Value from IT – There is a Better Way!

I have just returned from a hectic, but very successful couple of weeks in Australia. There I had the opportunity to meet with and talk to many people, including many CXOs, on the topic of “Delivering on the Promise of IT”. Overall, I was encouraged that there is more awareness of the need to do better when it comes to managing IT investments, but discouraged that there is still little awareness of how to do so, and even less appetite to take it on. As always, at the end of many sessions, a frequent reaction was “you have given us a lot to think about.” As I continue to say, we certainly need to think before we act, but thinking cannot be a substitute for action. A couple  of people echoed a comment that my friend Joe Peppard from the Cranfield  School of Management in the UK told me he had had from a senior executive of a European bank – “I didn’t know there was a better way.”

Well, there is a better way! As originally presented close to 15 years ago in The Information Paradox, proven Value Management practices exist, including, but certainly not limited to ISACA’s Val IT™ Framework, including:

  • Portfolio Management – enabling evaluation, prioritization, selection and on-going optimization of the value of IT-enabled investments and resulting assets;
  • Programme Management – enabling clear understanding and definition of the outcomes and scope of IT-enabled change programmes, and effective management of the programmes through to their desired outcomes;
  • Project Management – enabling reliable and cost-effective delivery of the capabilities necessary to achieve the outcomes, including business, process, people, technology, and organizational capabilities; and
  • Benefits Management – the active management of benefits throughout the full life-cycle of an investment decision.

This is illustrated in the figure below.

If enterprises are to successfully adopt and meaningfully use these practices, their leaders will have to change their behaviour. They will need to acknowledge that this is not an IT governance issue, it is an enterprise governance issue. Further, they will have to evolve from an enterprise governance 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 (for more on this, see a recent paper that I wrote with the Benefits Management SIG of the APM in the UK). In the IT context, this means recognizing that we are no longer dealing with “IT projects”, but with increasingly complex programmes of organizational change – change that is often both shaped and enabled by technology, but of which the technology is only a small part.

They should start by focusing on the business case. The business case sows the seeds of success or failure. Most today are woefully inadequate – based on “delusional optimism” and “strategic misrepresentation” (aka lying!), resulting in:

  • limited or no clarity around desired outcomes
  • limited or no understanding of the scope (“depth” and “breadth”) of change required to achieve the outcomes;
  • failure to balance “attractiveness” with “achievability” (including organizational change capacity, project and programme management capabilities); and
  • limited or no relevant metrics (both “lead” and “lag”).

In the context of IT, business cases must be owned by the business, and for any type of investment, used as a living, operational management tool to manage the full life cycle of an investment decision, and supported by the value management practices outlined above.

Again, in the context of IT, as Susan Cramm states in her book, 8 Things We Hate About IT, this will require  a significant  realignment of roles, responsibilities and accountabilities related to IT. There must be a partnership in which:

  • The IT function moves from providing infrastructure to being a broker of services (both internal and external – and increasingly external) while retaining responsibility and accountability related to fiduciary, economies of scale and enabling infrastructure;
  • Business units accept responsibility for defining the requirements for, meaningful use of, and value creation from these services; and
  • The IT function, as a trusted partner, helps the business:
    • Optimize value from existing services;
    • Understand the opportunities for creating and sustaining business value that are both shaped and  enabled by current, new or emerging technologies;
    • Understand the scope of business change required to realize value from those opportunities (including changes to the business model, business processes, people skills and competencies, reward systems, technology, organizational structure, physical facilities, etc.; and
    • Evaluate, prioritize, select and execute those opportunities with the highest potential value such that value is maximized.

The challenge here is not a lack of proven value management practices – it is 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 (should know) how to do it. Yet, so far, here has simply been little or no appetite for, or commitment to the behavioural change required to get it done, and stick with it.

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 – the status quo is not an option!

There is a better way!

The Future of IT

After another couple of month’s silence precipitated by some minor surgery, the holiday season and, quite frankly, too much “same old – same old” news, a couple of articles have caused me to, once again, put my fingers to the keyboard.

The first, a blog – unfortunately his last with CIO.com, by Thomas Wailgum, IT in 2020: Will it Even Exist?, and the second by Marilyn Weinstein, again in CIO.com, The Power of IT Drives Businesses Forward. While the two titles might appear contradictory, I felt they were both saying the same thing in somewhat different ways, and that what they were saying is important – although not new.

In describing a new report from Forrester Research, “IT’s Future in the Empowered Era: Sweeping Changes in the Business Landscape Will Topple the IT Status Quo”, Thomas suggests that the question that lingers throughout the report is whether corporate IT, as we know it today, will even exist in 2020.

In the report, analysts Alex Cullen and James Staten identify three forces bearing down on IT that will likely have long-lasting ramifications. The three forces include: Business-ready, self-service technology (including cloud and SaaS adoption); empowered, tech-savvy employees who don’t think they need corporate IT; and a “radically more complex business environment,” notes the report.

Cullen and Staten write “The IT status quo will collapse under these forces, and a new model–empowered BT [business technology]–will take its place. Today’s IT and business leaders should prepare by rethinking the role the IT department plays and how technology staff engage the business, shifting from controlling to teaching and guiding.”

Well, whether it be these three forces or others, I certainly agree that the status quo is unacceptable and this rethink needs to take place – it should have taken place a long time ago.

