overrun of $66 billion, more than the GDP of Luxembourg. The impact of these failures is more than financial. In the case of healthcare, for example, the impact includes significant avoidable loss of life, pain and suffering.

More anecdotally, The International Project Leadership Academy Catalogue of Catastrophe records quite a few troubled projects from around the world, many, but not all of them IT projects. The list includes the UK’s NHS National Program for IT in Health, the original budget for which was $4.6 billion, which had risen to $24 billion when it was cancelled in 2010. At the time, and possibly still now, it was the world’s largest civil IT project.

Challenges to success – being on time, on budget, and achieving the expected value, are common across private and public sectors and across all jurisdictions. If one were to take all the studies, audit reports, and other post-mortem review of so-called “IT projects” or, more recently, “digital” initiatives, you could fill a medium-sized – possibly larger – library. The good news is that you would only have to read one or two of them to realize that they all came to basically the same conclusions, and made basically the same recommendations. It’s great business for consultants, as they can usually just dust off and tailor a previous report – a great but expensive example of re-use. Over the same time, research papers and articles beyond count have been written on this topic, and frameworks, methodologies, tools and techniques have been produced (almost) ad nauseam. Yet, despite this, very little has changed, other than that the impact of these failures, as technology becomes increasingly embedded in everything organizations do, is both more severe and more visible, not the least so in the public sector.

The underlying causes of both earlier “IT project” failures, and those of more recent “digital” initiatives are basically the same. They include:
1. A continued, often blind focus on the technology itself, rather than the change – increasingly significant and complex organizational change that technology both shapes and enables, and which is required if organizations are to come anywhere near realizing the potential value from their digital investments;
2. The unwillingness of business leaders to get engaged in, and take ownership of this change – preferring to abdicate their accountability to the IT function (I should add that I have also seen cases where IT leaders know this should be owned by the business leadership team, but do not believe that they have the competence to do so);
3. Failure to inclusively and continually involve the stakeholders affected by the change, without whose understanding and “buy in” failure is pretty much a foregone conclusion;
4. A lack of rigour at the front-end of an investment decision, including, what is almost universally a totally ineffective business case process, resulting in lack of clarity around the expected outcomes, the full scope of effort required, the assumptions being made, the risks involved, and how progress and success will be measured;
5. Not actively managing for value; and
6. Not managing the journey beyond the initial “project” completion.

A much over-used definition of insanity, commonly yet apparently inaccurately attributed to Albert Einstein, is “doing the same thing over and over again and expecting a different result.” This is certainly a good description of the where we are today. It should have been obvious to anyone reading any of the previously mentioned reports and studies that the issue of IT or digital failure needs to be re-framed from a technology delivery problem to a business problem of managing increasingly significant and complex organizational change. A business problem that has had a global cost estimated by Michael Krigsman, a respected industry analyst, to be in the order of $US3 trillion/year. And that cost doesn’t include opportunity cost – the non-realization of expected value.

So, why is it that business leaders – in both the private and public sector, have not stepped up to the plate? Despite the term “digital” now being much more commonly used – or abused –  in place of “IT”, digital is still largely equated with, and thought of as, a technology implementation issue. We certainly don’t need any more studies! As a client of mine once said, the less will we have to solve a problem, the more we study it. We need leaders to finally wake up and understand that this is not a technology implementation problem, but a problem around understanding, accepting accountability for, and managing the business change required to create and sustain business value from leveraging digital. We need these leaders to move beyond eternal studies to action. I discussed this in an earlier post, “Digital Leadership – Much More Than IT Leadership”. What follows builds on parts of that post.

In this new digital era, technology itself, how technology is delivered, how it is used, and by whom are changing at an ever-increasing rate. This is blurring the roles and responsibilities of IT and other business functions, and giving rise to a fundamental rethinking of how IT, and its 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. The role of the CIO is being questioned ad nauseam, particularly as it relates to the CMO, and a new position, the CDO, is appearing. And, of course, let’s not forget the CTO. However, the answer is not as simple as renaming the CIO position, getting a new CIO, or appointing a few new CXOs (or now, due to alphabetic limitations, CXXOs).

I have, over many decades, used the simple formula below to describe reason for the current dismal state of affairs:

OO + NT = COO

The formula represents that simply applying new technology (NT) to an old organization (OO) results in a Complex Old Organization (COO). Gavin Slater, the new head of the Australian Government’s Digital Transformation Agency (DTA), used a variation of this formula in a recent address to the Australian Information Industry Association, in which he replaced COO with EOO – expensive old organization.

Digitization cuts across organizational silos, and across all levels of organizations. Realizing value from digital requires more than putting lipstick on the old industrial age pig, with its hierarchical, command and control approach to governance, leadership and management. It requires continually rethinking, reimagining and reinventing every aspect of our organizations. Digital transformation, or more accurately the on-going and ever-evolving digital journey towards a digital ecosystem will require digital literacy and collaboration across and beyond the C-suite to ensure that their organization has, as EY’s David Nichols said in a May 2014 CIO Insight interview, “an integrated and holistic plan to really leverage digital”. This includes questioning their very purpose, how they are organized, the very nature of the work they do, who does it, and how it’s done. It requires challenging established cultures and long-held beliefs. The digital economy both enables and requires a different view of leadership. As Sally Helgesen said in a May, 2014 article, “Leadership’ isn’t Just for Leaders anymore”, leadership no longer, or should no longer equate with positional power and has, or should become a behaviour that is broadly distributed, recognize and rewarded.

Organizations must tap into the collective knowledge of all their people…~70% of whom feel no engagement with their organizations today. As Julian Stodd said in a June, 2017 blog, “The Age of Engagement”:

“The mechanisms and mindset of engagement in many organisations lags far behind the lived reality of the Social Age: Organisations exist in a realm of expertise, domain specific input, hierarchical power, at a time when communities are rising, co-creation is maturing, and dynamism is key. The solution will not be adaptation within an existing mindset, but rather a paradigm shift to a new space: the Age of Engagement.”

Peter Staal extends this thinking in an August, 2017 article, “Organizations of the future operate as communities”, in which he says:

“Meeting the demands of the digital age will require a new way of working. Take for instance the decision-making process. Organizations no longer have the time traditionally taken up by this process through a decision tree. The future belongs to organizations which are made up of multiple autonomously operating communities forming part of the larger whole (so-called pods).”

This is not a new concept. It was original posited in the early 20th century by Oswald von Neil-Breuning with his law of subsidiarity – an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority. This means locating accountability and decision-making at the most appropriate level, while supporting decisions with broader and more knowledgeable input.

