Focus Must Shift beyond IT Spending to Business Value

I have been a little quiet on the blog lately as I have been, and am still heavily involved with my wife in organizing and running the Sidney Fine Art Show – one of the largest and most anticipated shows in British Columbia and a highlight on the cultural calendar of Vancouver Island. In the space of three days, we transform a community hall

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into a world-class art gallery which is visited by more than 5,000 people over the three days of the Show.

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The Show is also an example of what can be done when you have a clear vision, great people – over 300 volunteers – and appropriately used technology – in this case good old Excel which supports just about every element of the Show. In the current economic climate, and certainly in the context of significant cuts to government support for the arts in this part of the world, we have certainly had to be careful with our finances this year – the 7th year of the Show. We did not however make cuts “across the board” – we focused our spending on those areas that we felt would add the greatest value within the context of our vision. We spent less, sometimes nothing, in some areas, and more in others. I should add that the Show, totally run by volunteers, is not for profit, and not only do artists receive 85% of their sales revenue, but also any surplus from the Show goes directly back to the Community Arts Council of the Saanich Peninsula to support their many diverse programs. The cuts in government arts funding make the Show’s contribution even more important this year.

So, what does this have to do with IT – other than Excel? I read two somewhat conflicting reports on IT spending today, interestingly both under the CIO banner. The first, More CIOs Planning to Spend Money, Hire IT Staff, by Carolyn Johnson, suggests that more CIOs are planning to increase IT spending than at any time since mid-2008, with the average overall change (mean) being +5% . The second, IDC: IT spending unlikely to recover fully before next recession, by Leo King, reports  that IDC has warned that spending on technology will not return to pre-recession levels before the next downturn. IDC said CIOs should expect their budgets to grow, but only to a lower level than was reached before the recession, the highest realistic prediction was for a two per cent growth in spending by 2013.

Now, I don’t know who is right – nor quite frankly do I really care. While the amount of IT spend is interesting, and budgets should be managed responsibly, such discussion  continues to focus on the cost of IT. As in the case of the Sidney Fine Art Show above, the real focus has to shift to what is the business value of that spend. Our continued focus on spend – the cost of IT, is plain wrong-headed.We need to focus on value – value as defined by the Val IT ™ framework 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”. Only when we do this will we come anywhere near to realizing the full potential of IT-enabled change.

Best Practice – the Enemy of Good Practice!

Susan Cramm’s latest blog, Why Do We Ignore “Best Practices”?, has stimulated an interesting discussion about what really is the $64,000 question (actually a lot more these days!) – why do we often ignore the “blindingly obvious” and not do what we know is the right thing to do?  I discussed aspects of this question in a recent blog The Knowing-Doing Gap which referred to the book of the same name by Jeffrey Pfeffer and Robert I. Sutton. In the book, they say “…so many managers know so much about organizational performance, and work so hard, yet are trapped in firms that do so many things that they know will undermine performance.” They found that “…there [are] more and more books and articles, more and more training programs and seminars, and more and more knowledge that, although valid, often had little or no impact on what managers actually did.”

However, I don’t want to go more into the Knowing-Doing Gap here – what the blog and the associated comments caused me to reflect upon was the term “best practice”  – a term I dislike and avoid for a number of reasons:

  • Voltaire said  “the best is the enemy of the good”. We rarely need, or can afford, “the best”, and, in any event, what is best for one organization, or one situation, may not be best for other organizations, or different situations.
  • The term “best” can also create an erroneous and dangerous belief that there is no need for further improvement. The world doesn’t stand still – changes to the global economy, the regulatory environment, business models, and technology will continue at a fast rate. We must continue to learn, adapt and improve our practices – standing still is not an option.
  • Voltaire also said  “common sense is not so common” which is also relevant here. “Best practices” are all too often seen as a substitute for judgment or common sense – or for good, experienced people. As a result, they are treated as checklists to be followed blindly without the need to think. After all, “if all you have is a hammer, every problem looks like a nail”. In many cases, more focus is put on following the practice than on the desired outcome – with the means becoming more important than the end. As one commentator on Susan’s post, Mike Myatt says in his blog, The Downside of Best Practices, “My experience has been consistent over the years in that whenever a common aspect of business turns into a “practice area” and the herd mentality of the politically correct legions of consultants and advisers use said area as a platform to be evangelized, the necessity of common sense and the reality of what actually works often times gets thrown out the window as a trade-off for promotional gain.”
  • Another problem with “best”, which I see all the time, is that it implies a competition. When an organization determines that they need to improve their practices, they undertake an evaluation of “competing” practices to determine which is the best. As yet another saying goes – “the less you want to do something the more you study it”. Rather than trying to select the best – organizations should pick one and “just do it”!
  • The term that I have preferred to use, and that we use in Val IT™, is “proven practices”. We do, however, need “proven practices” that are “fit for purpose” – adapted intelligently and innovatively to specific organizational cultures and situations based on sound judgement and common sense. In this context I use one of the many definitions of common sense – “shared understanding” – which could well be extended to mean “shared values”.

