Who's More Important to the Firm? The CIO or CFO?

I saw a question this morning asking which position has more influence over the firm.  It depends on the firm.  Ten years ago we saw a large portion of CIO's which reported to the CFO.  Now with the IT transformation to a to a business enabler we are seeing CIO's report to the CEO.   When the CIO reports to the CEO and has a "seat at the table" then they are more influential than the CFO.  This is simply because they have created the notion of trust with the executives which then usually translates to the firm believing in the value which technology can bring to their competitive advantage.  Rarely will the CFO hold a position where they are bringing a competitive advantage to the firm but often you will see this with the CIO.  The caveat of course is that the CIO needs to be a business oriented partner and not your traditional CIO.

The Future of IT Cont.

Backdrop Five years ago, less than 25% of business leaders rated theirorganization’s IT function effective at delivering the capabilities they needed. Today the number hasn’t changed. IT functions have strived tirelessly to understand demand, set priorities, deliver effectively, and capture value, yet the results still disappoint. Business and IT leaders alike feel they should be getting more—more efficiency, more innovation, more value—from technology. Unasked QuestionsAmong all the talk of engagement, alignment, and “being part of the business,” one assumption is never challenged—that forinformation technology to grow in strategic importance, so must the IT function. But what if this is not the case? What if a dedicated, standalone IT function is no longer the best option and the function’s resources and responsibilities were better located elsewhere?

Shift 1: Information Over Process – The rise of technology delivered as a service, or the cloud, will significantly reduce sources of competitive advantage from information technology. In theory, a start-up could use the cloud to obtain the same functionality, scale, and quality as an industry leader. Differentiation will lie in how an organization manages change, integrates its service portfolio, and critically, exploits the information the services generate.The nature of demand for information technology also is changing. Most employees are now knowledge workers. Social media is becoming vital for customer and internal communication, and data volumes continue to rise. As a result, in the business areas that drive growth—innovation, marketing, sales, customer service—up to 80% of IT enablement opportunities relate to business intelligence, collaboration, or the customer interface. At the heart of each of these opportunities is the need to capture, integrate, and interpret information, both structured and unstructured.

Shift 2: IT Embedded in Business Services – The corporate center is in flux. All corporate functions have the same problems: their capabilities overlap; they do not control the outcomes they enable; and after many cuts, they are struggling to find the next big efficiency. And for organizations growing in emerging markets, no corporate function has the scale or expertise to provide sufficient local support.The IT function shares these problems. It has skills in strategy, program management, business process design, and sourcing. All are valuable, but none are needed solely for delivering technology, and so they can all exist elsewhere. Second, no amount of alignment and partnership changes the fact that the IT function enables business outcomes that someone else controls. Much value has disappeared down the hole that this situation creates. Finally, cost pressures mean many CIOs face the unwelcome choice of cutting delivery resources needed to “build things right,” or management resources that ensure IT “builds the right things.”

The need for efficiency and joint accountability for execution and outcome will change the IT function’s delivery model and organizational location. Technology will be consumed as part of business services as the IT function merges into a business shared services group alongside other corporate functions.

Shift 3: Externalized Service Delivery – Externalization of applications development, infrastructure operations, and back-office processes continues, gradually eroding the “factory” side of the IT function. The pace will accelerate as the cloud enables the externalization of up to 80% of application lifetime spend. As this occurs, internal roles will shift from being technology providers to technology brokers.

Shift 4: Greater Business Partner Responsibility – Technologies for collaboration, business intelligence, and customer interface all require experimentation and iteration, use non-linear, user-driven workflows, and offer value from diversity across the organization. None of this is easy for a central function to fulfill.A generation of business leaders and end users is emerging with greater technology knowledge and confidence. They see advanced, user-friendly technology as an everyday occurrence, and can recite stories of companies gaining industry leadership through technology. At the same time that business leaders’ expectations, and their ability to articulate those expectations, are quickly rising, the cloud gives them access to unprecedented technology scale and expertise. The fact that cloud services cannot be extensively customized levels the playing field; business units cannot customize cloud applications but neither can the IT function.Together, these trends point to a greater role for business partners in areas where the value of differentiation outweighs the need integration. This is not a return to local control of IT resources, rather it is a shift in responsibility for technology decision making.

