Monday 19 December 2011

Santa Claus's key performance indicators

Santa Claus has the ultimate in seasonal businesses, in just one night he has to deliver the right toys to the right children to over 1.675 billion houses (based on an average of 4 occupants per house www.convert-to.com). So what performance metrics would Santa require? There are the obvious ones on Christmas Eve, such as the need visit 19,386 homes per second, with the sleigh travelling at an estimated 3,000 times the speed of sound (http://www.baltimoremd.com/humor/santaengineer.html). And the avoidance of rework, if the wrong present is delivered to a child. But what about other measures?


When I posed this question at a recent Christmas Party my fellow party-goers suggested the amount of alcohol Santa consumers over the evening could be a problem. Based on 30ml of alcoholic spirits such as whisky or gin left out at every 5th house Santa consumes roughly 10,000 litres of spirits on Christmas Eve! However the energy required to visit 19,386 homes per second probably requires that sort of energy input, indeed Santa may budget for a particular amount of drink and food being left out to keep himself and the reindeer fuelled up, with a disaster recovery plan at hand should the planned food and drink not be available.

Of course the ultimate measure of success for Santa is as many happy smiling children as possible. Santa's marketing department has the triple role of promoting the Santa brand, determining who gets what presents (what to produce) and also who is naughty and who is nice, hence the year-wide viral marketing campaign using parents to cajole there little darlings into behaving with the threat that if they do not behave they will be put on the naughty list and Santa will not visit them. Of course I trust that you have been good during the year and Santa will be visiting your house on Christmas Eve.

This blog will be having a short break over Christmas, back late January. If there is anything you would like to the blog to cover in 2012 let me know, it is sure to be a fabulous year. I wish you a happy and safe Christmas.


Exploring the value of IT to organisations
email: david.gwillim@optusnet.com.au
blog: http://www.businessitvalue.blogspot.com/

Wednesday 14 December 2011

Forget IT strategy, it is now all about digital strategy

There has been a quiet revolution going on in organisations over the past decade which has gathered pace this year. Organisational IT is changing beyond recognition. With the widespread use of outsourcing, off-shoring, cloud services (application outsourcing), remote hosting and the rapidly developing automated economy, not to mention the rise of user owned devices and the shifting of IT purchasing and management power out of IT enclaves and into general business, the world of IT strategy is not what it used to be. Indeed organisations still thinking of IT as something to be aligned (proof if ever there was any needed of the 'otherness' of IT are just kidding themselves).

It is now, all about your digital strategy, that is, how will you electronically interconnect and interact with customers, suppliers, employees, government etc. The 'how' of IT is rightly taking a back-seat to the 'what - where - when'. Atlast organisational IT is maturing, it is an area of strategy every manager must now know, and it is as impossible to separate form the activity of business as finance or marketing is.

This is causing major challenges for IT managers and those living in the IT-Business alignment past. It is also a challenge for business schools and others charged with equipping tomorrows managers with the tools they need to lead tomorrows organisations. I have spent my entire career in IT and acknowledge the legacy thinking that I possess. I hope that I can embrace and contribute to the new world of digital strategy, it will be fast and exciting, and organisational IT will never be the same again. 2012 here we come.


Exploring the value of IT to organisations
email: david.gwillim@optusnet.com.au

Sunday 4 December 2011

Fire all the managers - a measurement solution

The development of bureaucratic management over the past 200 years has built up a whole heap of metrics, budgets, planning and other evaluative mechanisms designed to enhance performance within a functional hierarchy. A key question for me, when I read about alternative business models is how are the measurement and evaluation systems adapted so that desired behaviour is achieved in the new model. After all you get what you measure, and many a business change has failed because the measurement and reward system did not change or was not appropriate. After all you get what you measure?

"First, let's fire all the managers" is the title of management guru Gary Hamel's latest article in Harvard Business Review (citation below). It documents the practices of the Morning Star Company in California that operates 3 major fruit processing plants and is the worlds largest processor of tomatoes. With 400 staff and $700M in revenue such a company would typically have a hierarchy of 50 or so managers. At Morning Star no one has a boss, employees negotiate with their peers, everyone can spend the company's money, each individual is responsible for acquiring the tools they need, there are no titles or promotions and compensation decisions are peer based. Morning Stars vision is to create a company in which all team members "will be self managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers, and fellow industry participants, absent directives from others".

