Effective Governance – Aligning Culture, Strategy and IT to Create Value

Over the last two decades, I have worked with many organizations, led the development of a number of frameworks, methodologies and techniques, written a book and numerous articles, and give more presentations than I care to count on the topic of delivering on the promised value of IT. While I would like to think that I have made a difference, and know that in more than a few cases I have, there is still have a long way to go. Frameworks and methodologies are necessary, but not sufficient to address the challenge of realizing the full value potential of IT-enabled change. Last year, I authored a thought leadership report with the Benefits Management SIG of APM UK entitled Delivering benefits from investments in change: Winning hearts and mindsThe main message of this report is that we need to move beyond the current culture of delivery – build it and they will come, to one of value, and that this will require a new, and more effective approach to governance that promotes and supports such a culture.

A number of articles I have read over the last few days have caused me to further reflect on the relationship between value, culture, strategy and IT, and the role of governance in bringing this all together.

The first of these is a Fast Company article, Culture Eats Strategy For Lunch, in which Shawn Parr contends that culture is “often discounted as a touchy-feely component of business that belongs to HR”, whereas in fact “It’s not intangible or fluffy, it’s not a vibe or the office décor. It’s one of the most important drivers that has to be set or adjusted to push long-term, sustainable success.” Paraphrasing Shawn, it is culture that can install and nurture a feeling of “common purpose”, as described by Joel Kurtzman in his book of the same name, by providing focus, motivation, connection, cohesion and spirit. I came across a somewhat different , but reinforcing view of “common purpose” in a Cutter Consortium blog by Carl PritchardCommander’s Intent and Corporate Guidance. The concept of “commander’s intent” originated in the German military almost 200 years ago, in reaction to disastrous defeats. Defeats resulting from “malicious obedience” by the troops in the field to the tight control exercised from the top (sound familiar?). It’s premise is the, rather than apply such tight command and control, leaders should provide a clear sense of the outcomes they seek and the parameters they will accept – a “common purpose”, then give subordinate leaders freedom and flexibility in planning and execution. It’s a trusting relationship between manager and subordinate and, again, one that has clear application to the broader business environment.

The next article from strategy+business, Seven Value Creation Lessons from Private Equity, reinforces the importance of a culture of value, stating that “Companies are in business to create value for their stakeholders…” and that “A select number of them get it right…”. I would broaden these statements to include all enterprises, be they in the private or public sectors, for profit or not-for-profit (by choice, that is!). Unfortunately, most enterprises don’t do a good job of this. The article suggests that all enterprises could improve their performance by “following seven imperatives from private equity to build a value culture regimen”.  These are:

  1. Focus relentlessly on value.
  2. Remember that cash is king.
  3. Operate as though time is money.
  4. Apply a long-term lens.
  5. Assemble the right team.
  6. Link pay and performance.
  7. Select stretch goals.

While, as the article states, “Private equity firms enjoy a number of natural advantages when it comes to building efficient, high-growth businesses…, the article goes on to say “the best practices of top-tier PE firms still provide powerful and broadly applicable lessons” – my experience would certainly support that view.

Unfortunately, the problem for many enterprises starts with the first imperative above. A fundamental problem here is that in many enterprises there is limited understanding of what constitutes “value” for the enterprise, or how value is created. As Daryl Plummer said, in a recent Financial Times article Don’t go chasing ghosts in the cloud, discussing how to measure the value of the “cloud”, ROI all too often becomes the surrogate for value. Again, while his comments are specific to the “cloud”, they have broader application. ROI is usually totally focused on direct financial impact, while value in fact comes in many different forms. As the French actor and playwright, Molière, said ” Things only have the value that we give them”. We need to take a broader view of value – one where we recognize that value:

  • expresses the concept of worth;
  • is context specific, dynamic and complex;
  • can’t always be measured in financial terms;
  • to one person may not be valuable to another;
  • today may not be valuable tomorrow.

A clear and shared understanding of value is, or should be the foundation for a sense of “common purpose”  – providing the guiding light for why we do things, and how we do them.

My thinking about the next topic, strategy, was triggered by an Executive Street article by Joe Evans, Integrating Business Unit Strategies into a Synchronized Corporate Strategic Plan. Strategies, whose primary objective should be to to create and sustain value, are often poorly defined and even more poorly communicated. One study, described in a 2008 Harvard Business Review articleCan You Say What Your Strategy Is? by David J. Collis and Michael G. Rukstad, found that most executives cannot articulate the basic elements of strategy of their business – objective, scope and advantage – in a simple statement of 35 words or less – and that if they can’t, neither can anyone else. Joe contends that as businesses grow increasingly complex, with multiple, often globally dispersed, divisions and units supporting diverse lines of business, strategic planning models must adapt and change beyond a “command and control, one size fits all” approach if optimal results are to be realized. Linking back to “common purpose”, and “Commander’s intent”, the corporate strategy for a large and diversified business should serve as the umbrella strategy that provides overall structure, goals and measurement – the outcomes they seek and the parameters they will accept. Business units then have the freedom and flexibility to develop and execute their strategic plans under that umbrella, such that their results are consistent with, and contribute to overall corporate strategic goals. This approach leaves the accountability for leveraging intimate knowledge of customers, competitors, employees and culture to the business layer closest to the action – to the “troops in the field”,  allowing the flexibility to plan autonomously while remaining aligned with the overall corporate strategy and goals. One word of caution here – the more complex the business, and the more multidimensional the strategies, the more they may become interdependent –  to avoid falling victim to the “law of unintended consequences”, there must be effective communication and coordination between the business units to ensure that such interdependencies are recognized, and managed.