Shift 5: Diminished Standalone IT Role – As IT roles migrate to business services, evolve into business roles, or are externalized, the scope of the IT function will diminish and its headcount fall by 75% or more. Strategy, architecture, risk, program management, user support, and relationship management will exist at the business services level, not within the IT function. The CIO position will expand to lead this broader group or shrink to manage technology procurement and integration. Roles remaining in the IT function will organize around build and run, and adoptan agile operating model to allow rapid value delivery and resource mobility.Organizations that do not make these shifts will be left behind as they struggle to effectively exploit technology and manage an inefficient IT function and an underperforming corporate center. For IT leaders too,the shifts present risk and opportunity. Those who do not adapt face a much diminished role in a group with little strategic impact. But the opportunityis also significant. Leading a business shared services organization offersnew levels of resource and accountability for business outcomes. Another option is a leadership role in a newly empowered business unit that thriveson exploiting technology for competitive advantage.

The Future of IT

There is no magic sauce when working to fix an organization or department. Often I’m accused of over simplifying the process when doing an evaluation but it’s often when looking at problem in simple terms where the solution becomes apparent. The first mistake organizations make when making improvements is to realize that fixes cannot occur with a top down or bottoms up approach. Rather it needs to incorporate both approaches. The top down approach will define the organizational strategy which must always be the top consideration. Conversely the bottom up approach will allow those who are in the trenches to correctly identify the problems and offer suggestions for resolution. Where their complications arise is in making sure the bottoms up recommendations are fully in support of the top down strategy.

The Top down approach can only be successful if integrating the IT team into the upfront, top-down business planning processes of the organization. Additionally for both approaches Strategy is viewed as a “theoretical activity” rather than an operational planning process. Strategy can only be made real if it is directly linked to how the organization will make day-to-day investment and prioritization processes. Strategy is not something that can be done once and then executed over a multi-year period. Strategy needs to take the long-term view, with the recognition that annual events will require the business and IT to make adjustments to new market conditions or accepted events. It must be continually tested and validated over the planning period. Many CIOs have difficulty in getting business input to their IT strategy initiatives because the business doesn’t have a clearly articulated business strategy or because the CIO doesn’t know how to plan for, and respond to, multiple business requirements from multiple shared-service business customers.

My approach to accommodating and improving this process is to create a mind map with the organizational leaders as well as the day to day heroes. Using the mind map we will discuss which components of the map support the organizational strategy and which don’t. After determining the components which are useful and which aren’t, we will then value stream the problem components and dive in to problem activities which aren’t value added. Anything which is something the customer is not willing to pay for cannot be considered value added. After determining the Value added/Non-Value added ratio we will go to work to fix the problems. The above defined process is very high level but is an easy intro in to how to address organizational problems while empowering your employees to own and fix the issues.

If you're not planning for the transformation of IT you're planning for retirement

he Gartner IT Symposium is over and the message to the thousands of CIO’s who were there is Information Technology  is transforming  and transforming fast.  Those who aren’t prepared for it will likely be surprised when it passes them by, but they shouldn’t be.  Not only will IT transform in to a value added group but it will be expected to be a transforming force of innovation.  Richard Hunter a VP Distinguished Analyst for Gartner defined seven areas where innovation must occur.  While his description of those areas were valuable what I found most fascinating management structures in those areas are the same as they were decades ago.  Most management structure is defined around traditional value delivery organizations.  The ability to foster innovation in the firm needs to happen with organizational changes top down which empower innovation from the bottom up.  I have confessed my belief that success in the organization comes from those in the trenches and the discussions this week has validated that belief.   I have learned much from this conference.  Look for more information regarding empowering Lean in the organization and how you can foster Lean in IT over the next several weeks.

Gartner IT Symposium

Here at the Gartner IT Symposium in Orlando. Learning from some very intelligent people confirming the majority of what I’ve been writing about in the last year.

Focus on the four fundamentals which will empower your organization to realize its potential.
1. Cloud Computing – Nothing new here. Cloudsource what’s not a competitive advantage for you.