In her article, Marilyn echoes a comment I have been making for well over a decade in saying “One of the most overused terms I’ve heard in the past few years as CEO of an IT consulting and staffing firm has to be the word “alignment.” With IT embedded in just about everything that we do, it is ridiculous. and dangerous, to continue to talk about alignment. As Marilyn goes on to say, “IT drives efficiencies. IT enables business. IT powers business success. The goal is not merely to align, but to get in front of the business goals and spearhead growth… IT does drive and enable business. It’s time for IT leadership to drive that point home. ” Again, the long overdue need for IT and business leaders to rethink the role the IT department plays and how technology staff engage the business.

The role of the IT leader, the CIO is indeed changing, or certainly should be. The CIO is accountable for delivering required technology services at an affordable cost with an acceptable level of risk. The business leadership is accountable for investing in, and managing and using technology such that it creates and sustains value for their organization – this cannot be abdicated to the IT function. But nor can it be done without the IT function – they have a key role to play here. The CIO, as the IT leader, is responsible for ensuring that their team works in partnership with other business leadership to help them:

  • optimize value from existing services;
  • understand the opportunities for business change enabled by current, new or emerging technologies;
  • understand the business changes they will have to make to realize value from these opportunities; and
  • select opportunities with highest potential value and execute such that value is maximized.

This requires moving beyond the current culture of delivery – based on a philosophy of “build it and they will come”, to a culture of value. This will further require moving beyond the current approach to IT governance – one that is again focused on delivery and the “factory” to a broader more strategic approach to enterprise governance – one that ensures that organizations have:

1. A shared understanding what constitutes value for the organisation;

2. Clearly defined roles, responsibilities and accountabilities, with an aligned reward system;

3. Processes and practices around value management, including portfolio, programme and project management, supported by complete and comprehensive business cases, with active benefits and change management; and

4. Relevant metrics, both “lead” and “lag”.

The Val IT Framework 2.0™ provides, in Section 6 – Functional Accountabilities and Responsibilities, a summary of the roles of IT and business leadership required to support this approach.

In the Afterword of the revised edition of The Information Paradox, I introduced a Strategic Governance Framework. Since that time, as well as working with ISACA in leading the development of The Val IT Framework, I have continued to refine that framework into what I now refer to as the Strategic Enterprise Governance Framework. Over the next few months, I will be introducing this framework, and describing each of the ten major elements that it comprises.

Moving to such a governance approach is a business imperative, one which is itself a major change programme that will take time to plan and implement, and also for the benefits to be achieved. We will not however come anywhere near realizing the full potential value of IT-enabled change until we do so. It is time to move beyond words and place an emphasis on action. This will require strong leadership, and engagement and involvement at every level of the organisation.

The Real Alignment Challenge

It has, yet again, been a while since my last post – this partly because of both work and personal pressures – I have been helping Diane run one of the largest juried art shows in our province, but also because I haven’t seen anything that caused me to “lift up my pen”. A number of articles and posts that I have seen over the last few days have now pushed me to do so.

Yesterday, I read an interview with my old colleague, Don Tapscott, by Shane Schick in Computerworld Canada  in which he discusses yet another new book, his follow on to Wikinomics –  Macrowikinomics: Rebooting Business and the World (which Tapscott wrote with collaborator Anthony D. Williams). The book is based on the idea of mass collaboration both within companies and between them, with their partners, customers and other stakeholders. Since his first book, Paradigm Shift (which he co-authored with Art Caston), Don has been a visionary in the IT space – he has helped many individuals and organizations, including myself, to have a broader understanding of what could be. Whilst I would also like to think that I am somewhat of a visionary, I am primarily interested in what it takes to turn vision into reality – a reality where the potential of IT turns into realized value. Unfortunately, the gap between vision and reality (and, by inference, concept and implementation) continues to be large, and, as another former colleague of mine, Michael Anderson, once said (or, possibly, quoted), vision without action is hallucination.

This leads me to the second article by Chris Kanaracus in Computerworld – ERP woes blamed for lumber company’s bad quarter . On first seeing this, I thought here’s yet another ERP failure story to file away which, to some extent it is in that, as the article says “Lumber Liquidators is attributing a weak third quarter to a complex SAP implementation, saying the project imposed a significant drain on worker productivity.”  The article goes on to say that  “…lower productivity led to an estimated $12 million and $14 million in unrealized net sales, according to the company. Net income fell nearly 45% to $4.3 million.” Lumber Liquidators’ CEO Jeffrey Griffiths, in saying that “There were a few things that didn’t work quite right, a few things that were unique to our business that we didn’t see as well ahead of time…” , attributed the problems in the quarter to employees’ having difficulty adjusting to the SAP software, which he nonetheless praised. The article concludes by saying that “The situation differs from other troubled SAP projects, such as one conducted by Waste Management that led to a bitter lawsuit, which was ultimately settled.” It may differ in that it did not result in a lawsuit, and the SAP system is still running, but it certainly does not differ in that the significant loss of income, and the resulting drop in share value of 14%, was due to a problem that could and should have been anticipated and headed off – this did not have to happen! The problem here usually comes down to focusing too much on the technology – not the change that technology shapes, enables and require, not applying due diligence at the front-end – to understand the scope and breadth of the change, and not effectively and pro-actively managing the change. In Lumber Liquidator’s case, this view would appear to be supported by today’s ZDNet Article by Michael Krigsman – Understanding Lumber Liquidators’ ERP failure.

The next article, Business as Organism, Mechanism, or Ecosystem by Bob Lewis in CIO provides some useful insights into the nature and behaviour of organizations today. Introducing the article, he asks “Do you envision your organization as an organism, mechanism, or ecosystem?”