We could have adopted such a concept long before now, indeed, some organizations have done so. For organizations to survive and thrive in the digital economy, this is no longer an option! We certainly now have the technology available today to support such a concept. However, I’m not sure we will see this widely accepted  any time soon – likely not in my lifetime. As Steve Vamos said in a 2012 Australian Review article:

“The challenge ahead is to unwind more than a century of industrial-age mindsets at work which are controlling, mistake-averse and “know it all” and evolve them into mindsets that are enabling, learning and willing to try new things and fail.”

Laurence J. Peter, author of The Peter Principle, echoed those sentiments when he said, “Bureaucracy defends the status quo long past the time when the quo has lost its status.” The reasons for this are well laid out by Ted Bauer in an August, 2017 article, “Bureaucratic management ain’t going anywhere”, as summarized in the figure below.

As an eternal optimist, I hope that he’s wrong, but as a realist, having pushed similar ideas for many decades, I think it will take some time before we see the extinction of the organizational dinosaurs. This will certainly be the case if we stand on the sidelines and wait for it to happen. As a former colleague, Don Tapscott,  has said for decades “Leadership can come from anywhere”. We must all take a leadership role in making it happen.

A New Age of Digital Exploration

The first question you may have here is what do I mean by “digital exploration”? Is exploration being disrupted by digital, or does digital require exploration? The answer is yes to both. Although the focus of this piece is on the latter, my thinking about it was triggered by the first. In 2013, my son, Jeremy, was named one of National Geographic’s “Emerging Explorers of The Year”. This was not for grinding trudges dragging dugout canoes through tropical areas, although that was to follow, but for his work in data visualization – translating unimaginable blurs of information into something we can see, understand, and feel—data made human through visualizations that blend research, art, software, science, and design.

img_2788aAs a result of this, and meeting another National Geographic explorer, Steve Boyes, Jeremy became one of the four leaders of the Okavango 2014 expedition (that’s him on the left) – the first ever live-data expedition  across Botswana’s amazing Okavango Delta. Like the expeditions of old, they were pushing into the unknown, in search of measurements but, unlike previous expeditions, they used a set of open-source tools to develop a system that puts every piece of data collected onto the web, in near real-time, for anyone in the world to use and share. This data included wildlife sightings, water quality measurements, and the four leaders’ exact GPS location, heart rate, and energy consumption.

As I reflected on this expedition, and how it was positively disrupting exploration, I went back to thinking about how our use of technology has evolved and continues to evolve. I started to question how I have been describing this evolution. I have described, as depicted in the image below, three stages of evolution: the automation stage, which I characterized as the appliance era; the information stage, characterized as the rewiring era; and the transformation stage, characterized as the rebuilding era.

Slide1

I have always felt uncomfortable with the term transformation – a much over-used and abused word. When the initial version of this image appeared in The Information Paradox, almost two decades ago, it was being used to describe the implementation of ERP, CRM, SCM etc. While these were certainly complicated endeavours, and often required significant organizational change (a requirement usually recognized too late and poorly managed), they were primarily about integrating information, and making it more accurate, accessible and timely. There were  proven practices available to do this, although, they were all too often not adopted, or adopted too late. They did not essentially change what organizations did – they just did it differently and, hopefully, better. It certainly involved major organizational change, but was hardly transformational.

Since that time, there has certainly been real transformation in a number of industries, including entertainment, media, communications, retail and consumer goods, financial services, automotive, as well as around the edges of others, but we are now seeing this happening, or at least the potential for it to happen, across all industries. Indeed, across all organizations, public or private, large or small. This is taking us into unknown territory – moving beyond a complicated world to a complex one. One in which :

  • Technology itself, how technology is delivered, how it used, and by whom are changing at an ever-increasing pace;
  • Everything and everyone will be connected, anywhere, any time;
  • Technology is increasingly embedded in everything we do, and in ourselves;
  • Everything is becoming “smart’ – phones, cars, houses, buildings, cities, etc.;
  • Robots, cognitive computing and machine learning play an increasing role;
  • We are becoming increasingly embedded in everything technology does;
  • Data is available about everything;
  • Analytics are available to anyone; and
  • Everything is available as a service.

This increasingly complex world is moving us to  the next stage of evolution in our use of IT – exploration, as illustrated in the images below.

Slide1This first figure adds the exploration stage to my original three. This is a somewhat different and more fluid stage, as what emerges from the exploration stage could become a combination of automation, information, and transformation type uses of IT. In the next image I take a degree of licence in  integrating the four stages with the concepts of David Snowden’s Cynefin Framework – an analytical, decision-making framework based on understanding the nature of the systems you are working with – simple/ordered, complicated, complex or chaotic, and selecting the appropriate approach and practices to manage them.

Slide2The first three of the Cynefin system types: simple/ordered; complicated; and complex are  mapped to the four stages. Automation, and some basic examples of the information stage map to simple/ordered. Some of the more integrated information and simple transformation map to complicated. Broader transformation and exploration map to complex. The mapping again draws on David Snowden’s work in positing that best practices are appropriate for the simple/ordered systems, proven practices can be selected based on analysis and/or expert opinion for complicated systems, and new/novel practices emerge during the exploratory era.

Slide3While, as proven and best practices emerge, the nature of systems may change, i.e. they may become a combination of simple/ordered, complicated and complex, this last figure shows that when we attempt to apply best practices to a complex system, the result is the fourth Cynefin system type – chaotic. In today’s complex digital world, while proven practices are emerging, most of what we are doing is still very much exploratory in nature.

 

 
As organizations move into the digital world, they will still have simple/ordered systems, although most of these may be XaaS in the Cloud, and complicated systems, some/all of which may also be in the Cloud, but an increasing amount of what they do will be in the complex space. In this space, it will not just be just practices around delivery of products that will be emerging, but also new models of how work is organized, managed, lead and governed. It is, or should be becoming clear that our traditional industrial-age, top-down hierarchical control-oriented approach to leadership and management is simply not cutting it, and certainly won’t do so in a digital world. The engagement level of employees with their organizations is abysmal – ranging between ~13-30% (and its not much better for managers). This is sometimes attributed to generational differences, particularly the rise of the “millennials”, and is certainly not helped by the rising disparity between C-Suite pay and that of the median worker. However, I don’t believe that the aspirations of millennials are any different than mine were when I started work over 50 years ago.

What has changed is the global and social context within which we live and work. We are more globally aware and socially connected, and have 24/7 access to pretty much unlimited knowledge, information and expertise. We are exposed every day to how other organizations are already embracing technologies, including social, mobile and analytics, enabling greater engagement and two-way communication with and between employees, and orchestrating self-managing teams who can work collaboratively in a much more agile and responsive way with limited but relevant and appropriate oversight. Organizations who are “democratizing” their approach to leadership and governance – letting their people use their brains again.