2. Social Computing – Not just Facebook but the concept of create that environment to support the underlying social changes which will occur in an organization.

3. Context Aware Computing – Mobile computing power

4. Pattern Based Strategy – predictive analytics. This pushes home the power of the right data at the right place

Steps in Fixing a broken Organization

There is no magic sauce when working to fix an organization or department. Often I'm accused of over simplifying the process when doing an evaluation but it's often when looking at problem in simple terms where the solution becomes apparent. The first mistake organizations make when making improvements is to realize that fixes cannot occur with a top down or bottoms up approach. Rather it needs to incorporate both approaches. The top down approach will define the organizational strategy which must always be the top consideration. Conversely the bottom up approach will allow those who are in the trenches to correctly identify the problems and offer suggestions for resolution. Where their complications arise is in making sure the bottoms up recommendations are fully in support of the top down strategy.

The Top down approach can only be successful if integrating the IT team into the upfront, top-down business planning processes of the organization. Additionally for both approaches Strategy is viewed as a "theoretical activity" rather than an operational planning process. Strategy can only be made real if it is directly linked to how the organization will make day-to-day investment and prioritization processes. Strategy is not something that can be done once and then executed over a multi-year period. Strategy needs to take the long-term view, with the recognition that annual events will require the business and IT to make adjustments to new market conditions or accepted events. It must be continually tested and validated over the planning period. Many CIOs have difficulty in getting business input to their IT strategy initiatives because the business doesn't have a clearly articulated business strategy or because the CIO doesn't know how to plan for, and respond to, multiple business requirements from multiple shared-service business customers.

My approach to accommodating and improving this process is to create a mind map with the organizational leaders as well as the day to day heroes. Using the mind map we will discuss which components of the map support the organizational strategy and which don't. After determining the components which are useful and which aren't we will then value stream the problem components and dive in to problem activities which aren't value added. Anything which is something the customer is not willing to pay for cannot be considered value added. After determining the Value added/Non-Value added ratio we will go to work to fix the problems. The above defined process is very high level but is an easy intro in to how to address organizational problems while empowering your employees to own and fix the issues.

 

 

Future of Technology Continued

Backdrop Five years ago, less than 25% of business leaders rated their organization’s IT function effective at delivering the capabilities they needed. Today the number hasn’t changed. IT functions have strived tirelessly to understand demand, set priorities, deliver effectively, and capture value, yet the results still disappoint. Business and IT leaders alike feel they should be getting more—more efficiency, more innovation, more value—from technology. Unasked QuestionsAmong all the talk of engagement, alignment, and “being part of the business,” one assumption is never challenged—that for information technology to grow in strategic importance, so must the IT function. But what if this is not the case? What if a dedicated, standalone IT function is no longer the best option and the function’s resources and responsibilities were better located elsewhere?

Shift 1: Information Over Process – The rise of technology delivered as a service, or the cloud, will significantly reduce sources of competitive advantage from information technology. In theory, a start-up could use the cloud to obtain the same functionality, scale, and quality as an industry leader. Differentiation will lie in how an organization manages change, integrates its service portfolio, and critically, exploits the information the services generate.The nature of demand for information technology also is changing. Most employees are now knowledge workers. Social media is becoming vital for customer and internal communication, and data volumes continue to rise. As a result, in the business areas that drive growth—innovation, marketing, sales, customer service—up to 80% of IT enablement opportunities relate to business intelligence, collaboration, or the customer interface. At the heart of each of these opportunities is the need to capture, integrate, and interpret information, both structured and unstructured.

Shift 2: IT Embedded in Business Services – The corporate center is in flux. All corporate functions have the same problems: their capabilities overlap; they do not control the outcomes they enable; and after many cuts, they are struggling to find the next big efficiency. And for organizations growing in emerging markets, no corporate function has the scale or expertise to provide sufficient local support.The IT function shares these problems. It has skills in strategy, program management, business process design, and sourcing. All are valuable, but none are needed solely for delivering technology, and so they can all exist elsewhere. Second, no amount of alignment and partnership changes the fact that the IT function enables business outcomes that someone else controls. Much value has disappeared down the hole that this situation creates. Finally, cost pressures mean many CIOs face the unwelcome choice of cutting delivery resources needed to “build things right,” or management resources that ensure IT “builds the right things.”