Effective measurement systems are the corner stone of alternatives to the traditional control centric bureaucratic hierarchy. So how does measurement work at Morning Star? For a start employees negotiate with each other over the services and performance levels they will provide to each other. This is similar to internal SLA's that are familiar to many IT managers, the main difference from an IT perspective is that they are reciprocal rather than the typical one-sided internal IT SLA. Morning Star calls these agreements "Colleague Letter of Understanding" and there are 3,000 of them across the company.

Secondly, separate P&L's are created for as many business segments as possible (this is critical in empowering employees so they can determine their contribution to the companies overall results and modify behaviour as necessary - in large and complex business units typical in many big companies it is impossible for individuals to quantify their contribution - and therefore cannot make empowered decisions that are consistent with overall company success) at Morning Star there are 23 separate business units with P&Ls.

Also every staff member creates a personal vision statement that shows how they contribute to the company's overall vision. This seems to me to allow much for more flexibility than the balanced scorecard when it is applied to individuals as due to its format restrictions the individual scorecard often make no sense.

It is fascinating to watch organisations such as Morning Star, Google, WL Gore and others developing alternative management models, with common themes of individual responsibility and team based measurement, I'm sure more will develop in the knowledge economy. To read this article go to hbr.org and register for free, you can download 3 articles per month at no cost. Hamel, G, 2011, "First Lets Fire All the Managers", Harvard Business Review, December 2011.


Exploring the value of IT to organisations
email: david.gwillim@optusnet.com.au







Monday 28 November 2011

The widening gap between companies that use IT strategically and those that don't

The first mention I saw about a growing gap between companies that 'get' IT and use it effectively and those that don't was in research published by Meta Group (now part of Gartner) in 2004. They predicted that there would be an increasing gap between internal IT organisations that were strategic in their orientation and those that were operational. They predicted that those that were operationally focused would find themselves outsourced, downsized and had they know then - replaced by cloud applications.

There is plenty of evidence that Meta Group were right. A study published late last year by Accenture titled "Mind The Gap: Insights from Accenture's Third Global IT Performance Study" covering 225 of the worlds largest companies concluded that the gap in performance of IT in high performing organisations was 42% in terms of innovation and 37% for execution. Accenture identified 9 areas that high performing IT organisations excelled at:
1. Strategic IT alignment
2. Effective IT Governance and clear strategic business cases for all IT investments
3. Clear application architecture
4. Focus on information management not technology
5. Implemented a standarised platform and service management approach such as ITIL
6. Effective solution delivery and highly visible project performance
7. Effective workforce management
8. Effective and proactive IT security strategy
9. Intelligent use of outsourcing to access hard to get skill sets and agility

The question as a CIO then, is what do you do if your IT organisation is not viewed as strategic? Is it possible to change thaose perceptions or is a change of employer required?

Also look out for my article in the current issue of CIO Magazine on the challenges for the CIO of the future (Sept-Oct p. 80-81).

Monday 21 November 2011

Strategic use of IT - Computershare

Continuing with the theme of operational versus strategic IT investment, this week is a brief look at Computershare, an Australian company that started life providing third party share registry services to Australian listed companies. The company has expanded both internationally and into complementary high volume services such as handling parking fines and administration of rental bonds. It has increased revenues 36% over the past 5 years and profit  by 106% and employs 11,000 staff in 20 countries. It really is a great Australian success story.

It's relevance to this blog is that Computershare has used and developed its IT platform extensively to continually automate its processes and services. In short its IT capability forms an integral part of the company's sustainable competitive advantage. Using the analysis developed in this blog over the past few weeks Computershare stands out on some key criteria:

1. The board of directors and senior management take an active interest in IT strategy and spending (none of this reporting via the CFO)
2. IT spending averages 10% of revenue (9.9% in 2011), significantly higher than the 2.2% average for operationally focused IT operations
3. Portfolio management underpins all IT investment decisions
4. The strategic importance of IT is recognised by the board and senior management - it even gets a mention in the annual report to shareholders.
5. R&D makes up 41% of the IT budget compared to industry average of 30%
6. Contractors and outsourced IT is mininimal, 95% of IT manpower is in-house allowing critical knowledge to be developed and protected.