We know what the future of work could be, but don’t see that anywhere close to being universally realized. The challenge ahead is to break out of the straightjacket of more than a century of hierarchical, siloed industrial age mindsets at work which are controlling, mistake-averse and “know it all”. To evolve them into mindsets that are enabling, learning and willing to try new things and fail. To move to a more agile and inclusive approach to governance, leadership and management. A value-focused, data and analytics driven, agile, sense and respond approach that transcends functional and organisational boundaries, and engages employees, customers and other key stakeholders – locating accountability and decision-making at the most appropriate level (based on the principle of subsidiarity), while supporting decisions with broader and more knowledgeable input.

All this is will require a fundamental rethinking of how digital businesses are governed and managed, and the capabilities that are required to ensure and assure that the use of technology contributes to creating and sustaining business and societal value in the digital world Replacing current top-down, hierarchical and siloed processes with leadership across and beyond the C-suite with leadership capabilities recognized, nurtured, and empowered throughout organizations. It will all be part of a new era of digital exploration and transformation.

Does this mean that we have to throw out everything that has come before? No – but we do have to question everything? We do have to look at everything with the understanding of “what could be”, not “what has been”. We have to be careful here not to “throw the baby out with the bathwater” – this must all be done without losing sight of the fundamentals of governance as described in Back to the Basics – The Four “Ares” and A Value-Driven Framework for Change.

Digital Leadership – Much More Than IT Leadership

There has been much discussion of late on who should be responsible for “digitization”. The role of the CIO is being continually questioned, particularly as it relates to the CMO, and. a new position, the CDO, is appearing. And, of course, let’s not forget the CTO. A recent post by Michael Krigsman describing Intel’s IT leadership and transformation pyramid got me thinking yet again about this. The pyramid, shown below, is a brilliantly simple depiction of how digital leadership must evolve (in my words) from an operational “factory” to a business partner to a transformational leader.

 

intel-it-transformation-pyramid

As Michael Krigsman says, “The pyramid reflects the complex reality of IT / business relationships and the need for IT to deliver at multiple levels simultaneously.” This reminded me of discussions I had in New York last month at the Innovation Value Institute (IVI) Spring Summit around their IT Capability Maturity Framework (IT-CMF). The discussion centred around the digital economy, and the fact that organizations are taking an increasingly business-centric view of IT, with the focus shifting from the delivery of the “T” to the use of the “I”. That technology itself, how technology is delivered, how it is used, and by whom are changing at an ever-increasing rate. And that 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 an earlier post, The Digital Economy and the IT Value Standoff, I reiterated my long-leld view that the business change that IT both shapes and enables must be owned by business leaders, and they must accept accountability, and be held accountable for creating and sustaining business value from that change. This cannot be abdicated to the IT function. Yet today, in all too many cases, we have a stand-off where the business doesn’t want to take ownership, and the IT function doesn’t know how, or doesn’t want to give up control.

The key question that arose from the Summit discussion was “Why can’t we get our business leadership engaged in this discussion?” Certainly not a new question – how to do so was essentially the underlying theme of The Information Paradox when it was first published back in 1998. The answer to the question, going back to the leadership pyramid, is that the IT organization has to achieve operational excellence before it can start to change the conversation from bottom-up delivery of technology to top-down value from business change. This requires a maturity level of around 2.5, where 5 is the highest maturity – most organizations are still not yet at this level, most being somewhere between 1 and 2.

So, what does this mean for the CIO? Much has been written about CIOs themselves having to transform to fulfil the 3 leadership roles of the pyramid – running the factory, partnering with the business for value, and strategic transformational leadership. There is no doubt that all these roles are required – but is it reasonable, or necessary to expect that they will be found in one individual. Certainly, there are CIOs who have stepped up to the plate, but many more that haven’t, and possibly cannot.  Professor Joe Peppard at the  European School of Technology and Management in Berlin has put many hundreds of participants through an IT leadership program. He describes in a recent article how, using Myers Briggs typing, he has found that 70% of CIOs fall into one particular type: ISTJs (Introversion, Sensing, Thinking, Judging). Further, along the dimension of where they get their energy, 85% have a preference for introversion. In terms of moving up the pyramid, the very things that may contribute to success in their technology role, can be what leads to downfall in a business leadership position. Even where an individual does have the ability to handle all 3 levels, the day-to-day operational demands all too often leave little time for the other 2 levels. Demands that, while they will definitely change with the advent of the cloud and “everything as a service”, will not go away.

The real issue here is not so much, as Michael Krigsman says, “the need for IT to deliver at multiple levels simultaneously”, but understanding the range of digital leadership capabilities and responsibilities required in the digital economy, and where they should reside. The answer is not as simple as renaming the CIO position, getting a new CIO, or appointing a few new CXOs. It requires recognizing that digitization cuts across organizational silos, and across all levels of organizations.. It will take digital literacy and collaboration across the C-suite to ensure that their organization has, as EY’s David Nichols said in a recent CIO Insight interview, “an integrated and holistic plan to really leverage digital”. It will also require recognizing that the digital economy both enables and requires a different view of leadership. As Sally Helgesen said in a recent post, “‘Leadership’ isn’t Just for Leaders Anymore”, leadership no longer, or should no longer equate with positional power and has, or should become broadly distributed.

If organizations are to succeed in the digital economy, they cannot constrain themselves to the knowledge of a few individuals – to put it a more brutal way, they cannot be constrained by the habits or ego(s) of their leader(s)! Organisations must tap into the collective knowledge of all their people. We need effective governance that reaches out to and involves key stakeholders – retaining appropriate accountability, based on the law of subsidiarity – an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority. This means locating accountability and decision-making at the most appropriate level, while supporting decisions with broader and more knowledgeable input.

As a former colleague of mine, Don Tapscott,  has said for decades “Leadership can come from anywhere”. For organizations to survive and thrive in the digital economy, this is not an option!

Transforming governance and leadership for the digital economy

The digital economy

DE
The digital economy is not primarily about technology, nor is it just about the economy. Yes, it is being shaped and enabled by increasingly significant and rapid technological change. And, yes, it will have significant economic impact. But it is much more than that. It is part of a broader digital revolution. One in which, as in the case of the industrial revolution, we will see seismic shifts not just in technology, but in the nature of our lives, our work, our enterprises – large and small, public and private, and our societies. A shift that will not just change the nature of products and services, and how they are developed and delivered, but also how we govern and manage our lives, work, enterprises and societies.

