An agenda for Digital Economy

Digital Economy is expected to contribute a massive $4.2 trillion dollars (or 5.5%) to the GDP of the G20 economies by 2016. Already we are experiencing the impact of the digital economy on many companies and the way customers expectations are changing. For example mobile banking has become an expected service and not a nice to have. Customer expectations and behaviours are changing.  Retailers like Myer, David Jones and Harvey Norman are suffering from not having suitable on-line offerings.

The world is changing fast. What can the CIOs and the CEOs do to prepare for this disruptive change. Here is an agenda to get your organisation ready for the digital economy. 

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10 Barriers to Transformation

Over 60% of Transformations Fail

Large technology projects are often described as transformation projects. These projects significantly change the way organisations conduct their business and how work gets done. Unfortunately, the reality is that the success rate of transformations is less than 40%. Why do so many transformations fail? There are many common barriers to success. Many organisations have learnt to overcome these barriers and improve their success rates. In this article we discuss the top ten barriers to transformation and strategies organisations have used to overcome them.

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Finding and demonstrating IT value

Some commonly heard complaints about IT are ‘we are spending too much on IT’, or ‘IT is a black-hole’. While IT aspires to become a strategic business partner, business folks complain about the lack of trust between IT and business or the lack of a common language between the two. Business does not know if IT is doing a good job and many IT leaders cannot communicate how they are creating value for the business.

A book by Hunter and Westerman, “Real Business of IT” provides a four step process for finding and communicating IT value. I thought I would share their key ideas. Continue reading “Finding and demonstrating IT value”

Elevator pitch for your proposals

Why do you need an “Elevator Pitch”?

When you are a project owner, manager or a sponsor you get asked what the project is about. This is important because bosses, employees, customers, and partners all need to “buy in” and get excited about your idea. They will form an initial impression in three minutes or less. This first impression is the lens through which everything else is viewed. If you are not able to clearly communicate what the project is about and why you are doing it, then the chances of getting the necessary funding or support for the project will rapidly diminish. Busy executives get bombarded with ideas and proposal many times every day. Even when you have a great idea, if they don’t understand it quickly the opportunity is lost.

A well-articulated message or an ‘elevator pitch’, while not a guarantee of success, is an important part of selling an idea. The problem is that many people don’t have a prepared pitch or story that they can tell and so the opportunity to sell an idea walks out of the door.

What is an ‘Elevator Pitch’?

An elevator pitch is a crisp message that communicates key features of the project in a succinct way so that others can easily understand it. Imagine if you get asked about the project in the lift going up to your office. Can you communicate what the project is about before the elevator gets from the ground to the tenth floor?

A good elevator pitch covers what problem you are trying to solve, who it will benefit (i.e. the customers), how you are going to solve it (the solution approach), what efforts/ investments are required (e.g. time, resources and money) and what the next steps are (i.e. what support you need). An elevator pitch is intended to give just enough information to get others interested in your proposition without overwhelming them with a flood of information.

An elevator pitch is a tool to help you communicate your proposition or your idea to others who have a stake in its success. To start, you need to have done your homework and have a clear idea about the ‘project’. It is worth spending some time with your team to prepare answers to following basic questions.

An elevator pitch is a tool to help you communicate your proposition or your idea to others who have a stake in its success. To start, you need to have done your homework and have a clear idea about the ‘project’. It is worth spending some time with your team to prepare answers to following basic questions.

Step 1 – Describe the Problem or the Opportunity

  1. What motivated you to launch this idea? What is the key problem or need? A real life story or scenario about the problem helps the audience understand the problem or need in personal terms and agree that it is an interesting problem that needs fixing.
  2. Who else is doing something similar? What problems or success have they encountered?
  3. How long would it take?

Step 2 – Define Your Solution to the Problem

  1. What is your approach to solving the problem? Where do you start? When do the first results appear?
  2. Is what you are delivering different from what others are delivering? In what way? What are the alternatives?
  3. Who would be the users or customers? Would it be easy or difficult for them to use/adopt this?
  4. How would the solution benefit the customers, save time, save costs, increase quality or generate more revenue? Are the benefits easy to see?
  5. When would these benefits be delivered? How much it would cost?

Step 3 – Describe the Implementation Plan and Risks

  1. What are the key activities in the implementation?
  2. What are the key decisions that need to be made?
  3. Who will do the work (e.g. internal staff or suppliers)? Do we have the skills or expertise to do the project?
  4. Who will oversee the implementation? Who is involved in making the key decisions?
  5. What are the major deliverables or milestones? When will they occur?
  6. What are the key risks and how you are addressing them?

Step 4 – What Funding is Available and what is Needed?

  1. Do you have enough funding to do the project?
  2. Where is the funding coming from?
  3. Do you have full funding or there are progressive rounds of funding? What are the milestones (or success measures) for additional funding?

Step 5 – Describe the Support Needed to Ensure Success

  1. Who is supporting this initiative? Why are they supporting it?
  2. What type of support are they providing?
  3. How do you plan to communicate/sell the project internally? What opposition do you see?

Step 6 – Consolidate, Practice and Deliver

There are a number of questions to consider in preparing the pitch. Based on your situation only a few would be included for your pitch. But having considered these questions you would have fully analysed the opportunity and will be ready to face questions that may arise.