So should you race out and spend 10% of your annual revenue on IT? Well that depends on whether IT is part of your competitive advantage or not. What Computershare illustrates is that IT investment and management should be a series of deliberate decisions consistent with its place in an organisation. Cutting IT costs while claiming IT should be strategic is just plain fantasy, bad management or both.

Sunday 6 November 2011

Is your IT team strategic or operational?

"Do not expect value from a CIO with an operational profile" proclaims KPMG in their report "Cost to Value 2010 Global Survey on the CIO Agenda", but how do you determine what "operational" is?

Last week I provided a simple survey to determine if your IT team has a primarily operational or strategic focus. Of the 15 criteria listed there are 5 criteria that have stood out in my research to-date as being diagnostic, that is companies with a strategic focus almost always have these traits and those that are operational almost never do. The 5 criteria are:

1. Who does the CIO report to?: CIO's that have a reporting line into the CEO or top executives are 70% likely to be strategically orientated. CIO's who report to the CFO or COO are never strategically orientated. This makes sense, if IT is strategic to the business then the CEO wants to be involved, if it is something that should be neither seen nor hear (nor ever break) then it goes to the CFO. Many CIO's seem to forget this and think they can be strategic for behind the CFO, the results suggest otherwise.

2. Are portfolio management techniques used to manage IT investment?: This one surprised me. In 99% of companies with a strategic orientation portfolio management was in use, in operationally focused IT teams it was 11%.

3. When IT investments are being considered what are the key criteria for approval?: 98% of companies with a strategic IT orientation focus on strategic fit, while only 23% for companies with a operational focus.

4. Are IT benefits managed?: For companies with a strategic IT focus 70% actively manage benefits, for operational IT that percentage drops to 0%!

5. Is the CIO focused on value delivery or cost cutting?: 85% of strategically focused CIOs focus on value while only 22% of operational focused companies do.

So what does this all mean? Well, it has significant influence on what the CIO can achieve in a organisation and it also provides a guide as to what the CIO should be focusing on to align with how IT is truly viewed by the executives.

There will be no blog next week, back on the 21st of November.

Monday 31 October 2011

Strategic IT versus operational IT, how do you tell the difference?


Is your IT team strategic or just keeping the lights on? How would you know? Over the past few years I have been undertaking some research into the role of the IT team within a company. In short, is the IT teams role predominantly strategic (rare) or focused on operations (common)? Many CIO’s consider themselves ‘strategic’ when the rest of the company considers them ‘operational’ and wonder why they feel frustrated and not taken seriously by other managers. Understanding whether IT is strategic or operational in an organisation is the first step delivering better IT services.

To determine whether your IT operation is strategic or operational it is necessary to look at the ‘actual behaviour’ and position of IT in the organisation not the stated strategies or objectives.
Take the following quiz to determine the primary orientation of your IT group. Answer each question as either column A or column B, depending on which answer applies the most:

Count the number of scores for column A and column B. If you answered predominantly A scores then IT has a strategic orientation, if the answer if mostly B scores then IT is operational. The implications of this will be discussed next week as it has a huge impact on the value that the IT team can deliver to the organisation.

Monday 24 October 2011

Canny homeworkers 'out source' work

I had a fascinating discussion with someone today whose friend is a contract programmer. The friend works from home and where possible sends the work he has offshore to be done, then checks it and uploads it per his contract. Apparently he gets the work done for 30% of his hourly rate so make 60% without doing any work. While sub-contracting is common in production programming, it is not common (or probably expected) in personal contracting.