Technology is becoming embedded in everything we as individuals, enterprises and societies do, and, indeed, we are increasingly becoming embedded in everything technology does. If we are to deliver on the promise of the digital revolution, we have to acknowledge that the way we have governed and managed IT in the past has proven woefully inadequate, and that continuing on this path will be a huge impediment to delivering on that promise. Governance of IT has been a subject of much discussion over the last two decades. Unfortunately, most of the discussion has focused on the technology, the cost of technology, failed IT projects, and generally questioning the value that technology and the IT function deliver to the enterprise. Despite all this discussion, not much has materially or broadly changed over the last 50 years, including:
• An all too often blind focus on the technology itself, rather than the change – increasingly significant and complex change – that technology both shapes and enables;
• The unwillingness of business leaders to get engaged in, and take ownership of this change – preferring to abdicate their accountability to the IT function;
• Failure to inclusively involve the stakeholders affected by the change, without whose knowledge, understanding and “buy in” failure is pretty much a foregone conclusion;
• A lack of rigour at the front-end of an investment decision, including, what is almost universally a totally ineffective business case process;
• Not actively managing for value; and
• Not managing the journey beyond the initial investment decision.

We still have what is predominately a “culture of delivery” – “build it and they will come”, rather than a “culture of value” – one that focuses on creating and sustaining value from an organization’s investments and assets.

We have been having the wrong conversation – we need to change that conversation!

Governance of “IT”

GovernanceTreating IT governance as something separate from overall enterprise governance, labeling and managing investments in IT-enabled business change as IT projects, and abdicating accountability to the CIO are the root cause of the failure of so many to generate the expected payoff. Business value does not come from technology alone – technology in and of itself is simply a cost. Business value comes from the business change that technology both shapes and enables. Change of which technology is only one part – and increasingly only a small part. Technology only contributes to business value when complementary changes are made to the business – including increasingly complex changes to the organizational culture, the business model, and the operating model, as well as to relationships with customers and suppliers, business processes and work practices, staff skills and competencies, reward systems, organizational structures, physical facilities etc. Ultimately, it is people’s intelligent and innovative use of the information captured, organized, distributed, visualized and communicated by technology that creates and sustains value. This is not a technology issue – it is a business issue.

Much of the discussion around the digital economy today is on improving the customer experience – as indeed it should be, although we have been saying the same for decades with, at best, mixed success. We will come nowhere close to achieving this unless we put equal focus on our people, and rethinking how we govern, manage and organize for the digital economy such that we maximize the return on our information and our people.

Surviving and thriving in the digital economy is not an IT governance issue, it is an enterprise governance issue. Successfully navigating the digital economy requires that we change how we govern, lead and manage our enterprises – including, but certainly not limited to IT.

What needs to change?

ChangeIn work I have been doing with Professor Joe Peppard at the European School of Management and Technology in Berlin, we have identified 8 things that business leaders, starting with the CEO, need to do. These are:
1. Don’t see IT as something separate from your core business – technology today is embedded in, and an integral part of most, if not all parts of your business processes.
2. Don’t focus on the technology alone – focus on the value that can be created and sustained through the business change that technology both shapes and enables.
3. Do recognize that you are ultimately accountable for the overall value created by all business change investments – and ensuring that accountability for the realisation of business benefits anticipated from each investment is appropriately delegated to, and accepted by, other executives and managers.
4. Do demand rigorous analysis of every proposed business change investment, whether or not IT is involved. Ensure that you and your team know and can clearly define expected outcomes, that there is a clear understanding of how value is going to be achieved, that all relevant stakeholders have bought in to the required changes, and that they are capable of making or absorbing them and delivering on the expected outcomes.
5. Do recognize that the business case is the most powerful tool that you have at your disposal to manage business change investments – insist on complete and comprehensive business cases, including desired outcomes, benefits, costs and risks, and clear explanation of how each benefit will be achieved with unambiguously assigned accountabilities, supported by relevant metrics.
6. Do recognize that benefits don’t just happen and rarely happen according to plan – outcomes and plans will change – don’t think business case approval is the end of the story. Mandate that the business case be used as the key operational tool to “manage the journey”, updated to reflect relevant changes, and regularly reviewed.
7. Do know if and when it’s time to stop throwing good money after bad, or when there are better uses for the money and “pull the plug.”
8. If your CIO doesn’t “get” the above points, and hasn’t already been talking to you about them, get one who does and will!

Enterprise governance must evolve beyond a model rooted in a culture of delivery (of technical capabilities) to one based on a culture of value – creating and sustaining value from investments and assets. In the context of IT, this means recognizing that we are no longer dealing with “IT projects”, but with increasingly complex programmes of organizational change.

Leadership

LeadershipThe most important aspect of governance is leadership. Effective governance in the digital economy requires that leaders truly lead – moving beyond tactical leadership to strategic and transformational leadership. Understanding and taking ownership of the organizational, cultural and behavioural change that will be required to succeed in the digital economy – change that starts with the leaders themselves. We also need to get away from the cult of the leader to a culture of pervasive leadership. As Joel Kurtzman says in his book, Common Purpose, leaders need to move beyond the traditional “command and control” model to establishing a ”common purpose” and creating a “feeling of ‘we’ among the members of their group, team or organization”. This will require leaders who can “park”, or at least manage their egos, break down silos, and really engage with and empower all employees – fostering leadership across and at all levels in the organization. It will also require a dynamic, sense and respond approach to enterprise governance – one that is focused on value, while balancing rigour with agility. Only then will the full potential value of IT-enabled change in the digital economy be realized. The technology exists to support this today – what is lacking is the leadership mindset, will and capability make the change.

There is certainly not for a lack of proven value management practices. Since The Information Paradox was published, there has been an ever-growing proliferation of books, frameworks, methods, techniques and tools around the topic. The issue is the lack of serious and sustained adoption of them. The real challenge is one of overcoming the “knowing – doing gap”, as described by Jeffrey Pfeffer and Robert Sutton in their book of the same name. We know what to do, and the knowledge is available on how to do it. Yet, so far, there has simply been little or no appetite for, or commitment to the behavioural change required to get it done, and stick with it. This has to change!

As I said in my previous post, this will not be easy to do – very little involving organization, people and power is. However, the cost in money wasted and, more importantly, benefits and value lost, eroded or destroyed is appalling. It’s way past time to move beyond word to action. For enterprises to survive, let alone thrive in the digital economy, and for the potential individual, community and societal benefits of the digital economy to be realized, the status quo is not an option! To quote General Erik Shinseki, a former Chief of Staff of the US Army, “If you don’t like change, you’re going to like irrelevance even less!“

Partnering for Value in the Digital Universe – a Call to Action

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”

Slide1

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)

Slide2

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

Slide3

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!