So, you might well be asking at this stage, where does IT fit in all of this? While I would argue that IT, in and of itself, delivers no value, how we use IT – the change that IT both shapes and enables can create create significant value. With the pervasiveness of IT today, embedded in more and more of what individuals, societies and enterprises do, it is a key element of most business strategies, and investments. Yet, the track record of actually realizing value from those investments is far from stellar, and the IT function, specifically the CIO, is often in the position of having to justify or defend IT’s contribution. While there is certainly still room for improvement in the IT function, they can only be held acceptable for the delivery of IT. The business, the users of the technology, must be ultimately accountable for defining the requirements for, meaningful use of, and value creation from the services that the IT function provides. If they are to deliver on this accountability, business leaders must adopt an effective, value-driven approach to governance that promotes and fosters a culture of value – one which incorporates:

  • A shared understanding what constitutes value for the enterprise, how value is created and sustained, and how different capabilities contribute, or can contribute to creating and sustaining value;
  • Clearly defined roles, responsibilities and accountabilities of the board, executive management, business unit and delivery function management in the realisation of benefits and business value from investments in IT-enabled change;
  • Effective governance processes and practices around value management, including business case development and use, investment evaluation and selection, programme and project execution, asset management, with active benefits and change management; and
  • Relevant metrics integrated into the business which monitor the effectiveness of the approach and encourage continual improvement of the relevant processes and practices.

There are many resources that can help business leadership in adopting such an approach. One such resource, the development of which I led, is the Val IT Framework from ISACA, which is available for free download.

 

Value-Driven IT

As  the weather did not fully cooperate on the last week of my vacation, I spent some more time catching up on my reading, including reading Cliff Berg’s Value-Driven IT. I have to admit that Cliff sent me the book some months ago, but it has lain too long on my desk while I travelled the world. I am glad that I have taken the time now.

The overall thrust of the book – as described in it’s sub-title is Achieving Agility and Assurance Without Compromising Either. Cliff describes himself as “…an IT architect at heart, but one who has had business-level responsibility and who appreciates the business side of things.” In the book, he “makes the case for connecting business value with IT efforts” and goes on to recognize that “this has been tried countless times before, but today only a minority of firms are able to make this connection. It is a hard problem, and the gulf between IT and the business is as great as it ever was. The view from the ground is not pretty: ground level IT staff have a deep disrespect for policies, compliance, paper processes, and indeed for the entire mindset that is represented by the parts of the business that represent these. This is due to ignorance and a lack of communication between these two important parts of the business. The view from the middle is not pretty either: mid-level executives in IT and in  business units do not know how to change their organization s to address the resistance that they experience when it comes to implementing change. Finally, the view from the top is best characterized as misinformed: executives think that their IT staff have a handle on their technology and the executives do not realize how far their people are from having the skills that are really needed to get the job done.”

The book has four main premises:

  1. Business Agility – lead by a potent champion for change, with a mission to ensure consistency;
  2. Assurance within IT with regard to risks – with the champion for change introduced above having a mission to ensure that all enterprise concerns are addressed in a balanced manner;
  3. Accountability (transparency) for IT decisions – focusing on quantifying and measuring the business value of IT choices, recording the reasoning behind IT decisions, and measuring the actual value produced by IT; and
  4. Amplification – increasing IT’s value by using IT resources to amplify the effectiveness of the rest of the organization and being more transparent about IT’s value when this amplification is achieved.

Implied (and made explicit in the book) in these premises is that business value needs to be integral to IT. Yet, Cliff shares my view of the current state of IT governance saying that “the term ‘IT governance’ as used by the IT industry is a legacy of the separateness between business and IT.” As Mark Lutchen, says in the Foreword to the book: “Business value and IT – For some executives, even placing those words in the same sentence can be considered an oxymoron. Others might argue that you can focus on achieving business value and get it right or you can focus on delivering IT and get it right, but never the twain shall meet. I would argue that the real imperative within organizations today is to ensure that business value and IT are so commingled and intertwined with each other, that to not focus on getting them both right or to not understand how dependent each is upon the other, is to set up your organization for potentially disastrous failure.”

I couldn’t agree more. Having, over the last couple of weeks, read this book, and Stephen Jenner’s Realising Benefits from Government ICT Investment – a fool’s errand, which I discussed in a previous post A Fool’s Errand, I am pleased that more practical guidance is being offered in this space. At the same time, I am once again left wondering just how many more books need to be written about this topic before more than a minority of enterprises start doing this. To repeat Donald Marchand‘s conclusion in his testimonial to the Stephen Jenner’s book: “The big question is will [public sector] managers and executives have the “will” to put the book’s prescriptions and methods into everyday practice with ICT projects?” History would suggest that we still have much work to do before this happens – and not just in the public sector. Much of what I and others have been espousing over the last 10 – 20 years, and what Stephen and Cliff present in their books, is common sense – unfortunately, as I said in my last post, common sense is still far from being common practice!

Why is this?  As discussed by Jeffrey Pfeffer and Robert I. Sutton in their book The Knowing-Doing Gap, “…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.” There are many  proven approaches available to address the challenge of realizing business value from IT investments, including, but certainly not limited to Val IT™, yet adoption of these approaches continues to be limited and, as a result, value from IT investments remains elusive. One of the key findings presented in The Knowing-Doing Gap is that knowledge is much more likely to be acquired from ‘learning by doing’ than from ‘learning by reading’ or ‘learning by listening’. If we are to move beyond reading and listening to taking action, we need to focus on understanding the behavioural constraints to adopting such solutions, and identifying and implementing approaches to overcoming those constraints. Ultimately, as I discussed in an earlier post, Managing Change – The Key to Delivering Value, it all comes down to changing people’s behaviour – from the Board to the front line.