In the case of an ecosystem, he suggests that “The enterprise is organized, if that isn’t too strong a word [such that] employees at all levels interact to further their own self-interest. Furthering the interests of the enterprise is an accidental byproduct at best. More usually it isn’t a byproduct at all. The enterprise is left to look out for itself. And so, organizational ecosystems devolve to silos within silos within silos. It’s no way to run a railroad. Or any other organization, from an enterprise down to the smallest workgroup.”

He then goes on to say that, as a result of this proliferation of silos, “Many business executives choose to view their organizations as mechanisms instead — collections of gears, cams, cogs, levers and buttons, connected so as to achieve a coherent result. It’s business-as-automobile and business-leader-as-driver. It’s the view preferred by process consultants of all religious persuasions … lean, six sigma, lean six sigma, theory of constraints and whole-hog process re-engineering for the enterprise as a whole; ITIL for IT, and other process frameworks (I imagine) for other business disciplines. All start by describing an organization as a collection of processes and sub-processes that feed each other’s inputs and use each other’s outputs to achieve the organization’s purpose… the purpose of the executive in charge … the CEO for the enterprise as a whole and the other C-level executives…Business-as-mechanism is far superior to business-as-ecosystem because mechanisms, whether they’re automobiles, power tools or computers, can and do achieve the purposes for which they’re designed, so long as they’re operated by people who (a) have the appropriate skills to use the mechanism; (b) know what they’re trying to accomplish with it; and (c) have chosen to try to accomplish something for which the mechanism is suitable.” Relating back to the SAP challenge described above,  it is this last statement that contains the root of the problem.  Many executives choose to implement ERP solutions, such as SAP, as a way to address the silo problem. However, if insufficient effort is put in up front as part of the change management process to ensure that managers and employees think beyond their individual silos, have a clear and shared understanding of the purpose of the change that they are being asked to make, and how their roles and responsibilities will change across the silos, and if they are not trained such that they have the appropriate skills to operate in the changed environment, the result will be, at best, disruptive, and, at worst, highly visible outright failure.

Bob then goes on to contrast the above with organizations that operate as organisms, saying that “Unlike mechanisms, the organism’s purpose belongs to every part of it. That’s what lets it adapt to changing circumstances. Feet build callouses, muscles harden and bulk up, skin tans when exposed to more sunlight — each part supplies its own energy and figures out the details of its operation on its own without subverting the overall purpose of the critter it’s part of. Organizations that are organisms are rare because leaders willing to invest the effort to build them, and to forgo the gratification of being the sole driver, are rare. While evidence is sparse … Business Management theory hasn’t yet reached even the level of reliability associated with Economics … what evidence we have suggests organizations that operate as organisms are the most successful in both the short and long run.”

The above caused me to again reflect on Joel Kurtzman’s book, Common Purpose, which I referenced in an earlier post The Traveller Returns, in which Joel provides a very insightful critique of today’s leaders. (As I threatened in the previous post, I will review this book in greater detail shortly). What I took away from Bob’s article, and what I see in my everyday work across the globe is a serious mis-alignment between enterprises whose leaders have an ecosystem mindset, but  adopt mechanistic solutions to change what are becoming increasingly complex organisms – this is the real alignment problem! If we are to solve this problem, if enterprises are to survive and thrive, we need to get away from what I have described in previous posts as the cult of leadership. As Joel says in his book, 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. Only then will the full potential value of IT-enabled change be realized!

Helping Businesses Help Themselves

This morning, I spent little over an hour listening to Susan Cramm on the above live HBR webcast. I always enjoy what Susan has to say. She is a former CIO and CFO who definitely “gets it” when it comes to enterprises realizing value from IT-enabled change.

My takeaways – not new but very much reinforcing – from Susan’s webcast, which was based on her book “8 Things We Hate About IT” and the study which it describes, are that:

  1. It’s time to align authority and accountability for IT – in that the same way that we don’t expect the HR function to manage all our people, or the finance function to manage all our finances, we shouldn’t abdicate (my word) accountability for the intelligent (my word again) use of IT to the IT function.
  2. This means we need to re-architect our IT capabilities – key points being business leaders going from being “IT-dumb” (as the study reports 75% are today) to IT-smart, moving beyond thinking of IT as an organizational function to IT as a business asset, and moving beyond oversight to accountability, i.e. acknowledging their decision “obligations” (again, my word).
  3. The IT function should retain responsibility and accountability related to fiduciary, economies of scale and enabling infrastructure, while the business units must accept responsibility and accountability for delivery.
  4. The IT function stops doing things for the business that the business should be doing for themselves – shifting from an “IT Provides – Business Helps” model to an “IT Helps – Business Provides” model.

Basically, business leaders need to stop thinking of IT as a technology they can leave to IT specialists  to a business asset/tool that they need to manage such that it creates and sustains value for their enterprise and their stakeholders.

While it seems improbable that this has not yet happened, we know, as reinforced by Susan’s study, that this has not happened. From my experience:

  • A CEO told me, not that long ago, that while he knew IT was important, he was much more comfortable focusing on the “core business”. Years – no decades – ago, this might have been OK but today, in most enterprises, IT is embedded in most if not all aspects of the “core business”.
  • When we were developing Val IT 2.0, we added a practice within the VG1 process, Establish Informed and Committed Leadership, that was  VG1.3 Establish a Leadership Forum. The objective of this practice was to “…help the leadership understand and regularly discuss the opportunities that could arise from business change enabled by new or emerging technologies, and to understand their responsibilities in optimising the value created from those opportunities.” I was amazed – and somewhat disheartened – during the review process how many people questioned the need for this practice.
  • There is a consultant living just over the water from me who facilitates CEO forums and has become very successful at it. I approached her to see if we could work together to introduce the topic of CEO responsibilities, and accountabilities related to realizing value from IT or, more specifically IT-enabled change. Her response was “CEOs don’t want to talk about IT – they leave that to their CIOs.”