The Digital Economy and the IT Value Standoff

The emerging  digital economy, and the promise and challenges that it brings, including the need to shift focus beyond reducing cost to creating value, are adding fuel to the seemingly never-ending discussion about the role of the IT function, and the CIO.  There is questioning of the very need for and/or name of the position, and the function they lead. Discussions around the need for a CDO, the so-called battle between the CMO and the CIO for the “IT budget”, and other similar topics proliferate ad nauseam. Unfortunately, most, although not all of these discussions appear to be about the technology itself, along with associated budgets power and egos, within a traditional siloed organizational context. This akin to shuffling the deck chairs on the Titanic, or putting lipstick on a pig – it’s way past time for that!  As technology becomes embedded in and across everything we do, and we are increasingly becoming embedded in everything technology does, we have to acknowledge that the way we have managed technology in the past will be a huge impediment to delivering on the promise of the Digital Economy. Indeed, it has proven woefully inadequate to deliver on the promise of technology for decades.

Recent illustrations of this include failed, or significantly challenged healthcare projects in the U.S., Australia, and the U.K.as well as disastrous payroll implementations in Queensland, New Zealand and California (you would really think that we should be able to get payroll right). And this situation is certainly not unique to the public sector, although these tend to be more visible. In the private sector, a large number of organizations continue to experience similar problems, particularly around large, complicated ERP, CRM and Supply Chain systems.

All too often, these situations are described as “IT project” failures. In most cases, while there may have been some technology issues, this is rubbish. As I and others have said many times before, the ubiquitous use of the term “IT project” is a symptom of the root cause of the problem. Labelling and managing investments in IT-enabled business change, as IT projects, and abdicating accountability to the CIO is a root cause of the failure of so many to generate the expected payoff. Business value does not come from technology alone – in fact, technology in and of itself is simply a cost. Business value comes from the business change that technology increasingly shapes and enables. Change of which technology is only one part – and increasingly often only a small part. Technology only contributes to business value when complementary changes are made to the business – including increasingly complex changes to the organizational culture, the business model, and the the operating model, as well as to  relationships with customers and suppliers, business processes and work practices, staff skills and competencies, reward systems, organizational structures, physical facilities etc.

From my many previous rants about our failure to unlock the real value of IT-enabled change, regular visitors to this blog will know that I am particularly hard on non-IT business leaders, starting with Boards and CEOs, for not stepping up to the plate. When it comes to IT, the rest of the business, from the executive leadership down, has expected the IT function to deliver what they ask for, assuming little or no responsibility themselves, until it came time to assign blame when the technology didn’t do what they had hoped for. The business change that IT both shapes and enables must be owned by business leaders, and they must accept accountability, and be held accountable for creating and sustaining business value from that change. This cannot be abdicated to the IT function.

However, having spent quite a lot of time over the last few months speaking with CIOs and other IT managers, it has been brought home to me that some, possibly many of them are just as much at fault. There appear to be a number of different scenarios, including CIOs who:

  1. “Get it” and are already seen as a valued member of the executive team, providing leadership in the emerging digital economy;
  2. “Get it”, but have been unable, and, in some cases,  given up trying to get the rest of the executive team to step up to the plate;
  3.  Sort of “get it”, but don’t know how to have the conversation with the executive team;
  4. May “get it”, but are quite happy to remain  passive “order-takers”; or
  5. Don’t “get it”, still believing that IT is the answer to the world’s problems, and don’t want to “give up control”.

The result, in all too many cases, is a stand-off where the business doesn’t want to take ownership, and the IT function doesn’t know how, or doesn’t want to give up control. As Jonathan Feldman said in a recent InformationWeek post, “..enterprise IT, like government IT, believes in the big lie of total control. The thought process goes: If something lives in our datacenter and it’s supplied by our current suppliers, all will be well…my observation is that the datacenter unions at enterprises want “the cloud” to look exactly like what they have today, factored for infrastructure staff’s convenience, not the rest of the supply chain’s.” Until this standoff is resolved, the “train wrecks” will continue, and we will continue to fail to come anywhere near realizing the full economic, social and individual value that can be delivered from IT-enabled change.

At the root of all this is what I described in an earlier post as The real alignment challenge – a serious mis-alignment between enterprises whose leaders have an ecosystem mindset, and adopt mechanistic solutions to change what are becoming increasingly complex organisms. But it’s also more than this – in a recent strategy+business recent post, Susan Cramm talked about “the inability of large organizations to reshape their values, distribution of power, skills, processes, and jobs”. The sad fact is that, as organizations get bigger, an increasing amount of attention is spent looking inward, playing the “organizational game”, with inadequate attention paid to the organizations raison d’être, their customers, or their employees. As Tom Waterman said, “eventually, time, size and success results in something that doesn’t quite work.” Increasingly today, it results in something that is, or will soon be quite broken.

Most of the focus of the conversation about the digital economy today is on improving the customer experience, as indeed it should be – although we have been saying the same for decades with, at best, mixed success. We will come nowhere close to  achieving that success unless we put equal focus on our people, and rethinking how we govern, manage and organize for the digital economy such that we maximize the return on our information and our people.

This will require that leaders truly lead – moving beyond tactical leadership, aka managing, to strategic and transformational leadership. That we move from a cult of individual leadership – “the leader”, to a culture of pervasive leadership – enabling and truly empowering leadership throughout the organization- putting meaning to that much-abused term “empowerment”. That we break the competitive, hierarchical, siloed view and move to a more collaborative, organic  enterprise-wide view. The technology exists to support this today – what is lacking is the leadership mindset, will and capability make the change. As Ron Ashkenas said in a 2013 HBR blog – “The content of change management is reasonably correct, but the managerial capacity to implement it has been woefully underdeveloped”.

I am not saying that this will be easy easy to do – it isn’t, very little involving organization, people and power is. And somehow, throwing in technology seems to elevate complexity to a new dimension. And we certainly don’t make it any easier with the ever-growing proliferation of books, frameworks, methods, techniques and tools around the topic. Many of which have evolved out of the IT world, and are, as a result, while intellectually correct, often over-engineered and bewilderingly complex to executives and business managers who need to “get this”.

So, let’s get back to the basics – governance is about what decisions need to be made, who gets to make them, how they are made and the supporting management processes, structures, information and tools to ensure that it is effectively implemented, complied with, and is achieving the desired levels of performance. It’s not about process for process sake, analysis paralysis, endless meetings, or stifling bureaucracy – it’s about making better decisions by finding the right balance between intellectual rigour and individual judgement. In a previous post, Back to the Basics – the Four “Ares” I introduced the four questions that should be the foundation for that decision-making:

  1. Are we doing the right things?
  2. Are we doing them the right way?
  3. Are we getting them done well?
  4. Are we getting the benefits?