All of the above notwithstanding, the real challenge here is that we are trying to get people to change their behaviour to conform to rational, logical practices. People are not always logical or rational – often egos, emotions, old habits and a variety of other factors cause them to behave  differently. Changing such behaviour requires a well-orchestrated organizational change plan (even this is badly expressed as it is not organizations that change – it is individuals). We need to move beyond what is often mandated compliance to getting “buy in” and understanding of the need to behave differently, and the value in doing it – to the organization and the individual. We need to create those shared values within which proven practices are adopted but can be adapted to meet specific situations with an appropriate balance of rigour and agility.  Unfortunately, organizational change management is still largely paid lip service to and rarely done in most organizations.

If we are to deliver on the promise of IT – if we as individuals, organizations and societies are to realize the value of IT-enabled change – we need to change the way we manage that change. We have to stop asking: “When will they do something about this?”. We are “they” – all of us – we need to change how we think, manage and act. Only when we do this will we truly realize the potential value of the changes that IT can enable!

Get With The Programme!

Technology is today embedded in almost everything that we do as individuals, societies and organizations. We have come a long way from the early days – yes, I was there – when the primary use of technology was automating operational tasks such as payroll, where benefits – largely cost savings – were clear and relatively easy to achieve. Today, applications of IT enable increasingly strategic and transformational business outcomes. While these outcomes would not be possible without the technology, the technology is only a small part of the total investment that organizations must make to achieve their desired outcome, often only 5% to 20%. The reality is that these are no longer IT projects – they are investments in IT-enabled business change – investments in which IT is an essential, but often small part.

Unfortunately, our approach to managing IT continues to lag in recognizing this shift. We still exhibit “silver bullet thinking” when it comes to IT. We focus on the technology, and delegate – more often abdicate – responsibility for realizing value from the technology to the IT function. In a recent post, IT Value Remains Elusive, I discussed a recent ISACA survey in which 49 percent of respondents stated that the CIO or IT managers are responsible for ensuring that stakeholder returns on such investments are optimized – with 8 percent saying no one was responsible. Technology in and of itself does not create value – it is how enterprises use technology that creates value. With the evolution of how we use IT, a different approach to the management of investments involving IT has become a business imperative if we are to fully realize the potential value of these investments.

Realizing this value requires broadening our thinking to take many more interrelating activities into account – moving beyond stand-alone IT project management to business programme management. Managing programmes of business change where technology initiatives contribute to business results in concert with initiatives to change other elements of the overall business system, including the business model, business processes, people skills, and organizational structure. It also means that accountability now must be shared between the business and the IT function – while the IT function is accountable for delivering the required technology capabilities, it is the business that must be accountable for realizing value from the use of the technology. This includes: deciding which programmes to undertake; ownership of the overall programme – including all the necessary  initiatives ; and ensuring that expected business value is realized over the full life cycle of the investment decision. Further, to support this, the business case for any proposed investment should be: at the programme level; complete and comprehensive – including the full scope of change initiatives required to achieve the desired outcomes; and a “living”, operational document that is kept up to date and used to manage the programme through its full economic life cycle.

We originally introduced programme management as one of the cornerstones of the Benefits Realization Approach in The Information Paradox. With Val IT™, we included it as part of the Investment Management domain (IM). OGC has also introduced Managing Successful Programmes (MSP) and, more recently, Portfolio, Programme and Project Offices (P3O), and the Project Management Institute (PMI) have extended their PMBOK to include Programme Management. The good news is that there is certainly no shortage of resources for those who want to implement Programmme Management. The bad news is that, while many organizations across the world have significantly increased value through their use of Programme Management, they are the “early adopters” with the majority of enterprises still lagging.

