Back to the Basics – the Four “Ares”

Well, having now finished with the Sidney Fine Art Show – which was incredibly successful – it’s time to get back to this blog.

As I prepare to head down to Seattle where I am speaking at SIMposium09 on November 9th – just 6 weeks before my 65th birthday – I have been reflecting on the underlying foundation of what I have been doing over the last 20 plus years – what have come to be known as the “four ares”. They have certainly guided my thinking and, since they were published in The Information Paradox, continue to be widely referenced  – sometimes those references are even attributed. The idea came when I was presenting a diagram of, what we then called, the Information Resource Planning approach, to the executive of a large Canadian utility. As I was going through it, one of the executives stopped me, saying: “This is all “gobbledygook” to me – can you just explain it in plain English?” So, I turned the somewhat obtuse and long-winded statements on the chart into the questions each box was trying to address. What had been somewhat of a “talking head” session turned into a lively discussion which resulted in a  successful assignment with very positive outcomes. After that, I applied the same approach to almost everything I was doing including, at the time, DMR’s (now Fujitsu’s) Macroscope methodology – and the four “ares” were born. They have been “tweaked”, but have essentially remained the same for more than two decades.

At the time, I am not sure that I had even thought about the term governance, or could have described what it was. However, over time the two ideas have come together in that, in my view, the ability to continually ensure that enterprises can get positive answers to the four “ares” is the essence of effective enterprise governance. I use the term enterprise governance because, although the origins of the four “ares”, and much of their current application relate to governance of IT, they are equally applicable to the broader enterprise governance view. Indeed, one of the comments/criticisms I have had of both The Information Paradox, and the Val IT™ Framework, is that the term IT should have been dropped, or at least de-emphasized,  as they are both more broadly applicable to any form of investment or, indeed, any form  of asset.

For those of you still wondering what I am referring to, the four “ares” are:

  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?

Whenever I am talking with executives, I always have to pause when I get to the four “ares”as they invariability write them down. They are questions that are easy to understand although, unfortunately, not always easy to answer. Indeed, I often feel guilty that they appear too simple. I also feel somewhat guilty about the term “right” in the first two questions. I am not sure that there can always, or even ever be a totally right answer to those questions. However, asking these questions can definitely eliminate a lot of “wrong” decisions. A key point about these questions is that they need to be asked continually. Whilst important to ask them when an initial investment decision is being made, it is equally important to ask them throughout the full economic life cycle of that investment decision. That life-cycle includes a number of stages:

  • Development  – creating the necessary capabilities (hereinafter referred to as assets)
  • Implementation  – delivering the assets
  • Value creation  – adopting and using the assets to achieve the expected level of performance
  • Value sustainment  – assuring that the assets resulting from the investment continue to create value, including additional investments required to sustain value
  • Retirement phase – decommissioning some or all of the resulting assets
The four questions, in order, essentially apply to strategy, architecture, delivery, and value. As illustrated below, they collectively encompass alignment with strategy, business worth, including benefits and costs, and risk – including delivery risk and benefits risk.Slide1

As further illustrated below, within the context of governance of IT, the first and last  questions relate to the “demand” side – business governance of IT, while the second and third relate to the “supply” side – IT governance of IT. Collectively, they represent a complete view of enterprise governance of IT.
Slide2

As we said in The Information Paradox [with some updates], “ Tough questioning is also 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.”

In Val IT, specifically in version 2.0, we fleshed out these questions and also expanded them to include IT services, assets and other resources (while this is in the context of IT – they could equally well be expanded to include other assets).

1.  Are we doing the right things? The Strategic Question.

  • Are our investments:
    • in line with our mandate and vision?
    • consistent with our business principles?
    • contributing to our strategic objectives, both individually and collectively?
    • delivering optimal benefits at an affordable cost with a known and acceptable level of risk?
  • Are resulting IT services, assets and other resources continuing to deliver value by addressing real business needs and priorities?

2.  Are we doing them  the right way? The Architecture Question.

  • Are our investments:
    • in line with our organisation’s enterprise architecture?
    • consistent with our architectural principles and standards?
  • Are we leveraging synergies between our investments?
  • Are our IT services delivered based on optimal use of the IT infrastructure and other assets and resources?