The need for efficiency and joint accountability for execution and outcome will change the IT function’s delivery model and organizational location. Technology will be consumed as part of business services as the IT function merges into a business shared services group alongside other corporate functions.

Shift 3: Externalized Service Delivery – Externalization of applications development, infrastructure operations, and back-office processes continues, gradually eroding the “factory” side of the IT function. The pace will accelerate as the cloud enables the externalization of up to 80% of application lifetime spend. As this occurs, internal roles will shift from being technology providers to technology brokers.

Shift 4: Greater Business Partner Responsibility – Technologies for collaboration, business intelligence, and customer interface all require experimentation and iteration, use non-linear, user-driven workflows, and offer value from diversity across the organization. None of this is easy for a central function to fulfill.A generation of business leaders and end users is emerging with greater technology knowledge and confidence. They see advanced, user-friendly technology as an everyday occurrence, and can recite stories of companies gaining industry leadership through technology. At the same time that business leaders’ expectations, and their ability to articulate those expectations, are quickly rising, the cloud gives them access to unprecedented technology scale and expertise. The fact that cloud services cannot be extensively customized levels the playing field; business units cannot customize cloud applications but neither can the IT function.Together, these trends point to a greater role for business partners in areas where the value of differentiation outweighs the need integration. This is not a return to local control of IT resources, rather it is a shift in responsibility for technology decision making.

Shift 5: Diminished Standalone IT Role – As IT roles migrate to business services, evolve into business roles, or are externalized, the scope of the IT function will diminish and its headcount fall by 75% or more. Strategy, architecture, risk, program management, user support, and relationship management will exist at the business services level, not within the IT function. The CIO position will expand to lead this broader group or shrink to manage technology procurement and integration. Roles remaining in the IT function will organize around build and run, and adoptan agile operating model to allow rapid value delivery and resource mobility.Organizations that do not make these shifts will be left behind as they struggle to effectively exploit technology and manage an inefficient IT function and an underperforming corporate center. For IT leaders too,the shifts present risk and opportunity. Those who do not adapt face a much diminished role in a group with little strategic impact. But the opportunityis also significant. Leading a business shared services organization offersnew levels of resource and accountability for business outcomes. Another option is a leadership role in a newly empowered business unit that thriveson exploiting technology for competitive advantage.

What is Lean and why is it not more prevalent outside manufacturing?

Thirty years ago US automobile manufactures were challenged with building quality products which customers actually wanted.  They often neglected to understand what the customer was really looking for in transportation and the customer considered value.  Fortunately the manufacturers were able to imitate the Japanese Lean models in producing vehicles which customers would buy.  Unfortunately the concept of designing products based on value didn’t mature much past manufacturing division or department.  Flash forward thirty years today and much hasn’t changed.  Lean IT (or any department for that matter) is that change, with Value Stream maturity mapping an organization can adapt Lean Manufacturing concepts within IT.  There are several cultural changes which must occur for any Lean initiative to be adopted.

1.Treat your employees as intellectual capital  – True change can only occur where the rubber meets the road. Employees who live inside a process all day inherently know what’s broken and what’s not. Giving them the ability to make changes in the organization is the most effective way to increase value and continuous improvement.

2. Understand your core competencies – When businesses start they do so in order to make money. Money is made because an organization believes they have a core competency which is superior to their competition. It’s easy for an organization to lose focus on this point. I would argue if there’s anything you shouldn’t forget it’s what your core is and how does any decision you make impact that competency?

3. Anything not providing value is waste – Value is defined as anything the customer is willing to pay for. Simply enough anything which doesn’t provide value is considered waste. Waste can further be defined as anything which doesn’t support the core competencies. There are certainly times when waste is not an option (Government Regulations, Safety, supporting process) but as a rule of thumb focusing on waste will allow the organization to provide optimal value. Inside IT waste some waste examples are system functionality which isn’t being used, duplicate data store, server sprawl, change control wait times.

In summary, using Lean tools within a firm can keep the focus on value added activities. Remember the customer is only willing to pay for value added activities and after all aren’t we in business to provide the customer with value?