I am giving a keynote speech in November at the ER 2010 Conference in Vancouver. As I was listening to Susan, I reflected on the work of Steven Alter – a recognized authority in the evolving ER (or, more accurately, conceptual modeling)  space, who says: “IT success isn’t just about IT, it is about the effectiveness of people and organizations – IT usage makes an important difference only when it is part of a work system, and IT success is really about work system success.”

In the same way as the IT function – even if it were willing and capable – cannot be held accountable for the ultimate success of IT-enabled change, they cannot be held accountable for the ultimate success of work systems. They are undoubtedly accountable for delivering the enabling infrastructure, and responsible for working in partnership with the business to help them better understand potential opportunities – and the business responsibilities  and accountabilities related to successfully exploiting those opportunities, but cannot be held accountable for their ultimate success.

For this to happen requires significant behavioural change – there is and will continue to be resistance from both business and IT leadership. For this change to happen, we need – as Susan said today to “engage senior leadership in exploring the appropriate role for IT” and, I would add, their role responsibility and accountability in the context of that role. We need that leaderhip forum – an ongoing forum – that we proposed in Val IT 2.0 so that we can get “the right people in the room having the right discussion”.

The response from a number of listeners to the webcast, which is the same as I always get when I present, was “you have given us a lot to think about here.” Yes, we always need to think, but thought must be balanced with action. We have been talking about the role of business leadership related to IT-enabled change for well over a decade now – it’s time to move beyond thinking to action!

If you missed Susan’s webcast, you can watch a recording at http://s.hbr.org/cR3qlT

Getting Healthcare Right

I have just returned from a trip to Australia where I gave a keynote speech at the HIC 2010 Conference in Melbourne. I also had a number of other meetings and workshops while in Australia. most around the topic of healthcare and, more specifically, eHealth.

Those of you who read this blog will know that my primary passion is around value – specifically enterprises realizing value from IT-enabled change. What you may not know is that there are two areas where I have worked in the past, and continue to work, where I believe IT-enabled change has enormous potential to deliver real value, including social value – but they have as yet come nowhere near to doing so. These are healthcare and education.

Staying with healthcare, and resisting the temptation to further lambaste the UK NHS’s National Program for IT in Health (NPfIT), my experience, and a review of case studies from a number of countries, reveals two disturbing common features among them. These are:

  1. Much is said about the biggest challenge in realizing benefits/value from major IT-enabled change programs in Healthcare (often lumped under the eHealth umbrella)  being management of change – process and behavioural change – yet little or no guidance is provided on how to manage that change, or even what the major elements of change are; and
  2. Benefits are usually treated as an afterthought, often not well defined let alone evaluated until years into the program.

Basically, the approach appears to be: let’s get the technology implemented first, then we’ll find out what changes are required to “meaningfully use” the technology, then we’ll worry about the benefits. As long as we continue with this technology first approach, we will continue to fall dismally short of realizing the potential benefits of such change – the waste of money is a scandal – the opportunity cost of not delivering on the value promise is even worse. We must move from starting with the technology to “starting with the end in mind”.

Over the last few months, I have been involved in working on a number of case studies of enterprises who have made significant progress in implementing value management practices and developing a “value culture”. In preparing my speech to the HIC conference, I drew on the factors that I found to be common in the success of these enterprises – factors that I believe should be seriously considered in the healthcare context. They include:

  • Shifting the focus beyond technology, activities and cost to focus on change – process and behavioural change, outcomes and value
  • Strong and committed business leadership – change programs must be owned by the business and the business must be held accountable for the benefits of those programs
  • Appropriate business engagement and sponsorship/ownership – change cannot be done to people – it must be done with them
    • Cascading sponsorship – there must be leadership at all levels in the enterprise – this should include “formal” leadership, those appointed to lead, and “informal” leadership, those selected/looked to by their peers as leaders
    • “Front-line”  input and feedback – these are the people who usually know what needs to be done, their voice is all too often not heard
  • Clearly defined governance structure, role and responsibilities
  • Don’t underestimate the emotional and political issues around “behavioural change”
  • Be prepared to change course – both the journey and the destination
  • A strong front-end planning process with inclusive and challenging stakeholder engagement
    • Get “the right people in the room having the right discussion”
    • Use Benefits mapping workshops
      • Build clarity and shared understanding of desired outcomes
        • Recognize and balance/optimize different views of value
      • Surface “assumptions masquerading as facts”
      • Surface, understand and manage complexity – understand the full scope of effort including changes to the business model, business processes, roles and responsibilities, skills and competencies, reward systems, technology. organization structure, facilities and management of change
      • Don’t treat  as a one-time event – revisit regularly through an ongoing process
    • Avoid the “big bang” approach – break work into “do-able” chunks that deliver measurable value
  • Define, develop and maintain standard and complete business cases
    • Clearly defined outcomes
    • Full scope of effort
    • Clearly defined – and accepted – accountabilities (for outcomes – not activities)
    • Relevant metrics, both “lead” and “lag”  – “less is more” – measure what’s important and manage what you measure
  • An aligned and results-based reward system
  • A clear and transparent portfolio management process to select and optimize investments in IT-enabled change
  • Manage the journey
    • Use the updated business case as a management tool
    • A strong gating process for progressive commitment of resources
      • When things are not going to plan, understand why and be prepared to change course, change the destination or cancel the program
  • Manage and sustain the change
    • On-going inclusive two-way communication
    • Support/sustain with one-on-one coaching/mentoring
    • Celebrate and build on success
    • Learn and share

All investments in IT-enabled change are important, but few have such impact on all of us as  those in healthcare (and, I would add, education). We cannot continue to muddle through with technology-centric approaches that are designed to fail. We must learn from past failures. There is a better way. Starting with the end in mind, with strong ownership and leadership, inclusive engagement, and pro-active management of change – managing the destination and the journey – we can do better. We must do better. We deserve no less!