One of the reasons for this is that there is a common tendency to view programmes  as large, complex beasts – only applicable to large enterprises – and a mistaken belief that using the term will over-complicate things. Nothing could be further from the truth – certainly not when programme management is intelligently applied. Enterprise Resource Planning, Customer Relationship Management, Supply Chain Management, Business Intelligence, Social Networking, etc. are extremely complex programs of business change. Denying complexity – taking a simplistic view of change – only increases complexity. Only when complexity is understood can it be simplified, and then only so far. As Albert Einstein once said “Everything should be as simple as possible but no simpler.” The line between simple and simplistic is a dangerous one. Implementing organisational change requires changing our “traditional” approaches to governance – it requires that we “change how we change”!   Effective Programme Management is an important part of that change.

Taking the programme view can still however be a very daunting prospect – there can be just too much to take in all at once – unless an appropriate technique is used – one designed specifically for this purpose. In an earlier post, A Fool’s Errand, I discussed the need for a benefits mapping process (using Fujitsu’s Results ChainCranfield’s Benefits Dependency Modelling, The State of Victoria’s Investment Logic Mapping, or some other similar technique) to develop “road maps” that support understanding and proactive management of a programme throughout its full economic life cycle. Using Fujitsu’s Results Chain terminology – the one I am most familiar with – the process is used to build simple yet rigorous models of the linkages among four core elements of a programme: outcomes, initiatives, contributions, and assumptions. With the right stakeholders involved, and supported by strong facilitation, such a process can, in a relatively short time frame, result in clearly defined business outcomes and contributions, enabling management to ensure alignment with business strategy, define clear and relevant measurements, and assign clear and unambiguous accountability. They help to “connect the dots” and facilitate understanding and “buy in” of the those who will ultimately receive the benefits.

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. This is where Programme Management, supported by benefits mapping can and must play a key role. The OGC states that: “The fundamental reason for beginning a programme is to realise the benefits through change.” In a March, 2008 Research Note, Gartner said that “We believe [strategic program management] is the management construct best suited to enable better business engagement, value delivery and risk”. Enterprises who want to enable such outcomes would do well to take a serious look at Programme Management.

Enterprise IT or Enterprise IM?

Reflecting on yesterday’s post CIOs told to scrap enterprise IT departments, I realized that over the last 5 years working with ITGI discussing IT governance, I have myself become a victim of the “IT label trap”. While implicit in everything I have done, I have not made explicit a distinction that I started making with a large Canadian resources company client way back in 1991 – the distinction between information management and information technology. Although I am not sure we even used the term back in those days, what we did, working with the executive, was to put in place effective governance of information.  Governance which separated, and made explicit the differences between managing information and managing the technology used to collect, store, manipulate and distribute it – with the business being accountable for managing information, while the IT function was accountable for managing the technology.

We defined the distinction between information management and the management of information technology as:

  • Information Management is concerned with the “why” and “what” of business requirements, and the “how” of business management processes, but not the technological “how”.
  • The management of Information Technology is concerned with the technological “how” of meeting business requirements, within the guidelines established by the information management processes.

As this information is still proprietary, I will not go into more detail here other than to say that, based on understanding this distinction, we created a vision for the role of information, then went on to develop and implement principles, an overall architecture, roles and responsibilities, and supporting organizational structures. Among other things, this involved Integration of business planning and information systems planning and transfer of a significant portion of the IT budget to line departments.

Fast forwarding now to the “Four Ares” that we introduced in The Information Paradox and which became the basis for Val IT™:

  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?

The first and last questions are primarily concerned with information management, while the second and third are primarily concerned with effective management of information technology.

I was reminded of this distinction again in 2005 – just as I was getting involved with ITGI so the IT label hadn’t quite got me – when leading a number of CIO workshops with the Seattle chapter of the Society for Information Management (SIM). The workshops were around the topic of  “Rethinking IT Governance – Beyond Alignment to Integration.” I found that the discussion kept descending into technobabble and had to remind the participants that there might be a reason why the organization was called the Society for Information Management – NOT the Society for Information Technology! I will be making this point again when I speak at SimPosium09 in Seattle in November.