3.  Are we getting them done well? The Delivery Question.

  • Do we have:
    • effective and disciplined management, delivery and change management processes?
    • competent and available technical and business resources to deliver the required capabilities and the organisational changes required to leverage them?
  • Are services delivered reliably, securely and available when and where required?

4. Are we getting the benefits? The Value Question.

  • Do we have:
    • a clear and shared understanding of what constitutes value for the enterprise?
    • a clear and shared understanding of the expected benefits from new investments, and resulting IT services, assets and other resources?
    • clear and accepted accountability for realising the benefits, and relevant metrics?
    • an effective benefits realisation process over the whole investment economic life-cycle, to ensure that we are maximising business value?
One of the objections we often here to implementing or improving governance practices or frameworks is that we are making it much too complex. There is indeed some truth to this given that the IT industry appears to have single-handedly invented English as a second language, i.e. talking in “techno-speak”. There are also a growing number of what are perceived to be competing frameworks in the marketplace. The four “ares” rise above this and provide a very simple yet comprehensive and powerful set of questions that can be used to help you to start the conversation – a conversation that is long overdue in many enterprises.

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

BodineEmpty

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

SFAS

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.

Moving Beyond PPM to P3M

Over the last little while, I have been asked to write introductions to, or testimonials for a number of books on Project Portfolio Management (PPM). This has caused me some angst because, while PPM most certainly has its place and is a valuable management tool, the name also unfortunately perpetuates the myth that IT projects, in and of themselves, deliver value. As discussed in an earlier post, Get With The Programme!, we need to move beyond IT projects to comprehensive business change programmes.

The concepts of portfolio management (as related to IT investments) and programme management were introduced in The Information Paradox. While portfolio management has seen significant adoption since then, largely in the form of PPM, the adoption of programme management has been slower, which certainly contributes to the popularity of the PPM term. (It would likely help if we could all agree on a common spelling of program/me!)

I have heard  number of arguments against using the term “programme” including that we are making things too complex by introducing another term, it scares people, and it doesn’t apply to small enterprises etc. The reality is that much of what we are enabling with IT today is complex – very complex, and denying that results in even greater complexity. Taking the programme view facilitates better understanding – shared understanding – of complexity and, as a result, more effective management of change. Regarding scaring people, I always say when I am presenting or discussing this topic that if the audience doesn’t leave both excited and scared, they haven’t “got it”. As Albert Einstein once said “You cannot solve a problem by applying the same thinking that got you into the problem in the first place.” We need to shake people out of their complacency and get them to think and act differently. I also believe that the concept of programme applies just as much to smaller enterprises – appropriately  scaled to fit  size and culture.

Programme management does now appear to be gaining some momentum. In addition to ITGI’s Val IT™, both OGC and PMI have programme-related materials. In a recent research paper, Gartner states “Organisations are discovering that program management is a level of business discipline that is key to delivering business outcomes”. It goes on to say that “We are focusing on a specific research project that addresses strategic program management – an emerging discipline focused around the multi project delivery of business outcomes…we believe that this is the management construct best suited to enable better business engagement, value delivery and risk.”

The definition of Portfolios, Programmes and Projects – as introduced in The Information Paradox, and continued in Val IT – is illustrated in the figure below.
Slide1

Given the above definitions and relationships, I would strongly recommend adoption of the term “Programme and Project Portfolio Management”, or P3M to better reflect both the relationships between portfolios, programmes and projects and the need to have all 3 in place. Indeed, I usually portray this with the “3” in superscript (which WordPress doesn’t seem to like) as I truly believe that it is “P to the power of 3 M”. While all three are necessary, none are sufficient on their own. All three, working together, are needed if enterprises are to:

  • Identify, define, select and execute new investments in IT-enabled change such that they maximize value creation and sustainment, taking early corrective action when this is at risk
  • Make intelligent spending decisions, focusing on spend that creates or sustains value, and avoiding the value destruction inherent in across-the-board (percentage) cuts
  • Ensure that their ongoing investments optimize benefits –  contributing to the creation and sustainment of  value – and again, where this is at risk, take early and appropriate corrective action
  • Deliver business and technology capabilities in a reliable, responsive and cost-effective manner

The relationship between Portfolios, Programmes and Projects, in the context of value management, is illustrated in the figure below.