A common reaction to the four “ares” is that they are common sense. Indeed they are, but, unfortunately, they are far from common practice! if business leadership to move beyond words in addressing the challenge of creating and sustaining value from investments in enterprise computing, social media, mobility, big data and analytics, the cloud etc. emphasis must be placed on action—on engagement and involvement at every level of the enterprise,  with clearly defined structure, roles and accountabilities for all stakeholders related to creating and sustaining value. The four “ares” are a good place to start!

 

A Value-Driven Framework for Change

In an earlier post, The Future of IT, I mentioned the Strategic Governance Framework, introduced in the Afterword of the revised edition of The Information Paradox, and that over the next few months, I would be introducing this framework (which I now refer to as the Strategic Enterprise Governance Framework). Well, it has taken much longer than I had intended, but in this post, one that I must admit is somewhat drier than my usual posts, I introduce the Framework, and briefly describe each of the ten major elements that it comprises. In subsequent posts, I will describe the individual elements, and the relationships between them in greater detail.

Although more than a decade has passed since the The Information Paradox was first published,  the nature of enterprise value—and how to achieve it—continues to be a subject of much discussion. It is clear that the failure to realize business value from investments in IT-enabled change described in the book is a symptom of a wider malaise—one that presents managers with significant new challenges. The fact is, the track record for implementing any major change successfully continues to be  terrible. Although arguably more visible with IT, the same applies to any large-scale investment or change.

One of the root causes for this poor track record is the woeful inadequacy of current governance approaches to manage what is, in most cases, “an uncertain journey to an uncertain destination.” All too often, current practice results in a lack of understanding of the desired outcomes, and the full scope of effort required to realize the outcomes, not knowing what to measure, not surfacing and tracking assumptions, and not sensing and responding to changing circumstances in a timely or well-considered manner.

In the Afterword,  I described how our thinking and practices had evolved beyond the Benefits Realization Approach introduced in the first edition, to a broader strategic governance framework – a framework for overall enterprise governance. Since that time, I have further extended the framework, as illustrated below, from the original seven elements to ten.

The first, and overarching element of the framework is Strategic 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 which.  Strategic Governance establishes how direction and control is accomplished within and across the other 9 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 have to be taken into consideration when decisions are being taken in or across the management domains.

The nine “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.
  • 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).
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • Management of Change – A holistic and proactive approach to managing the transition from a current state to a desired state.
  • 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 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.

In subsequent posts, I will describe each of these domains, and the critical relationships between them, in greater detail. In the meantime, I encourage you to think about the state of governance in your organization, or in organizations that you are working with, and consider:

  • Are all the management domains included?
  • How completely and effectively are they covered?
  • Are they dealt with holistically, or within silos?
  • How well are the relationships between the management domains, or between the silos covered?
  • How effective is the governance of these domains and relationships in sensing and responding to changes in today’s complex and rapidly changing environment?

The Siren Call of Certainty

In Greek mythology, the sirens were three bird-women who lured nearby sailors with their enchanting music and voices to shipwreck on the rocky coast of their island. The term siren call, from which this derives, is described in the Free Dictionary, as “the enticing appeal of something alluring but potentially dangerous”. In today’s increasingly complex and interconnected world, it is the siren call of certainty that is luring many organizations into failures akin to shipwrecks, particularly, although not limited to their increasingly significant investments in IT-enabled change. More accurately, it is their failing to recognize, accept and manage uncertainty, that leads to these wrecks.

Yet again here, what we have is a failure of governance, and of management – a failure that starts with how strategic decisions are made. In a recent McKinsey paper, How CFOs can keep strategic decisions on track, the authors make the point that “When executives contemplate strategic decisions, they often succumb to the same cognitive biases we all have as human beings, such as overconfidence, the confirmation bias, or excessive risk avoidance.” My discussion here covers the first two (excessive risk avoidance essentially being the opposite of these, and equally dangerous). Executives are often so certain about  (overconfident in) what they want to do that others are unwilling to question their certainty or, if they do, they are dismissed as “naysayers” (and quickly learn not to question again) or the executive only chooses to hear those parts of what they say that confirm their certainty (confirmation bias). I must admit that I have probably been guilty of this myself, in language if, hopefully, not intent, when I have told my teams, “I don’t want to hear why we can’t do this, I want to hear how we can do it.” What I really should have added explicitly was “…and then tell me under what conditions it might not work”.

To resist the lure of the siren call, we require an approach to strategic decision-making  that is open to challenge – one in which multiple lenses are brought to bear on the decision, where uncertainties, and points of view contradictory to those of the person making the final decision, be that the CEO or whoever, are discussed, and where individual biases weigh less in the final decision than facts.

I am not suggesting here that uncertainties should prevent investments being approved, if they did we would never do anything. I am saying that they should not be buried or ignored – they must be surfaced, recognized, mitigated where possible, and then monitored and managed throughout the life-cycle of the investment. This means acknowledging that both the expected outcomes of an investment, and the way those outcomes are realized will likely change during the investment life-cycle. It means managing a changing journey to a changing destination. Unfortunately, once again the siren call of certainty also gets in the way of this.

When investments are approved they are usually executed and managed as projects, all too often seen as technology projects (I use the term broadly here). In a 2010 California Management Review article, “Lost Roots: How Project Management Came to Emphasize Control Over Flexibility and Novelty”, authors Sylvain Lenfle and Christoph Loch, discuss the history of Project Management, and suggest that the current approach to Project Management promises, albeit rarely delivers, greater cost and schedule control, but assumes that uncertainty can be limited at the outset.”

The origins of “modern” project management (PM) can be traced to the Manhattan Project, and the techniques developed during the ballistic missile projects. The article states that “the Manhattan and the first ballistic missile projects…did not even remotely correspond to the ‘standard practice’ associated with PM today…they applied a combination of trial-and-error and parallel trials in order to [deal with uncertainty and unforeseen circumstances] and achieve outcomes considered impossible at the outset”. This approach started to change in the early ’60s when the focus gradually changed from ‘performance at all costs’ to one of optimizing the cost/performance ratio. Nothing inherently wrong with that, but along came Robert McNamara who reorganized the planning process in the Department of Defense (DoD) to consolidate two previously separate processes – planning and budgeting. This integration was supported by the Program Planning and Budgeting System (PBS), which emphasized up-front analysis, planning and control of projects. Again, nothing inherently wrong with that, but the system resulted in an emphasis on the complete definition of the system before its development in order to limit uncertainty, and a strict insistence on a phased “waterfall” approach. The assumptions underlying this approach are i) as decisions taken by top management are not up for discussion, the PM focus is on delivery, and ii) rigorous up-front analysis can eliminate and control uncertainty – these underlying assumptions are still very much part of Project Management “culture” today.