This raised the question in my mind as to whether home workers (employees) will get in on this and start outsourcing their work to cheaper providers. If you think this is unlikely check out this site that writes academic essays for you (for a fee), the extension of these types of services to doing my job for me is not that hard to imagine. http://www.assignmentmakers.com/Default.aspx

The question that this raises, is how can this happen and how will it be managed in the future? My thesis is that our relationships to work/study is becoming more remote. Historically workers were apprenticed and students met lecturers face to face, therefore it was difficult (not impossible) to fake personal effort. With the coming of the internet the relationship between employee/boss and lecturer/teacher are becoming more and more remote. It will be interesting to see what social system develops to control this. For example contract law developed in England in the 19th century in response to mass production and imports from overseas that broke the traditionally strong relationship between grower/manufacturer and consumer, necessitating a code of conduct (common law contracts) to ensure fair behaviour (as the traditional  'relationship controls' no longer worked). What do you think?

Sunday 16 October 2011

The 2nd economy and the implications for software companies


Last week I wrote of Brian Arthur's article on what he termed the ‘second economy’ that was, all the electronic transactions that go on in our economy automatically in the back ground without undue human interaction and that this ‘economy’ was growing rapidly. In that blog I canvassed the potential social impact if future productivity growth comes predominantly from this sector rather than the traditional economy where productivity means job creation.

There is a second area of interest with the second economy and this the impact on software pricing for the software industry. Traditionally pricing has been based on a ‘per-seat’ basis, this is easy to calculate, usually on a ‘named-user’ or concurrent user basis. But what if your software does not have any physical users, or more typically your software if a successful greatly reduces the number of people an organisation needs thereby reducing your revenue base? While companies such as Oracle who own the database technology have long used ‘processor’ metrics in their processing it has been fraught with difficulty (processor technology is evolving rapidly) and would be much more difficult for a pure application company to administer and police. The answer would seem to be some form of transaction pricing as used by some of the EDI vendors (per-user models make no sense in their industry). Are the software vendors and their customers up to it?

Tuesday 11 October 2011

Robots may not take over the world but automated processes might


How is technology changing society and will it be for the better? Science fiction writers have long predicted a society of robotic automation, in the utopian version humans are freed from daily chores by a multitude of robots, the darker versions including nightmares of robots taking control from humans. From the cartoon Jetsons to 2001 A Space Odyssey thru Bladerunner (Do Electric Sheep Sleep) to the animated Wall-e movie it is a recurring theme.

Fortunately it does not look like robots are going to challenge our authority anytime soon, however something just as compelling may be happening right under our noses according to Brain Arthur a visiting researcher at Palo Alto Research Centre (PARC). Arthur posits that there is a vast and rapidly growing ‘second economy’ that is totally automated (without human interference unless it breaks), he give the example of freight transactions where electronic systems linking companies and government departments across multiple countries share data and communicate with each other unseen and untouched by humans.

Arthur raises concerns that this second economy is not only growing rapidly but is the source of the majority of current productivity growth. The implications of this are quite serious, if growth does not create more jobs, and automation continues to eliminate jobs, humans may well find they have more leisure time while computers do the work but it may be a poor unemployed leisure time. This would give a whole new meaning to the term ‘digital’ divide which refers to the digital ‘haves’ and ‘have nots’, the current use of this term relates to access to technology, however it could equally refer to those who have lost the ability to earn an income due to technology driven restructuring. What do you think?

Brian Arthurs article can be found in the McKinsey Quarterly 2011 Number 11.

Monday 3 October 2011

Do you take ‘opportunity’ cost into account in IT investment decisions


TechRepublic blogger Patrick Gray who writes about challenges in IT management recently wrote of the inappropriate use of IT to solve problems http://www.techrepublic.com/blog/tech-manager/dont-try-to-avoid-hard-work-by-automating/6776?tag=nl.e106 one of the stories he told was of a company spending a massive amount on an IT project to automate a $500 problem. 
I have experienced this myself. I was once confronted by a sales manager who wanted a process his PA did automated so that the PA did not need to do it any more, claiming it was a waste of her time. My team had a look at the IT changes needed to replace the manual work and came up with a couple of months work. Concerned that this was going ahead without any ROI analysis I reviewed the actual work that the PA was doing that was to be replaced and discovered it took up around one day of the PA’s time a month. Doing the wage maths that translated to the manual work costing the company about $4k per month. The IT solution was estimated at $40k, on a discounted cash basis that is about 12-13 years to break even. So the project was canned.
There was one additional question that was not asked and that was what the ‘opportunity cost’ of the work the PA was doing. If the 2 days could be replaced by work that exceeded $40k value to the business a year then the company’s hurdle rate of 12 month payback for the IT investment would have been met. This is a brief example of the way IT investments need to be looked at both from an economic and whole of company perspective. Have you had a similar experience?