Slide1

There is an argument that you shouldn’t consider portfolio management until you have dealt with project and programme management, i.e. get delivery right before you determine if you are doing the right things and creating or sustaining business value. I clearly do not agree with that argument – as Peter Drucker said “There is nothing worse than doing well that which should not be done at all!” Portfolio and Programme Management are the vehicles that bridge the gap between strategy and execution – ensuring alignment with business objectives and delivery of value through investments in IT-enabled change by effectively understanding and managing that change. Project management ensures that the technology and business capabilities required to enable the IT-enabled change and the resulting benefits and value are delivered. If we are to realize the full potential of IT-enabled change and translate that into real and sustainable business value, we need to work to all three of these areas – we have no choice!

ERPs – Can’t live with them – Can’t live without them!

A CIO.com article and a blog, both by Thomas Wailgum, caught my attention this week. The first, Why ERP is Still So Hard, and the second, The United Nations ERP Project: Is SAP the Right Choice?. Both caused me to reflect on ERPs – in many organizations now themselves legacy applications.

The first article opens by saying that:”After nearly four decades, billions of dollars and some spectacular failures, big ERP has become the software that business can’t live without–and the software that still causes the most angst.” Interestingly, when we wrote The Information Paradox, the major IT investments at that time were ERPs, and that is where most of the problems where. It appears that not much has changed.  The article goes on to make a number of points:

  • ERP projects have only a 7 percent chance of coming in on time, most certainly will cost more than estimated, and very likely will deliver very unsatisfying results. In addition, today’s enterprise has  little better than a 50 percent chance that users will want to and actually use the application.
  • CEOs and CFOs are still trying to wrap their heads around the financial aspects of your standard ERP package, a most unusual piece of the corporate pie: the licensing, implementation, customization, annual maintenance and upgrade costs. A CFO Research Services study of 157 senior finance executives, found that a typical company will spend an average of $1.2 million each year to maintain, modify and update its ERP system.
  • Manjit Singh, CIO of Chiquita Brands International, makes a key point that the reality CIOs face when synching business processes with those in ERP applications leads to “internal arguments over how we are going to define something simple as a chart of accounts. So all of the sudden, what looked like a very simple concept has exploded in complexity, and now you’re into trying to get some very powerful people aligned behind one vision. In some cases, you can; in some, you can’t.”
  • In a  first implementation, Taser International customized its chosen ERP package to meet the business processes that it already followed. In a subsequent upgrade, they decided to “…get rid of these customizations and go back to the best practices and recommendations out of the box”. Taser International CIO,  Steve Berg, acknowledged that the upgrade took longer than expected: Testing and training issues, as well as certain customizations that were unavoidable, complicated progress along the way.

In summary, the track record of ERP implementations continues to be spotty at best, costs are not well understood – nor are benefits, change management is a huge issue – not to be underestimated, and there needs to be an appropriate balance between “out of the box” and rampant customization.

So, let’s now look at the UN situation. My first reaction was one of relief that I did not have to do this. Not that it isn’t most likely needed, and could contribute to improving the UN’s efficiency – which is certainly a noble goal – but that it appears to a close to impossible  challenge. What are the chances of the now $337 million project actually coming in on budget – it’s already 4 months behind schedule – and delivering the expected benefits? If this is being considered a “technology project” it will almost certainly fail. If it is really an “IT-enabled change programme”, it will likely cost much more and still be challenged. To extract just a few points from Thomas’s blog:

  • “History tells us that the greatest odds for success with SAP ERP are at organizations that run lean, disciplined shops where change doesn’t have to involve translators or global resolutions.” He then goes on to quote from the UN draft report (released in an article by Fox News – not my usual source of information!) on the progress and scope of the project: “A substantial number of its administrative processes are largely based on practices from the 1940s and 1950s and supported in many cases by technology from the 1980s and 1990s…. There are at least 1,400 [non-integrated] information systems currently in the United Nations Secretariat but in many cases they are used to support or track paper-based processes. Very often, documents are printed from these systems, signed, manually, routed, photocopied and filed with associated costs in time and money. Furthermore, paper documents are usually the source of trusted information, casting doubt on the reliability and acceptance of data existing in electronic systems. The result is that we often have several versions of ‘the truth.'”
  • He acknowledges that “The implementation team…is well aware of the challenges.” Again, from the report: “[The project] is not just about implementing a new system; it is about implementing new and better ways of working together. To meet this challenge, [the project] must improve staff attitudes and skills, align processes, policies, and organizational structures with known leading practices and standards, and deploy a new global information management platform.”

