CIO’s – Who do you report to? Does it matter?

The CIO industry press often states that who you report to does not matter and that it is possible to lead and be innovative from any reporting line within a company. The evidence suggests otherwise. My own research http://businessitvalue.blogspot.com.au/2011/11/is-your-it-team-strategic-or.html shows that organisations that use IT strategically always have the CIO reporting in to the CEO or is a member of the executive team. The current trend of shifting the CIO under Finance in many organisations indicates a view that IT is not strategic but operational and a cost to be minimised.

New research published this week by Price Waterhouse Coopers (PWC) adds to the evidence that reporting and organisational structure is important and does determine the role and effectiveness of IT in the organisation. They found that high performing organisations (25% of the 489 surveyed organisations) were twice as likely to have the CIO reporting to the CEO than other organisations, indeed they considered this essential to the effective use of technology. In these organisations IT regularly delivered on business needs.

They conclude that “unlike the predictions of some pundits who say IT is commoditizing, we see that those IT organisations that can effectively serve both their customers and their firm, deliver projects on time and on budget, and distil mountains of bits into meaningful insights are as rare as ever. In this way IT’s ability to drive business value is becoming more – not less – differentiated.”

With the rapid changes in technology, and even more rapid changes in technology use (think social, global, individual) the opportunities to gain competitive advantage from innovative use of IT has never been greater, for organisations willing to integrate technology into their strategy and recognise the CIO’s pivotal role in helping the organisation through the reporting structure the potential rewards are immense. Who do you report to?

The PWC report can be accessed at:
http://www.pwc.com/us/en/advisory/2011-digital-iq-survey/index.jhtml

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

Are standards destroying IT governance?

Fundamentally, governance is “the exercise of authority” (Dictionary.com), this is operationalised as who can make what decisions, also called ‘decision rights’. Through the allocation of ‘decision rights’ the directors/owners of a company exercise control (to the degree that they choose to) over an organisation (corporate governance). IT governance is essentially the same (being a subset of corporate governance) with a focus on the IT assets of the company.

Governance applies (with differing decision rights patterns) regardless of the organisational structure or objective. Governance exists in an organisation regardless of whether it is a tightly controlled, highly centralised company, a large bureaucracy or a loose alliance of semi-independent actors. Why then is governance and IT governance in particular considered a stifler of innovation, agility and new forms of organisation?

Perhaps it is because those on the IT governance gravy train have found value in systemising governance and IT governance in particular into a series of standards, processes and methodologies which an organisation ‘has to have’ to have good governance. ISO 38500 “Corporate Governance of Information Technology” was issued in 2010 based on the world’s first IT Governance standard AS8015 issued by Standards Australia in 2005. It contains six general principles for IT Governance which are intended as guide for organisations of decisions to consider. This however has become an umbrella standard and IT Governance has become (according to the influential IT Governance UK organisation) defined under the Calder-Moir framework as consisting of 6 exhaustive ISO standards and no less than 25 complex frameworks and methodologies. Just one of these frameworks is CoBIT which alone has over 300 ‘control points’ in order to manage an IT system. If implemented in its entirety the Calder-Moir framework would bury an organisation under a weight of process and policy that it would never recover from. No wonder managers and employees have negative views of IT governance.

It is time to return to the fundamentals of IT governance, not just to revive the efficiency of today’s organisations but so that it can play its rightful place in emerging forms of organisation that seek to avoid the bureaucratic and sole destroying impost of traditional command and control organisations. Governance is not the enemy.

David Gwillim
Exploring the value of IT to organisations

email: david.gwillim@optusnet.com.au

blog: http://www.businessitvalue.blogspot.com/

What would you advise someone who is starting their career in IT in 2013?

One of my assignments this year is to assist final year IT students at the University of Technology to prepare for a career in IT. It will include resume writing and interview techniques etc, but what are their career prospects?

Careers in IT in Australia have changed rapidly in the past decade, the opportunity to work in a hardcore research or software development company have always been small (some like Atlassian, Wisetech and  Canon’s CISRA provide career options), however the traditional IT organisation within non-IT businesses are facing the paradox of IT becoming infinitely more complex while being easier than ever to install and use allowing other business divisions to by-pass the internal IT department entirely, leading to considerable downsizing. Outsourcing (including cloud services) has greatly simplified the IT challenge within many organisations. There is currently an opportunity for a career in Australian IT services companies, this area has enjoyed rapid growth in recent years, however once organisations get comfortable with outsourcing, third party management and off-site storage of their data, the next logical step is to move it all offshore to the lowest cost provider, impacting Australian IT careers.

The greatest opportunity I see for today’s IT graduates is to identify a better application, system, process, web design, iPhone app, game etc and build their own business around it. The opportunities for IT entrepreneurs have never been greater, with the rapid pace of technology development the opportunity to leverage technology in new ways is vast. Those graduating today are ‘digital natives’ with an insight into IT and a relationship with technology that us old-timers cannot even imagine. The opportunities are endless and very exciting, today’s IT graduates can shape not only the future of IT but the world.

What would you say to today's IT graduates?

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.

David Gwillim

Exploring the value of IT to organisations

email: david.gwillim@optusnet.com.au

blog: http://www.businessitvalue.blogspot.com/

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.

David Gwillim

Exploring the value of IT to organisations

email: david.gwillim@optusnet.com.au

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.

David Gwillim

Exploring the value of IT to organisations

email: david.gwillim@optusnet.com.au

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).