Sunday 25 September 2011

The peculiar value of “information”


Its seems within corporate IT that the ‘information’ part of IT often plays second fiddle to the ‘technology’ part. This could be because technology is sexier or easier to understand or something that the IT organisation can control. Information however is the fundamental reason for IT in the first place, it is surprising then that ‘information value’ does not play a bigger role in how IT views itself and communicates its value. In a recent thread on a linked-in IT forum the question of the IT elevator pitch (an elevator pitch is your 30 second value proposition) came up for discussion, the thread was well attended with many suggestions especially around IT supporting business and providing tools, the concept of ‘information management’ was almost completely absent in the suggestions.
Before tackling IT’s role in ‘information’ it is worth covering some theory about the ‘value’ of ‘information’. The following comes from a paper in an accounting journal published around 2005 that takes an ‘accountants’ view of information as an asset and contrasts it to ‘normal’ assets such as a piece of machinery. It is instructive because it summarises many of the headaches facing those developing business cases for IT investments.
          Information is infinitely shareable – a machine has limited capacity whereas information is unlimited to the degree it can be used simultaneously
          The value of information increases with its use – information is only of value if it is used in some way, this also applies to machinery though the machine will also usually have intrinsic value as well
          Information is perishable – a lot of information captured by organisations has a short ‘use by date’ for it to influence positively decisions or behavior, a machine can have a life of many years
          The value of information increases with accuracy
          The value of information increases when combined with other information
          More is not necessarily better – someone should tell the data warehouse vendors!
          Information is not depletable – it does not get ‘used up’ in use, a machine wares out overtime and this fact underpins the accounting concept of asset depreciation

The point of this paper was to show that the typical accounting approaches to valuing and depreciating assets are inappropriate for use with ‘information assets’. This is one reason why it is so hard to do an effective ROI on many IT investments. Funnily enough this analysis has not found its way into IT value debates. Perhaps it should.

Monday 19 September 2011

‘Big Data’ does it have meaning....


I observed two opposing ideas in the press this week. The first was estimates of the growth of data in this information age (known as ‘big data’). The statistics are quite overwhelming www.boardmember.com predicts that in the next 24 months more data will be created than has been created in all history. And according to IDC’s Digital Universe report the data created globally on an annual basis will leap from 1.2 zettabytes this year to 35 zettabytes in 2020 (one zettabyte is equal to one billion terabytes). Now I cannot comprehend just how much data that is, but I suspect it is a lot and IT company’s are lining up to help you mine that data and promising all sorts of new analytics and insights. This is exciting times for the growth of data analytics and may warm the hearts of some CIO’s hoping to regain the IT initiative with the help of big data.
The opposing idea came from a blog by Roger Martin on the Harvard Business Review site titled “you can’t analyse your way to growth”, his argument is that business growth is dependent on opportunities in the future and that analysis of past data is no use in identifying those opportunities. He argues that analysis of growth in most industries would show static or slow growth showing no real future opportunities, however innovative companies who look to the future rather than the past and in his words have a ‘deep appreciation’ of a customers life and what makes their life easier or happy or sad have opportunities to imagine possibilities that do not currently exist. He cites explosive growth in alternative cleaning products as an example of filling a need in a market which historic analytics would have suggested was mature with no prospects of above normal growth.
I suspect both approaches are right and wrong, the moral I take from these two examples is the need for an open mind and willingness to consider other possibilities whenever making a decision and to avoid being obsessed with technology for its own sake. After all humans are the customer. 