It is encouraging that the implementation team does recognize that this is indeed not a technology project, but an “IT-enabled change programme”. However, the report also say:”…based on the process analysis and requirements review done to date and assuming the organization’s ability to adapt, no customizations to the core SAP code have been identified.” Given the nature of the UN, this would seem to be the mother of all assumptions. The danger here is that while starting with this understanding, the challenges will be so daunting that the “programme” will be scaled back over time to a “technology project” with significant and expensive customization, and erosion of anticipated benefits.

As Thomas concludes: “…if there is one thing that will surely doom the project—because rest assured that the software will eventually run, whether it’s by 2013 or beyond—it will be the ill-equipped users tasked with actually changing the day-to-day of their jobs to fit the strict parameters of this foreign software.”

But, does it have to end this way? Here are my thoughts on what the UN should do to improve their chances of success:

  1. Maintain active executive sponsorship – cascade sponsorship across and down through the organization.
  2. Clearly define the desired outcomes – both end outcomes and intermediate outcomes. Use some form of benefits mapping approach to do this (for more about this look at  Get With the Programme!). Develop relevant metrics – both lead and lag metrics and consolidate them in a benefits register.
  3. Assign clear accountability for all the outcomes – with consequences – align the reward system.
  4. Develop a realistic plan – schedule enough time – break it down into “do-able chunks” with clear outcomes from each.
  5. Recognize the full depth and breadth of the change – specifically cultural and behavioural change. Manage the process of change. Have a two-way communication plan – cascade it across and down to all stakeholders. Listen to the people who have to do the work – be flexible where appropriate. For more on managing change, look at Managing Change – The Key to Delivering Value.
  6. Invest in training – cascade the training using a train the trainer approach.
  7. Measure performance against the metrics – both lead and lag. Understand and act quickly and decisively on deviations.
  8. Be prepared and willing to change course – both the outcomes and the journey.
  9. Stay the course – but know when to fold.
  10. Plan for more change.

I am sure they are doing some of this today, but certainly not all, and likely not enough – if they are to avoid a costly and avoid highly visible failure, and realize real value from this significant investment they would do well to do more!

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.

Who is “Minding the Farm”?

Two recent articles, one about outsourcing, and the other about risk-management provide yet further evidence of the current shortcomings of enterprise governance, and the urgent need to take action.

Outsourcing – seen as one approach to deal with the current economic downturn – is the subject of a recent CBR article Euro business execs blind to outsourcing cost benefits by Kevin White in which he discusses the results of a new study.  The study, which was carried out by Cognizant in conjunction with Warwick Business School, found that:

  • Most CIOs and finance directors think the outsourcing of IT services can help them reduce costs but fewer than half of them could actually prove it, since they do not try or find it difficult to quantify its impact on the bottom line.
  • More than a third simply do not bother to assess the financial contribution to their businesses and 20% cannot remember if they have tried.
  • A third of CIOs and CFOs believe that the business value of outsourcing cannot be assessed beyond a one-time cost saving.

The research was carried out to assess attitudes to outsourcing and the impact of the current economic climate on IT and business decisions. The researchers polled executives in some of Europe’s biggest companies. The businesses reached across the UK, Germany, Switzerland, Benelux, France and the Nordics and a majority of the 263 respondents were reported to be spending between $5 and $100 million annually on outsourcing.

“They seem to believe outsourcing will save money, but fewer than 20% of the CFOs and CIOs had any confidence in their quantification,” said Sanjiv Gossain, VP and head of Cognizant in the UK. The study also showed that CFOs feel CIOs need more help to communicate the full benefits of outsourcing but only 37% of CFO respondents rate their CIOs ability to do this.