Value Management is not just a challenge for IT

I had the opportunity to deliver the closing keynote to the APM Benefits Management SIG Annual Conference at the National Motorcycle Museum in Birmingham, UK on Tuesday – from my home office in Victoria on Vancouver Island in BC, Canada (the view from which you can see below).
Slide1
The purpose of this blog is not to dwell on the technology that allowed me to do so – which has both advantages (in terms of not having to travel) and disadvantages (in terms of audience engagement and feedback) but to share some thoughts that I got from listening to the presentation that preceded my keynote. The presentation was entitled “Benefits in the Built Environment” and given by Matthew Walker.

Matthew defined the “Built Environment” as being “output centric” and relating to infrastructure programmes in the communications, energy, transportation, waste and water sectors. Within the UK context – and indeed any nation – these are often taken for granted – only thought about when they break – but are of strategic importance in terms of providing an economic backbone, having national security and quality of life implications and impact, and requiring sustainability targets. Investment in these sectors in the UK 2005/6 to 2009/10 has been ~£30b/yr and is currently projected to be ~£50b/yr in 2010/11 and to continue at that level until 2030, with the current drivers for investment in these areas being the economic situation, population growth and carbon reduction. Rising to this challenge requires diversification of investment methods and the political will and capability to make long-term investments. To deliver value for money, this will require prioritization of desired outcomes, and understanding of interdependency’s through effective benefits management, or – in my preferred terminology – value management. Does this sound familiar? This is what we have been talking about in the context of IT – or IT-enabled change programmes – for well over a decade or more! It gets even more familiar.

The track record of benefits management for such infrastructure investments – if you go beyond schedule, cost, and delivery to specification is largely unknown, but the indicators are not good. A 2009 APM report, “Change for the better. A Study on Benefits Management across the UK”, found that >60% of organizations had no more than an informal or incidental approach to benefits management, and ~70% felt that value was added only some of the time, or never.

Matthew’s recommendations included:

  • defining success in terms of benefits;
  • putting benefits management at the heart of oversight and governance of major programmes and projects;
  • increasing awareness and exposure of the business case;
  • using benefits management to prioritize investments; and
  • providing transparency through assurance.

Matthew stressed that achieving such a “benefits renaissance” would not be an “overnight journey”, but one that we must take – the “we” in this case including:

  • funders;
  • professional bodies;
  • business executives; and
  • construction industry practitioners.

I have long said that the issues around realizing value from IT investments or, more accurately investments in IT-enabled change, are not an IT issue but a business issue – a business issue that is not unique to IT. They are a symptom of our preoccupation with cost, activities and outputs, and our failure to move beyond this preoccupation to a focus on value – understanding the desired outcomes of an investment, and the full scope of interdependent effort required to deliver these outcomes, assigning clear accountability for outcomes – supported by relevant metrics and an aligned reward system, and designing and managing complete and comprehensive programmes to deliver those outcomes. Only when we do this – which will require significant behavioural change – will we  address “the challenge of value”,  and begin to consistently create and sustain value  for all stakeholders, including shareholders in the private sector, and taxpayers in the public sector. In today’s complex and rapidly changing economic environment, to quote from “Apollo 13”, “Failure is not an option!” Or, 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!

Moving beyond IT Cost to Business Value!

I have been meaning to read KPMG‘s From-cost-to-value-2010-global-survey and today’s CIO Article by Beth BacheldorOutsourcing IT Must Create Value Worth More than Simply Savings, combined with a break between working on a couple of case studies (yes, of course, about value from IT) gave me the opportunity to do so. I don’t intend to review the whole document – it’s only 32 pages, many of which are pictures – but I do want to highlight and comment on what I see as the key points.

The management summary states “In the next few years, CIOs envision a shift in focus from cost efficiency and compliance to value creation and innovation“. I will avoid launching into my usual rant here, but would suggest that those CIOs who are not already well into doing this should be seriously reviewing their career options. The summary goes on to say “The days when IT was seen merely as a means of improving efficiency seem behind us. These days, IT contributes directly to realising the business strategy and has a central role in management. According to CIOs, this requires the distance between the business and IT as small as possible.” Again, I’ll hold the rant, but in organisations who ‘get it’, this has been the case for many years.