Again, I am not saying here that there is no need for sound analysis up-front – quite the contrary, I believe that we need to do much more comprehensive and rigorous up-front analysis. What I am saying is that, no matter how good the up-front analysis is, things will change as you move forward, and there will be unexpected, and sometime unpredictable surprises. We cannot move blindly ahead to the pre-defined solution, not being open to any questioning of the outcome (destination) or approach (journey), and focusing solely on controlling cost and schedule. The history of large projects is littered with wrecks because, yes, there was inadequate diligence up-front, but equally, or even more so, because we failed to understand and manage uncertainty – forging relentlessly on until at some stage, the project was cancelled, or, more often, success was re-defined and victory declared.

The article suggests that “Project Management has confined itself in an ‘order taker niche’ of carrying out tasks given from above…cutting itself off from strategy making…and innovation”. Many organizations, particularly those embracing agile development approaches, do apply a combination of trial-and-error and parallel trials in order to deal with uncertainty and unforeseen circumstances, and to achieve outcomes either considered impossible at the outset, or different from those initially expected. But, as the authors say, “these actions happen outside the discipline of project management…they apply [these approaches] despite their professional PM training.”

The tragedy here, with both strategic decision making, and execution is that we know how to do much better, and resources exist to help us do so. Strategic decision making can be significantly improved by employing Benefits Mapping techniques to ensure clarity of the desired outcomes, define the full scope of effort to achieve those outcomes, surface assumption, risks and uncertainties around their achievement, and provide a road-map for execution, supporting decision making with an effective business case process, and by applying the discipline of Portfolio Management to both proposed and approved investments. The successful execution of investments in the portfolio can be increased by moving beyond the traditional Project Management approach by taking a Program Management view, incorporating all the delivery projects that are both necessary and sufficient to achieve the desired outcomes in comprehensive programs of change. Many of the elements of such an approach were initially discussed in The Information Paradox, and subsequently codified in the Val IT™ 2.0 Framework.

We know the problem, we have the tools to deal with it – what is still missing is the appetite and commitment to do so.

Reflections on SIMposium09

I had the opportunity to attend and speak at SIMposium09 in Seattle last week. As Seattle is a great town and close to Victoria,  I took the opportunity to take Diane and we both enjoyed Seattle and spent a few very relaxing “Internet-free” days at the wonderful Lake Quinalt Lodge on the Olympic Peninsula after the conference. Having now had time to reflect on the conference, I offer a summary of my thoughts (and in doing so, draw on a number of my earlier posts).

Introducing the sessions on Tuesday, the Moderator, Julia King, Executive Editor of Computerworld, said that what she had taken away from the conference up to that point were three things – people, process and productivity. While productivity – specifically doing more with less – was a common theme, and there was considerable emphasis on people and some on process, I would expand on this somewhat. From what I heard, both through formal presentations, and in informal discussions, the things that I left thinking about, and which I will expand on below were – value (including but not limited to productivity), leadership, innovation (where I would include process), people, and change (specifically management of strategic change). I will talk a bit more about each of these below.

Value

It should come as no surprise that this is my first point. I was pleased that a number of sessions did focus on value, and it was mentioned to varying degrees in others. I was however disappointed when Jerry Luftman presented the results of the 2009 SIM IT trend survey that the word was not mentioned in any of the top ten CIO issues. In fairness, I do understand that in order to plot trends, there has to be some consistency in questions year over year. While it could be argued that the “alignment” question may be a proxy for value (although many people told me they never wanted to hear this question again), and that it is implied in others – I believe we have to make value explicit and  put it front and centre. Certainly, productivity is one aspect of value, but only one aspect – one that tends to focus on doing more with less, and by inference cost. In The Information Paradox, we talked about 3 aspects of value: alignment (NOT the infamous “Aligning IT with the business” topic which, in my mind, makes about as much sense as talking about “aligning our heart with our body”, but rather ensuring that investments are aligned with the enterprise’s strategic objectives); financial worth (which I now refer to as business worth including both financial and non-financial aspects); and risk (both delivery risk and benefits risk).  The Val IT ™ framework further defines value as “total life cycle benefits net of total life cycle costs adjusted for risk and (in the case of financial value) the time value of money”. We need to shift the discussion from the cost of technology to the value of the business change that it enables. We need to create a culture of value in our enterprises.

Leadership

A quick scan of the agenda shows that this was by far the most prevalent topic – not surprising given SIM’s target constituency. There is absolutely no denying that we need more and better leadership – but what do we mean by that? Are we talking about grooming those few who will rise to the corner offices in the top floor of corporate HQ, or are we/should we be talking about something beyond that?  A former colleague of mine, Don Tapscott, used to say (may still say) that “leadership can come from anywhere”. I have been thinking for a while about the “cult of leadership” – in his book, The Wisdom of CrowdsJames Surowiecki identifies one of the challenges is that we put too much faith in individual leaders or experts, either because of their position or track record and that these individuals also become over-confident in their abilities. I don’t want to question the ability and competence of all leaders or experts – while I certainly have seen my share of bad ones, most are good people doing the best they can. However, in today’s increasingly complex and fast-paced knowledge economy, much of which is both enabled by and driven by technology, it is unrealistic to expect individuals, however good they are, to have all the answers, all the time. The reality is that neither position nor past success is any guarantee of future success.

If organisations are to succeed in today’s knowledge economy, they cannot constrain themselves to the knowledge of a few individuals – to put it a more brutal way, they cannot be constrained by the habits or ego(s) of their leader(s)! Organisations must tap into the collective knowledge of all their people – retaining appropriate accountability, based on the law of subsidiarity – an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority. This means locating accountability and decision-making at the most appropriate level, while supporting decisions with broader and more knowledgeable input.

Innovation

We hear a lot about innovation and the potential for CIOs to become Chief Innovation Officers. Interestingly, a number of recent surveys show that executive leadership is disappointed with the lack of innovative ideas from CIOs. But what is innovation? The Oxford Dictionary defines innovation as [t0] bring in new methods, ideas etc. often followed by making change. All too often, we believe that innovation requires new technologies. In a recent Entrepreneur article, Tim O’Reilly, who launched the first commercial website, coined the term “Web 2.0” and was instrumental in the popularization of open-source software, isn’t buying the hype: He calls the era of the I-word “dead on arrival.” “If it is innovative, everybody will know,” O’Reilly says. “Adding words to it does not help.” The current “innovation” overload is the result of folks who don’t know what true invention is trying to pass themselves off as trailblazers. He’s seen companies throw away great ideas because it wasn’t immediately obvious how to make money from them. Then smaller companies and entrepreneurs would come along and play with the idea, just because they’re passionate about it. And they would be the ones to unlock the idea’s potential and grow into the money. While new technologies do indeed enable new methods and ideas, they are not necessary for innovation. Innovation is equally powerful, and often easier, by simply coming up with new and creative ways of using existing technologies.