Given the above, I think that what I should have said in yesterday’s blog was that the heading of the article should have been: “CIOs told to scrap enterprise IT departments BUT not an enterprise IM Role”. In the same vein, I also think that Val IT might have been more appropriately named Val IM.

You can be assured that I will be making the distinction between information management and the management of information technology more explicit in the future.

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.

Leveraging the Value of IT in Good Times and Bad

This article was published in IndustryWeek today. It discusses that, while manufacturing companies and other enterprises are increasingly recognizing the opportunities for information technology to add competitive advantage and significant business value,  the track record of successfully doing so continues to be less than stellar. The issue continues to be the failure to recognize that we are no longer investing in technology, but in IT-enabled change. Effective governance processes, supported by proven value management practices, such as those provided in ISACA’s Val IT 2.0 Framework, are required to ensure that the right IT-enabled investments — those that will create and sustain measurable value — are selected and managed such that they deliver that value throughout their lifecycle. Enterprises that do this are able to thrive in good times and survive in bad ones. Unfortunately, they are in the minority.

The terror of transparency

As a follow up to my earlier post on the U.S. Government’s IT Dashboard, this Infoworld post by Erik Knorr discusses the challenge of transparency and also highlights one current weakness of the dashboard in that “…these ratings have been provided by agency CIOs themselves. What matters more, of course, is the assessment of people who use these systems.” I would add here that these are not just the people who use them, but who often commissioned them in the first place. I say current weakness as Knorr goes on to say that “In the postlaunch Q&A, Kundra [the Federal CIO] said this will be incorporated into future iterations of the platform.”

While the above is indeed a weakness, and the dashboard is still in it’s early days – the fact that such a platform has been made publicly available is still one heck of a leap forward.

Did You Know?

One of the arguments that we have always faced when discussing the dismal track record of IT and promoting the need for different governance models around enterprise use of IT to create/sustain value is that the same thing happened with the emergence of railroads and electricity and that, essentially, “this too will pass”. I have always had a problem with this for a number of reasons including i) the pervasiveness of IT, iii) the pace of the change, and iii) the fact that it is unclear if/when we will ever reach a “stable state”. This youtube video certainly reinforces that view and provides much food for thought – not the least being that we need to be moving beyond “tweaking” traditional governance models to thinking about radically different models.

Uncle Sam’s IT dashboard: Your tax dollars at work

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It is a holiday – Canada Day – here today so this post will be brief. I couldn’t resist looking at this article by Robert X. Cringely in Infoworld while looking for some personal email. After only a cursory review, the IT Dashboard discussed here appears to be a huge leap forward in terms of investment transparency, in this case by the U.S. Government. Over the next few days, I will be looking into this more, and will certainly be posting additional comments.

Value Management – We Still Have a Long Way To Go!

I recently worked with ISACA to create a short survey around “Value of IT Investments”. The responses from more than 500 IT professionals in the US raise some interesting questions. While 67% of respondents felt that they were realizing between 50 – 100% of expected value from their IT investments, only 34% felt there was a shared understanding of what value was in their enterprise, and only 29% had a comprehensive approach to measuring that value. This raises the question, “On what basis are spending decisions made?”.

These findings support the results of a number of other studies, anecdotal evidence and my own experience that most decisions related to value from IT are subjective, and all too often based on perception and emotion rather than facts. The survey also confirms that responsibility for ensuring the realization of value from IT-enabled investments continues to be abdicated to the IT function with 57% responding that this is the case. Remarkably, 11% responded that no-one was responsible!

In response to another question about responding to the current economic crisis:

· 16% of enterprises are making across-the-board cuts in IT spending;

· 14% are freezing at current levels;

· 44% are reducing spending selectively; and

· 26% are increasing selectively.

These results are encouraging in that they show that enterprises are moving away from the traditional across-the-board cuts, but again raise the question of how spending decisions – decisions to freeze, spend more or spend less – are made.

We are still consolidating these results with those from other countries, which, while largely consistent, show some interesting differences. I will post and discuss these when they are made public.

The results so far, however, show that we still have a long way to go – organizations will continue to come nowhere near to realizing the full value of their increasingly significant and complex IT-related investments until they implement effective governance of IT, as an integral part of overall enterprise governance, adopt proven value management practices – such as those in the Val IT™ Framework 2.0 from ISACA, and assign accountability for the realization of value for those investments to the business, rather than abdicating it to the IT function.