The survey goes on to present “eight clear conclusions” which I believe, ranting aside, organisations and their leaders would do well to heed. I will not go through each of these, but rather provide an overall summary (where I have included statements directly from the conclusions these are in bold):

  • IT is no longer about cost cutting – it is about creating value – IT value dominates the CIO agenda. Absolutely! Study after study show, and my experience would certainly support that organizations that are laser-focused on value outperform those that fail to do so. However, there is a danger here of falling into “the tyranny of ‘or’ vs. the beauty of ‘and’ trap, i.e. forget cost and think about value. The survey recognizes this saying that “Cost optimization remains important“. Of course it does and must continue to do so. We should always be looking for opportunities to reduce costs – but must do so in the context of value. The fundamental question that we should be asking is: Are we maximizing the value of our investments in IT-enable change (see my next bullet for more on this) such that we are getting optimal benefits, at an affordable cost, with a known and acceptable level of risk? The underlined words are carefully chosen. If we attempt to maximize all benefits, many of which are in conflict with each other, the result is sub-optimal. If we seek lowest cost, risk goes up. If we avoid risk, we fail to make the changes required for our organizations evolve and grow. Leading into the next bullet, as a Chief of Staff of the US Army once said: “If you don’t like change, you are going to like irrelevance even less.
  • IT value is not only about technology – people are the success factor behind IT value. Right on! IT, in and of itself has no value beyond what you can get for it on ebay – as we discussed in The Information Paradox, it is the change that IT shapes and enables that creates value. It is how we manage and use technology – more specifically how people use the information that technology provides – that enables that change and creates and sustain business value. How well this is done determines the success or even the very survival of organizations. This is far too important to be abdicated to the IT function but, unfortunately, all too often – in organizations that don’t ‘get it’ – this is the case. As the survey says: “Successful IT value creation needs to integrate and align the organization’s Technology, Processes and People agendas…CEOs and CIOs need to ensure that sufficient importance is attached to these aspects during project initiation.
  • Do not expect IT value from a CIO with an operational profile. A CEO once asked me “Why is it that whenever my CIO talks to me he only wants to talk about technology?” My response was “Because you let him!” As the survey points out: “The daily focus of a CIO depends to a large extent on the sector in which he or she operates. In addition, the results show that a CIO’s agenda is also determined by his position in a organization.”  There is, however, also the question of the CIO’s ‘comfort zone’. While somewhat unbelievable, given how long we have been talking about this, it is  regrettably true that there are still many CIOs who either don’t want to engage appropriately with the business, or are simply not capable of doing so. On this topic, KPMG provides a view on CIO competencies: “A CIO should have four important competencies. First, the ability to think like the organization’s customers and to understand clearly what they want. Second, the ability to obtain a good understanding of relevant technology trends and identify their specific business benefits. Third, the ability to manage IT investment for value creation. Finally, the ability to connect well with the organization’s business leaders, to help them unravel he mysteries of technology.” Although not a highlighted conclusion, there is an interesting discussion in the document on the merits of rotating people between IT and the other parts of the business. I have long been a proponent of this and echo the comments of Maarten Buikhuisen, IT Director Western Europe for Heineken Breweries when he says: “The general manager of the future has worked in IT.” (Tesco’s new CEO would certainly be a recent case in point.)

The survey covers a number of other topics, including process improvement, risk and compliance, and new ways of working including collaborative tooling and cloud computing, but I will restrict my commentary in this post to the above. Overall, ranting apart, I found the survey to be a very useful and well written document – one that is relevant to all executives, not just CIOs. They would do well to read and study it carefully.

The Traveler Returns

To quote Mark Twain, “The reports of my death are greatly exaggerated!” Understandable, however, as it has indeed been quite some time since my last post. This is largely because I have been traveling extensively – a mix of business and  personal time – including Toronto, Asia, Alaska, Vancouver, the UK and Greece. Part of the personal time included a 23 day cruise from Beijing to Vancouver. A quick scan of emails on my return – once I eliminated the 90% related to the (aptly named) Cloud –  had me yet again shaking my head and wondering whether I had not been on a cruise ship at all – rather traveling in Dr Who’s police box time machine – backwards! Here are just a couple of examples:

  • In his May 21st blog, Project Managers Need to Engage IT At the Right Time, commenting on a project predictability seminar, Jim Vaughan says “It was noted that problems with requirements management are rarely with the IT organization and process. This caught me by surprise at first because I usually thought of IT, myself included, as the source of the problem.To get to the right requirements you need the right people to define those requirements. These are not the IT people. If we let the IT people define the requirements we will likely get into trouble. That is why people will blame IT for failed projects. The correct people to define the requirements are the business people and end users.” As this is what I have done for more than 45 years – and what I assumed was well understood, if not common practice – I was amazed that Jim should be surprised by this.
  • In a May 24th Computerworld article by Julia King, These CIOs go way beyond IT-business alignment, she discusses “an admittedly unscientific short list of pioneers in IT-business convergence including  The Progressive Corp., Southwest Airlines Co. and The Procter & Gamble Co.” as well as Vanguard Group and Zappos.com where “business and IT are virtually indistinguishable” and “IT doesn’t just support the business; it enables and continually transforms the business, often creating new revenue and profit streams.” I think that this is great – but why, when we have been talking about this for decades, are there still only a small group of pioneers doing this?

On a more positive note, I attended the CICA conference in Toronto at the end of March, where I gave a Val IT™ workshop, and was pleased to have some people talk to me about Val IT before they even knew who I was, and also to discover that an increasing number of organizations, including the Office of the Auditor General of Canada, are using it, or planning to do so.

In May, I presented at the first annual CMC BC Consulting Conference in Vancouver – how could I resist speaking at a conference with the theme “Charting a course to value”. Among the other topics, there was much discussion about social media and networking and I was pleased to see a tweet sent from Chris Burdge of bWEST who was attending my presentation saying that he was finding it “surprisingly fascinating”. He has subsequently invited me to participate on a panel at a  SocialMediaCamp he’s organizing for October. My son, Jer (blprnt), is quite active in the social media scene, and has a digital art practice in which (I quote) he “explores the many-folded boundaries between science and art”. He and I have been spending quite a bit of time lately discussing the intersection of governance and social media/networking – not just the current preoccupation with how to control social media/networking but, beyond that, how it could be used to improve governance, specifically the quality of decision-making, by tapping into a much broader experience/knowledge base. I may need to spend more time with him before October.