Sunday 11 September 2011

Apple and the double edged sword of corporate IT


Following Steve Jobs announcement that he was stepping down as CEO of Apple two weeks ago there has been a great deal of IT industry press about Apple and its future role in corporate IT. This is a market that Apple has previously failed to conquer, while the MacIntosh made in roads into education and the graphics design/architecture niches it failed to gain any real market share in the rest of the corporate world. Apple has long eyed the corporate market as an untapped growth area rivalling the consumer market for potential revenue and profit growth and with the never ending need to grow and exceed analysts expectations and its market dominance of the consumer market it must surely be very tempting. Certainly the iPhone and the iPad are making their way into the corporate landscape in a way Apple has not been able to do since the early days of the Mac, that is through the board rooms and executive suites.

But should Apple be so eager to become a major corporate player, have they considered what it may cost the Apple brand?

As I noted in my blog last week corporate IT is on the nose, it has been responsible for massive job losses, outsourcing, off shoring and untold human misery. And yes I know, executives made these decisions not the technology but there is a deep seated suspicion around any corporate IT project or new IT product that is entirely justified. This suspicion has impacted the major corporate IT vendors such as IBM, Oracle, SAP and Microsoft and there brands have suffered accordingly. The current fad with cloud computing is as much a reaction to perceived problems with existing vendors and corporate IT departments as it is about economics. Apple has never been called the “evil empire” (a phrase coined by Novell’s CEO to describe Microsoft) as it has not been tainted with the poison corporate IT chalice. As one of the IT newsletters pointed out last week Microsoft has changed the world more than Apple, however Apple has gained the moral high ground and consumer perception of being the world changer. 

That is because Apples products have enhanced users lives, not threatened them. Apple has changed the way music is consumed, totally replaced Sony’s walkman, made family photos portable and available anytime anywhere and provided the technology (via the iStore and its web of application providers) for connecting friends and family instantly. This is all perceived as positive to individuals, this brand perception is incredibly valuable to Apple and contracts starkly to perception of corporate IT vendors.  Also Apples products are about personal freedom and individuality, what will Apple need to sacrifice to meet the command and control imperatives of a modern corporation (the industry press have gleefully listed a great many changes that Apples needs to make to be accepted as corporate grade IT)?

The billion dollar question is – can Apple seriously enter the corporate IT market, make money and maintain its brand position of innovation that enhances our lives?

Sunday 4 September 2011

Why corporate IT needs a heart



This bit of marketing wizardry was a glossy multi-page high cost marketing document from Street Technologies, the front page read “How to eliminate half your workforce” the second page read “get the other half to use your software”. Does anyone, spot a problem with this? Oh in case you are wondering, Street Technologies does not exist anymore, I wonder why?
It sums up nicely a major issue for corporate IT, it lacks a heart. IT’s incursion into the corporate landscape over the past 40 years has been filled with replacement of staff by computers, the automation and elimination of many low skilled jobs such as parking attendants and more recently mass retrenchments due to outsourcing and offshoring, all made possible by corporate technology. Now I hear you say, isn’t that a good thing, company’s are more productive and profitable than ever aren’t they? And yes you could be right, evidence is finally showing IT now improves productivity (not a sure thing in the first 20 years of the IT revolution), its effect on profitability is less certain as technology has generally intensified competition in most industries.
However from an individuals point of view corporate IT has been a disaster, with IT leading to retrenchment, family dislocation and competition for employment from countries not previously thought possible. Even CEO’s who have signed off on IT investments, off shoring and mass retrenchments have not been immune from the personal effects. I bet there is not a CEO in office who has not had themselves or a close family member impacted negatively by corporate IT. No wonder corporate IT departments are viewed with suspicion and fear in most organisations. And it will remain that way until corporate IT finds its heart and focuses on enhancing employees lives rather than eroding them.
Many consumer IT companies have greatly enhanced individual wellbeing, Apple Computer and Nintendo come to mind. The challenge for them will be the subject of next weeks blog.