The study report concluded, “Senior executives appear to be making outsourcing decisions based upon short term cost cutting – which remains crucial – but outsourcing’s impact stretches well beyond the initial labour, skills and cost advantages.”

Shareholders and taxpayers alike should find it totally unacceptable that such major decisions would be made without a full understanding of their impact,  inadequate or no quantification of business value, and without even measuring whether cost savings are actually being realized.

Governance shortcomings also extend to risk-management – another recent article from Accenture Heeding lessons from economic downturn discusses the results of an an their 2009 Global Risk Management Strategy Study which found that the vast majority (85 percent) of corporate executives surveyed say they need to overhaul their approach to risk-management if the lessons of the economic crisis are to be used to improve business results.

The study, based on a survey of 260 chief financial officers, chief risk officers and other executives with risk-management responsibilities at large companies in 21 countries, also pointed to a lack of integration of current risk-management and performance-management processes. While nearly half the respondents said that their company’s risk-management function is involved to a great extent in strategic planning (48 percent) or in investment and divestment decisions (45 percent), only 27 percent said the risk-management function was involved to a great extent in objective-setting and performance management.

“Executives could improve their organizations’ performance and position themselves for economic recovery by linking and balancing risk management and performance management to aid their decision-making and increase shareholder returns,” said Dan London, managing director of Accenture’s Finance & Performance Management practice. “Being effective at this also requires companies to integrate their risk management capabilities enterprise-wide.”

Survey respondents identified a number of common problems with their risk-management functions, including:

  • Ineffective integration of risk, return and capital issues in decision-making (identified by 85 percent of respondents);
  • Lack of alignment between the company’s strategies and its risk appetite (85 percent);
  • Insufficient enterprise-wide risk culture (82 percent);
  • Inadequate availability of timely risk, finance and business data (80 percent);
  • Lack of integration and aggregation across all risk types (78 percent); and
  • Ambiguous risk responsibilities between corporate and business units (78 percent).

What I find particularly worrisome is that I could substitute the term “value” for “risk” above and the findings would still apply.

The Val IT™ definition of value is “the total life-cycle benefits net of related costs, adjusted for risk and (in the case of financial value) for the time value of money”. When management continues to focus on cost, with little understanding of, or attention to benefits or risk, or indeed of overall value, and also fails to manage actual performance, it should come as no surprise that we continue to have such a poor track record of actually creating and sustaining value – especially, but certainly not limited to IT-enabled investments! Enterprise governance needs to focus on creating and sustaining value, integrating all aspects of value – benefits, costs and risks –  to support the full life-cycle of investment decisions from ideation, definition, selection and execution of investments through to the operation and eventual retirement of resulting assets.

CIOs in the Era of Doing More with Less

A shorter post than usual, but I wanted to  highlight an interesting article by Brian P.Watson in CIO Insight which quotes, among others, Peter Whatnell, CIO of Sunoco and President of the Society for Information Management (SIM).

While quite a bit of the article is about tactical stuff, the quotes below capture the type of thinking we should be looking for from CIOs, and that CEOs should be demanding. These include:

“Most importantly for IT leaders today, doing the right things means focusing on the long-term view—the strategic components of your plan and that of the overall business, not the bits and bytes of whatever hot technology is dominating the IT buzz”. – Brian Watson

“…the opportunity for IT leaders is more strategic than tactical, more business than technology.” – Peter Whatnell, CIO, Sunoco and President, SIM

“When all is said and done, blending a strategic business focus with the right IT decisions could be what separates the CIO wheat from the chaff. Put those skills together, and you’ll become a true partner:  A CIO has to become the internal, go-to expert consultant for every functional head in the organization to help them execute, innovate and enable strategy more efficiently with the right technology.” – Vincent Cirel, CIO, Norwegian Cruise Line

While these quotes are encouraging, we should remember that the requirement for CIOs to be more strategic business partners should not come as a “Eureka” – resulting from the current economic crisis. The requirement has existed for a long time – certainly well over two decades. The difference today is that the consequences of not doing this are much more serious. CIOs and CEOs who do not understand this are putting the very survival of their organizations at risk!

You can be assured that I will be discussing this topic more in presentation at my SIMposium09 in Seattle on November 9th.