What Does the Leader of Tomorrow’s Technology Look Like?

Noetic Labs has spent a great deal of time researching and building models regarding the transformation of IT over to a business service centric model. Forrester calls this the IT to BT transformation, while Gartner doesn’t specifically call this out but does state the need for the CIO to be more in tune with the business. Tomorrow’s Technology Leader will look more like the CEO than ever before. They will possess more business sense and a better grasp of financial modeling. Additionally they will report less to operating and financial leaders and directly to the CEO. What is leading to this transformation? The simple answer is technology itself is driving this metamorphosis. Technology platforms are blurring the line between IT and business functions. With the emergence of Software as a Service and Cloudsourcing many organizations have less reliance on traditional IT models and more reliance on models which serve to understand and help drive business decisions. These implications have tremendous impact on IT structures. This change starts with the leaders of IT and trickles down to the rest of the organization. Below are a couple points I envision which will define the transformation.

• Traditional – IT kept the lights on.
• Future- IT invents and innovates products to grow the business.
• Traditional – IT is a cost center which utilizes Total Cost of Ownership in evaluating projects.
• Future – IT is a profit center which utilizes ROI to measure the value of investments.
• Traditional – IT took requests thrown over the wall and found technologies or developed tools to accommodate.
• Future – IT is engaged in marketing and new product development so far upstream that they have input on strategic decisions.
• Traditional – IT did projects.
• Future – IT engages in services which enables products.

The future model cannot rely on the IT leadership of the past. The new leader needs to model the IT organization no differently than how marketing ormanufacturing does. They need a seat at the leadership table and will be essential in producing an organization which produces the most value. Essentially the new IT leader needs to have a larger focus on running a successful organization and how to maximize overall value rather than reducing IT spend. Compiling these new types if IT leadership with Leanprocess control and proper cloudsourcing will result in an organization which will resemble the IT of today.

Look for us to tie this in with our process discussions over the next six months.

Moving from Traditional IT Architecture to Business Architecture

The Architect in Business Technology as a Service

September 30, 2010 in Information Technology, Innovation, Lean, Value Delivery | Tags: Technology, Business architecture, Enterprise architecture, Business | Leave a comment (Edit)

As interest in business architecture grows, multiple approaches are evolving. Architects are blending a wide variety of generic models to develop business architectures that are specific to their environment and organizational context. Organizational scope, business architecture goals, and EA’s viewpoint also drive architects to produce unique business architecture views. In addition, architects are iteratively developing, validating, and refining their business architectures to create products that resonate with their stakeholders’ needs. All of this creativity is resulting in widely divergent perspectives on business architecture. Business architecture approaches and artifacts will diverge even more as architects become more business knowledgeable and generate architectures that align tightly with their company’s business model.

How do you achieve this?

The technology side of enterprise architecture can be, and often is, developed from the bottom up. Architects frequently start with technology standards and work their way toward strategy and portfolio management. Developing business architectures with a top-down approach requires more upfront planning. The first planning steps are all-important. To start up a successful business architecture effort, you should:

Define your scope. Set your business architecture’s scope based on organizational realities. Business receptivity is the primary determinate. Are business leaders willing to engage in business architecture efforts? At what level: executive leadership, business unit management, product and process owners? If business leaders are reticent, can you sell them on the idea? Will IT leaders support business architecture development efforts? Be prepared to start at with a narrow scope and expand as you gain traction and deliver value.

Set your goal. Business architecture efforts can produce a wide range of benefits, but be careful that you don’t get bogged down trying to boil the ocean. Setting a specific goal helps the team focus on outcome and creates a clearer value proposition for business leaders.

Define your deliverables. Identify the business architecture deliverables that reflect your scope and goals. Stay focused on what is important to reach your current goals; don’t create too much detail. Start with high-level views, and validate them with stakeholders. Iteratively develop the next level of detail until everyone is satisfied with the outcome. Don’t assume that every artifact needs the same level of detail. Business models, value chains, and business goals often provide context for other, more-detailed artifacts.

The New IT

This Blog is being written by Patrick Phillips the owner of Noetic Labs.