Sunday 28 August 2011

Why aren’t CIO’s taken seriously at board meetings


Last week I looked at the skills of a CIO and how the skills that were critical in climbing the IT ladder and becoming CIO are now a big negative. I was discussing this issue with a CEO and veteran of the IT industry recently and he had an interesting take on the struggles CIO’s have to be taken seriously in the board room. He felt the problem lay in CIO’s not generally being in the same social circles both professionally and socially as your typical board member. They don’t belong to the same golf clubs, live in the same suburbs and did not go to the same school. Therefore while they may get to the board on skills and intellect they fail to ‘fit in’ as they live in a very different world to the other board members and lack the social skills and mores that are required.

He has an interesting point. I have no intention to take up golf or go and live at Killara and have never been to a party hosted by the Packers, so I am not sure how best to address this problem. Having worked for 3 Japanese companies being able to play golf sure would be handy. Sadly I just can’t get interested in chasing little white balls around a mowed lawn no matter how much skill is required (or perhaps because I have no golfing skill what so ever). 

Sunday 21 August 2011

The skills that got you to CIO are now your worst enemy


All those skills that we used to get promoted through the IT ranks to eventually become a CIO’s such as being detail orientated, methodical, structured and risk adverse are totally the inappropriate for a CIO who wants to lead strategy and transform their organisation and to have a seat at the executive table. I don’t mean these skills are not valued, just that they are not valued at the executive table. It poses a real problem especially for managers such as me who do not come from a sales or marketing background. To play with the big dogs you need to behave like them with big picture thinking, lots of blue sky and playing with ambiguous ideas and strategies.

It is critical to avoid being associated with the attributes of your craft such as structured and conservative decision making. One way to do this, is to bring one of your team into the meeting whenever there is a IT presentation or project to explain the “technical” stuff, allowing you to align with the rest of the execs in playing a high level game of review.

Now I can’t take credit for this idea, that goes to Linda Price from Gartner who made the observation during a roundtable discussion at the IT Management Program at the University of Technology Sydney, it does make great sense to me and is consistent with my own experiences. What do you think?

Sunday 14 August 2011

Adaptability – IT’s role in the “new competitive advantage”


In the latest issue of Harvard Business Review* Martin Reeves and Mike Deimler argue that a new source of competitive advantage is a company’s ability to quickly adapt to rapidly changing and turbulent markets. They say “in a world of constant change the spoils go to the nimble”. Building a company ecosystem that supports and nourishes adaptability is therefore crucial. They identify key skills of:

1.       Ability to read and act on signals – this is the skill of identifying external changes, quickly and accurately determining their impact and responding before competitors do
2.      Ability to experiment - experimentation, rapid prototyping, small scale trials, simulations and rapid scenario building are the tool box of adaptability
3.       Ability to manage complex multi-company systems – partnering with other businesses can increase flexibility and speed to market
4.      Ability to mobilize – take the successful small scale experiments and make them global quickly

While the authors do not stress the point, IT has a critical role in enabling all of these abilities (if you don’t use it effectively your competitors will). The challenge is to sell to management the acceptance of high level IT principles that acknowledge and support IT’s critical role in supporting organisational adaptability. CIO’s also have a responsibility to add adaptability to their fundamental design and to manage the trade-off with the traditional IT design principles of predictability and reliability, it is time to stop being IT accountants and become IT business developers.

* Reeves, M. & Deimler, M., 2011, “Adaptability: The New Competitive Advantage”, Harvard Business Review, July-August 2011, p. 135-141.

Monday 8 August 2011

I hate IT because...


The Australian Institute of Company Directors (AICD) Linked-in forum recently hosted a thread entitled “I hate IT because..” it quickly reached 26 pages as managing director after managing director let fire at IT. It was all there, the fear, the loathing and the doubt about IT and specifically the value IT delivers to their organisations!
Also recently, on a well known CIO forum on Linked-in a thread was posted asking how members measured the business value and performance of their IT team. Apart from my short reply (as I was hoping see a good discussion) there were zero responses! Instead the hottest topics were “should the CIO report to the CFO” and “agile versus waterfall”?
What is it about selling our value as CIO’s and selling the value of IT to organisations that makes us all go weak at the knees? What is the point about complaining about who you report to if you cannot articulate why you should be employed in the first place? Come-on IT wake up to yourself and start focusing on the only thing that matters – delivering IT value.