After Vancouver, I headed off to Greece to speak at the Thessaloniki Business Conference. There was an impressive line up of speakers, all of whom had a strong focus on value.  Many of the messages resonated with me, including:

  • Professor Leslie de Chernatony, Professor of Brand Marketing Universita della Svizzera italiana and Aston Business School, who spoke about “Growing out of a recession through more effective brand strategies” stressed that that companies needed to focus on value – not price, to move beyond product quality to outcome quality, and to “watch how you invest”.
  • Howard Stevens, CEO of The HR Chally Group, talked about “Unlocking the Science of Sales Development” and reinforced the value and outcome quality messages saying that there is only a 2-3% difference in product quality between the serious players, all products can be replicated, and what really differentiates the players is the “customer experience”. He also discussed the importance of business analytics and contended that we have information management (IM) backwards – we start with the company executives when we should be starting with the customer.
  • Harold Stolovitch of HSA Learning and Performance Solutions spoke on “Maximizing Workplace Performance in Tough Economic Times” and reiterated the importance of really “walking the talk” when it comes to treating people as “your most important asset” and said that study after study shows that the most important performance blocks are failing to set expectations and failing to provide feedback.
  • Jeremy Hope, Director of the Beyond Budgeting Round Table talked about “How to save 20%-30% on costs, by managing operational bureaucracy and the introduction of modern tools for the running of the Finance Department”, claiming that replacing the annual budget with rolling plans and forecasts could save 90% of time currently spent on the budget process. This is certainly in line with my thinking as expressed in The Budgeting Circus.
  • Dr David Hillson, Director at Risk Doctor & Partners, covered the topic of “Managing risk in innovation projects”. In defining risk as “uncertainty that matters”, he suggested that risks present opportunities as well as threats, with both needing to be managed proactively, and made the case that Risk Management addresses both threats & opportunities in a single integrated process.

I spoke on the role of IT in the economic crisis, and the challenge of maximising the value from IT. I made the case that, while Nicholas Carr might say that “IT [as a commodity] doesn’t matter”, how we manage the change that IT both shapes and enables determines the success or even survival of our enterprises, and business leaders must own and be accountable for this –  it is far too important to be abdicated to the IT function.

En route to and from the Greek conference, I read Joel Kurtzman’s book, Common Purpose. The need for leadership came across in most of the above presentations, and Joel provides a very insightful critique of today’s leaders, and the need for them 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”. I will review this book in greater detail in a later post.

On the subject of books, I am also reading Susan Cramm’s latest book, 8 Things We Hate about IT – as always, Susan is “right on the money” and, again, I will shortly post a review. Also, I  have received a copy of Stephen Jenner’s latest book, Transforming Government and Public Services: Realising Benefits through Project Portfolio Management, which I hope to be able to get to soon and – yes – will again be posting a review.

Hopefully, it will not be 3 months before my next post, but, as I will be slowing down somewhat through the summer – if it ever comes, it may be a while before I get back to being as prolific as I have been in the past.

Getting Information Management Right

A couple of recent articles by Thomas Wailgum in CIO.com got me thinking – yet again – about information management (IM – for more on IM see Enterprise IT or Enterprise IM?). The first, Information Wants to Be Free, But at What Cost?, makes the point that the more information that enterprises continue to exponentially collect, the more difficult and expensive it’s going to be for them to understand and disseminate that information. The second, The Future of ERP, Part II, makes the case for change in that after four decades, billions of dollars and many huge failures, big ERP has become the software that no business can live without—and the software that still causes the most angst.

In The Information Paradox, and every time I present or discuss the topic of getting real value from our increasingly significant and complex investments in IT-enabled change, I use the slide below to explain how the way we use IT has evolved.

Slide1

When I started in this business, back in the early 60s, most, if not all commercial applications of IT were automation of existing tasks – where the focus was on doing the same thing more efficiently. I call this the appliance era – applications were stand-alone and very little business change was required (as illustrated by the pie chart on the slide). You could essentially have be given the application for Christmas – plug it in and it would do the job.

In the next era, which emerged during the 70s, things became  more complex. We moved beyond automation of tasks to creating, storing, distributing and manipulating information. The focus here was on effectiveness – using information to do things differently and to do different things. You now had to worry about what information was needed, by whom, where, when and in what form – and people had to be trained and incentivized to work differently. Appliances now had to work together in an integrated way, and the way business was done had to change – I call this the rewiring era.

In the next era, which emerged during the 80s, we began to see what I heard a Northrop Grumman CIO describe as “game changing plays” – changing the rules of existing industries and creating new ones. I call this the transformation era. While the changes might not be possible without the technology, the bulk of the effort required to achieve the desired outcomes involves changes to the business – including the nature of the business, the business model, business processes, peoples roles and skills, organizational structure, physical facilities and enabling technology. Those appliances – now ranging from “mainframes” to smart-phones – have  to work together in an integrated way, not only within an enterprise, but outside it – on a global basis.

Unfortunately, while our use of IT has evolved – our management of it has lagged. In far too many cases, the focus is still on the IT appliance  – “plug it in and the value will flow”. Those days are long gone. We are not today simply dealing with appliances – or with simple appliances – we are dealing with massive organizational and cultural change – transformational change. Change that is enabled by technology, but of which technology is only a small part.