People

Ultimately, it is people who lead, people who innovate, and, as a result, people who create value. Over the last few decades, much has been said and written about empowering the people within an enterprise – unfortunately little of that talk and writing has translated into reality. As James Surowiecki says, “Although many companies play a good game when it comes to pushing authority away from the top, the truth is that genuine employee involvement remains an unusual phenomenon.” As a result of this, information flows – up, down and across organisations – are poor, non-existent or “filtered” in all directions, decisions are made by a very few with inadequate knowledge and information, and there is limited buy-in to whatever decisions are made. As Peter Senge says in The Fifth Discipline Fieldbook , “…under our old system of governance, one can lead by mandate. If you had the ability to climb the ladder, gain power and then control that power, then you could enforce…changes…Most of our leaders don’t think in terms of getting voluntary followers, they think in terms of control.” I should add here, based on Monday’s closing keynote “It’s about the People”, given by Bill Baumann, Vice President of Information Technology for REI, that REI does appear to be one enterprise that does understand empowerment.

In this context, although there was not a specific session on the topic, social networking (including Web 2.0 and crowd-sourcing etc.) was discussed in many of the sessions, and in informal discussions. As I have said before, I am becoming increasingly interested in how social networking, rather than being viewed as a potential problem to be managed within the “traditional” view of governance and management – today still largely based on beliefs and structures that are a hundred years old – has enormous potential to revolutionize governance and management. In doing so, we could truly tap in to the experience of all employees (and other stakeholders) – not be limited to the knowledge/experience of those few anointed leaders or experts. This could actually make the much-abused term empowerment mean something by giving people the opportunity to contribute to/participate in decision-making, actually be listened to and, as a result, re-engage and really make a difference.

Change

The challenge facing enterprises today is not implementing technology, although this is certainly not becoming any easier, but implementing IT-enabled organisational change such that value is created and sustained, and risk is known, mitigated or contained. The creation and sustainment of value from innovation requires understanding and effective management of change in how people think, manage and act, i.e. change in human behaviour. Unfortunately, as we were reminded in one session by Jeffrey Barnes and Cheryl White, studies have shown consistently over the last 25 years that the failure rate of strategic change initiatives is between 85-90%. Let’s look at a number of scenarios where such initiatives can come to a premature halt.

The first of these is implementation by fiat, without an adequately thought out plan and commensurate resources. There is all too often a tendency for executives to believe that once they say something should be done it is – this is rarely the case. I sometimes describe this as the “Star Trek school of management”. Executives, just like Captain Picard, say “Make it so!” – they often don’t fully understand what “it” is or how they will know when they get there, and  the people they say it to all run off with very different ideas of what “it” is creating a lot of activity – often in conflicting directions. As Larry Bossidy and Ram Charam suggest in Execution, The Discipline of Getting things Done, the role of the executive when saying “make it so” is to ensure that no-one leaves the room until the executive is confident that they all understand what “it” is and, when they come back with a plan, that they don’t leave the room until he/she is confident that the plan has a good chance of delivering “it”.

In other cases, organisations take on too much in the first bite – this either results in “sticker shock” with no action being taken or, particularly when, as is often the case – especially in the current environment of short-termism – the time-frame is unrealistic, failure. The opposite can also be true, doing too little and/or taking too long to do it such that patience runs out and/or interest diminishes to the point of backing off.

Also, where progress is being made, success is not always promoted and built on – without demonstrated and recognized success it can be very difficult to maintain the interest and attention of executives to sustain the change initiative, especially one that may take many years, as many, if not most such initiatives can do. This can become particularly evident if a new executive comes on the scene and asks “Why are we doing this?” Without a sound response, this is often followed by “We did just fine without this where I came from!”

Many of these scenarios are exacerbated when insufficient thought has been given to metrics – measurements that must include both “lag” metrics – are we there yet? – and “leading” metrics – are we on track to get there?, as well as tangibles and intangibles. As Faisal Hoque, Chairman and CEO of the Business Technology Management Institute says, “…technology [itself] warrants evaluation with a tangible set of measures. But the majority of what technology actually does falls more into the sphere of the intangibles”. Understanding how those intangibles (often lead indicators) can contribute to tangibles (often lag indicators) is a key part of value management.

John Zackman offered another explanation for the challenge of change when positioning enterprise architecture – in the context of the overall enterprise – as being about managing complexity and change (which I very much agree with). John said “If you can’t describe it you can’t build it or change it.” John’s comments raise a number of  interesting questions which I won’t attempt to answer here.  Is it actually possible to “reverse architect” today’s complex global enterprises that have, somewhat like London’s Heathrow airport, grown ad hoc over time without any underlying architectural framework or design? If not, are they doomed to eventually fail? Will new and emerging enterprises take a more disciplined approach or will they follow the same pattern such that the cycle continues?

For more on the topic of change, go to Managing Change – The Key to Realizing Value and The Knowing-Doing Gap.

I will explore some or all of these topics more in subsequent posts.

CIOs told to scrap enterprise IT departments

Before CIOs seeing this heading go apoplectic at such heresy, let me say that the heading of this article by Shane Schick in itWorldCanada referring to the keynote speech given by Peter Hinssen at an invitation-only event for Canadian CIOs should end with “BUT not an enterprise IT role!”. This would more accurately reflect what  Peter is saying (in this article and supporting video – I have not yet read his book although I have met Peter and heard him speak). Peter’s main points are:

  1. IT is too important to be left to the IT function
  2. IT is today embedded in everything we do
  3. The term IT alignment perpetuates the separation between IT and the rest of the business
  4. We need to move beyond alignment to “fusion”
  5. We need to redefine the relationship between IT and the business
  6. IT needs to move from being a side activity to a core activity of the business
  7. We need to focus on technology-enabled innovation
  8. IT people need to be rewarded on a balance of IT measures and direct business value

I very much agree with all of these points – indeed, we made similar points 11 years ago in The Information Paradox and much of that thinking has carried through into Val IT™ and other similar approaches. I encourage you to watch the short video interview with Peter and reflect on what he is saying. In doing so – going back to my suggested heading change – consider that there will always be an enterprise IT role, but not necessarily or even likely an IT department – parts of which will and should move into the business areas with the “factory” pieces being provided by an external utility, be it SaaS, the “cloud” or whatever we call it by then. How many of today’s CIOs will be able to fill that enterprise role is, as Peter suggests, another question.