Sunday 31 July 2011

IT dependent strategic competitive advantage

I promise this is my last page of theory for a while. Many writers and vendors use the term ‘IT value’ as a corollary for ‘competitive strategic advantage’ and assume that any benefit IT delivers an organisation is automatically strategic in nature. I thought I would dedicate this paper to defining the circumstances that give rise to ‘IT dependent strategic advantage’. The definition I like best is provided by Piccoli & Ives 2005* who define IT dependent strategic advantage as “identifiable competitive moves that depend on the use of IT to be enacted, and are designed to lead to sustained improvements in a firms competitive position”. A critical part of this definition is that the IT output must be the reason for the advantage not just an enabler (for example electricity may be critical to competitive advantage in manufacturing but it is not the source of the competitive advantage).

For a competitive advantage to be sustainable there must be barriers that make it hard for competitors to copy the company’s source of advantage. Barriers can be in a wide range of forms for example patents on designs or drug formulae’s or share options to critical staff members. The diagram below shows the relationship between competitive advantage and the barriers that develop and protect that advantage:


Response-lag drivers are features within a firm or its environment that makes it harder for a competitor to copy the strategic advantage. For example software developed in-house by a firm is much harder for competitors to copy than off the shelf software (hence Nick Carrs argument that competitive advantage is impossible to gain by using off the shelf software/IT components). Specific barriers (competitive advantage) that IT can provide are:


In summary, IT led sustainable competitive advantage is a very specialised and comparatively rare form of IT benefit. If IT is considered strategic by your organisation what barriers/advantage does it directly enable and how will you enhance and protect that advantage?  Of course IT can provide many other benefits to an organisation and these will be the focus of future posts.

* Piccoli & Ives 2005, “Review: IT-Dependent Strategic Initiatives and Sustained Competitive Advantage: A Review and Synthesis of the Literature, MIS Quarterly, Vol. 29, No. 4, p. 747-776

Sunday 24 July 2011

The business value of IT - bit of theory

What value does IT deliver to an organisation? This week I will look at the theoretical development in this area as it will provide useful background to later discussion and specific opportunities and challenges. This is a bit dry but stick with me. In March 2010 Saggi Nevo and Michael Wade* published the best explanation of how internal use of IT within an organisation provides value (or not) that I have ever read. In summary, they combine systems theory and the resource-based view of a firm to argue that IT assets when created/purchased have a potential to benefit the organisation. These IT assets are then combined with other IT and non IT organisational assets/resources and if the combination is effective they create a synergy that can provide benefits to the organisation including potentially operational improvements or strategic advantage. Note that these combinations of assets/resources can also fail to generate a synergy or even form a negative synergy that harms the organisation. The diagram below shows these relationships.



I particularly like this explanation because it shows that an IT asset does not automatically deliver any benefit. To deliver a benefit it must be used and often it needs to be used in combination with other IT assets and organisation resources such as people and processes. Also it only provides a benefit if the combined effect creates a positive synergy. The model also shows that a range of benefits are possible, strategic advantage being just one of them, it is also possible for the assets to generate nil or negative benefits to the firm.

* Nevo, S. & Wade, M, 2010, “The formation and value of IT-enabled resources: Antecedents and consequences of synergistic relationships” in MIS Quarterly, Vol. 34, No. 1, pp. 163-183

Tuesday 19 July 2011

The search for the business value of IT

A few years ago I was in an executive meeting with 7 of my peer managers, the gruff and aggressive CEO was screaming at me “David you are the CIO, prove to me what value your IT team deliver to the business, how many millions have you made for the organisation, where is the bang for my buck?” I gave a lame reply that was shouted down, the meeting did not go well. It set me on a quest to really understand the value that IT delivers to an organisation. As a part time researcher and lecturer in IT Management at the University of Technology Sydney, as a qualified accountant with a degree in economics and as a senior IT executive I have a great deal of insight into the value of IT. This weekly blog will cover a wide range of technology management issues focusing on IT value, IT benefits, IT strategic competitive advantage and the information revolution and social computing revolutions.