The more that I have though about this, and talked about it, the more I feel that one of the sources of the perceived and real failure of investments in IT-enabled change to deliver the expected business value is that we have still not got the information piece right. (Note that in the following comments, I may appear to, and indeed do, to a certain extent, use the terms data, information and knowledge somewhat loosely. This is not because I do not understand the difference – or at least have an opinion on it – but because terminology in common use doesn’t always make a clear distinction, and I don’t want to bog this post down with that discussion.)

While the amount of data we store continues to grow – Gartner predicts that the amount of enterprise data will grow 650 percent during the next five years, a recent Forbes Insights survey of more than 200 executives and decision makers at top global enterprises found that nearly one-quarter of the respondents cited the availability of timely data as one of the top barriers to aligning strategy and operations today. In an earlier post, The Knowing-Doing Gap,  I quoted James Surowiecki, from his book, The Wisdom of Crowds, where he said “…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.” So, with an enormous and growing amount of data being collected, at considerable cost, why haven’t we got it right? I would suggest that there are a number of reasons for the current state of affairs:

  1. Knowledge is power
  2. Not knowing what information is relevant
  3. Too much information
  4. Bad data
  5. System complexity
  6. Go with the gut

Let’s examine each of these.

Knowledge is power

Building on the Surowiecki quote referenced above, Sir Francis Bacon was (among) the first to say that “Knowledge is power”. Peter Drucker expanded on this saying “Today knowledge has power. It controls access to opportunity and advancement.” This presents a cultural and behavioural barrier to sharing information and to getting it to (all) the people who need it – one that should not be under-estimated.

Not knowing what information is relevant

In another life, I led a lot of what we then called Information Resource Planning assignments. We would interview key stakeholders in an enterprise to find out what information they required. Once we had their requirements, I always asked one final question: “If you had this information, what would you do differently?” Very few people could answer this question or had even thought about it. Enterprises need to take an outcome and role based approach to identifying and meeting information requirements. Expanding on my earlier question, we need to ask: ” Based on the outcome(s) we want to achieve, what decisions/actions need to be taken, who needs to take them, and what information do they need – where, when and in what format – to take them, and what information do we need to know that things are working as they should be?”

Too much information

Today we are drowning in information and, as per the Gartner prediction above, it is only going to get worse. Even if the information that we require is available, it may be lost in the sheer volume of information – the information noise. This noise level is only going to increase. If we are to cut through this noise to what is relevant, it is even more critical to take an outcome and roles based approach to defining information requirements. We will also need to beyond the traditional reporting metaphor and simple, or simplistic dashboards to much more sophisticated, yet intuitive (see “System complexity” below) analytical and data visualization tools.

Bad data

One of the biggest risks to organizations is “bad data quality.” Results from Scott Ambler‘s September 2006 Data Quality Survey show that 46% of data have some data sources that are a “complete mess” or the data itself has serious problems. In an April 2009 data quality PRO survey of Data Quality in Business Intelligence, 42% of respondents reported minor issues, 50% reported major issues, and 4% didn’t know –  leaving just 1% reporting no problems. A 2007 Accenture CIO survey claimed that the costs of compromised data quality are clear—billions of dollars squandered each year due to mistakes, manual processes and lost business. Of the CIOs surveyed,  29 percent said that they had minimal or limited data quality efforts in place, even for critical systems, and only 15 percent of respondents believed that data quality was comprehensively (or near comprehensively) managed. Indeed, not a single North America-based organization reported that they have a fully comprehensive data quality program today. Information is only as good on the data it is based on. It will take time to implement workarounds for, and fix the mess that we have created. In the interim,  we need, at a minimum,  to know how credible the information is and what confidence we can have in decisions based on that information.

System complexity

ERPs were promoted as one “solution” to the information management challenge, but have  proven a challenge for many enterprises – see ERPs – Can’t live with them – Can’t live without them!. Where they have been successful, they may have done a good job of integrating data across enterprises, but few would describe them as easy to use. Even if relevant information is available, if it is too complex or time-consuming to get at it, people won’t. While somewhat simplistic, I have often felt, and even more often heard that “if I need to be taught how to use it, I won’t use it.” Again, information needs to be relevant, outcome and role based, and easy to access and understand.

Go with the gut

Business intelligence was identified in the 2009 SIM Trends Survey as one of the top technologies that enterprises were planning to invest in. Research reported by Accenture in 2008 found that close to half (40%) of major corporate decisions are based on “gut feel”.  The reasons for this executives cited most often, which reinforce some of the points above, were: because good data is not available (61 percent); there is no past data for the decisions and innovation they are addressing (61 percent); and their decisions rely on qualitative and subjective factors (55 percent). 23 percent of respondents identified “insufficient quantitative skills in employees” as a main challenge to their company, and 36 percent said their company “faces a shortage of analytical talent.” 39 percent of respondents said that IT capabilities restrictions were a major challenge and 27 percent said there was an inability to share information across organizations within their company. I also wonder if this might not also be a bit of the “cult of leadership” where they believe that they have achieved a level of knowledge/wisdom where they don’t need information to make good decisions.

Information and people are the two most important and, in all too many cases, the most ineffectively utilized assets in today’s enterprises. What information is available to people – be they executives, managers, workers, suppliers, customers or other stakeholders –  the quality of that information, and how they use it is a key part of what determines business success or failure – value creation and sustainment, or value erosion and destruction. This is true both for “business as usual” activities and – even more so – for transformational change. If enterprises do not get the information piece right, their transformational efforts, and their survival, will be in extreme peril.

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.