Delivering the pitchThe pitch is a tool to educate and communicate so be clear, don’t use jargon! Create a tag line that captures the essence of the idea, e.g. “loans approved in five minutes” or “eliminating errors by data entry using smart phones”. Focus on the opportunity problem you’ve encountered and why your solution is the best for providing value and benefit to the customer. Make the argument compelling.

A typical closing statement may be – “We are solving an important problem, with a solution that works. We understand the risks and challenges ahead. We have a team that can execute. We need X dollars to reach Y milestone. We need your support to help us achieve this success. “

Keep the pitch concise and conversational. A pitch that has about 230 words would take a minute to deliver. Don’t come across as if you are lecturing or giving a long monologue. Ask a question to engage the listener. Your pitch needs to be credible. Avoid the temptation to overpromise or underestimate the cost or efforts. Use hard numbers wherever possible to demonstrate that you have done your homework. Be specific about the benefits and the support or resources needed for success. Tailor your pitch to the needs and interests of your audience while keeping the basic message consistent.  Finally, practice delivering your pitch on your team and colleagues. Time it to keep it short but relevant. Show passion and confidence. Ask them to join the crusade.

If, as a result of your pitch, they want to know more and invite you for a meeting you have succeeded in your task!

Acknowledgement: This article is based on a lecture by Prof. Lynda M. Applegate at Harvard Business School.

Running IT as a business: Myth or reality

IT as a business

In January this year Bob Lewis posted an article in Infoworld titled “ Run IT as a business — why that’s a train wreck waiting to happen“. In this article, Bob suggests that a lot of current thinking about running IT like a business is misguided and leading CIOs in the wrong direction. This article explores what is ‘Running IT like a business’ and what should a CIO do?

The myth of the internal customer – IT is expected to treat internal departments as customers and deliver them the software or projects that they have asked for. The problem is that customers don’t always know what they want and they are reluctant to commit anything to paper. Even if they do commit something to paper their thinking (and often budgets) demand a “silo” solution which only partially meets the needs of the enterprise. As a result, IT architecture suffers. IT becomes just an order-taker and not a partner.

IT Costs are always too high – Comparing costs of IT services to the external market is always fraught with danger. Why does a corporate laptop cost $2000 when I can buy a laptop from the local store for half of that price? It doesn’t matter that the other would not run corporate applications or the reliability is too low or it does not include software licenses. Similar stories are heard about the network costs, applications and hosting.

Challenge of the charge-back – IT as a business is expected to charge internal customers for its services. Charge-back is a popular mechanism for this. However, charge-back can create unintended behaviours, where departments try to reduce costs by avoiding IT services. I know a department, which stopped using help-desk for password resets due to the cost of the calls. This resulted in major security issues. Rather than figuring out how to reduce the overall costs, departments tend to focus on individual cost reductions.

IT seen as a vendor – Business begins to see IT as a vendor (usually an expensive one). This results in an arms-length relationship between IT and the rest of the business. As a result, trust begins to erode and outsourcing IT begins to look like an attractive proposition.

Bob believes, “The alternatives begin with a radically different model of the relationship between IT and the rest of the business — that IT must be integrated into the heart of the enterprise, and everyone in IT must collaborate as a peer with those in the business who need what they do.”

Is IT ready for the radical model?

Bob’s comments are spot-on! I agree that turning IT into an internal business unit, which conducts business transactions with other departments, is a less than optimal model. So what should a CIO do? For IT to be accepted as a credible internal partner there are a few things IT needs to get right.

  • Is IT managing service right? – When IT fails to deliver basic services and project, it would be impossible to develop any meaningful relationship with business.
  • Is IT managing the budget right? – If IT budgets are not predictable and IT does not understand or manage its costs, IT would not have much credibility in the enterprise.
  • Is IT investment generating value for the business? – IT must be able to demonstrate that its projects and investments support the business strategy and deliver benefits for the business such as, revenue growth, cost reduction, better decisions or reduction in risk.
  • Is IT managing the resources (or capability) right? – IT capabilities consist of people, technology assets, intellectual capital (processes and know-how) as well as relationships (trust and shared ownership). Successful IT groups leverage these capabilities to deliver and sustain competitive advantage for the business.
  • Is IT managing the “business of IT” right? – Managing the business of IT means managing the costs of IT services and projects, managing demand for services, having effective governance processes along with delivering and communicating value.

IT as a businessThe “radical model” moves the focus from managing IT like a business to managing IT for business value. When IT is solely focused on chargeback and internal customer requirements, it is not always working in the best interests of the enterprise as a whole. But it is neither easy nor straightforward to make the transition from the traditional to the new operating model. Martin Curley of Intel uses the business value maturity framework to describe the journey.

Managing IT for Value

There are interrelated challenges of managing IT for business value (or contribution to business success), management of IT budget, IT capability and managing the business of IT.  IT groups gradually move from one maturity level to the next and need different strategies at each level.

Managing the IT budget

The initial challenges are to get a handle on IT costs and budget and apply financial discipline of expense control as well as forecasting to ensur

Managing IT for Value

There are interrelated challenges of managing IT for business value (or contribution to business success), management of IT budget, IT capability and managing the business of IT.  IT groups gradually move from one maturity level to the next and need different strategies at each level.

Managing the IT budget

The initial challenges are to get a handle on IT costs and budget and apply financial discipline of expense control as well as forecasting to ensure that the budget is predictable. Many IT shops cannot forecast half-year or year-end expenses confidently. Executing the strategies for systematic cost reductions (e.g. demand management, SOE, adjusting service levels, BPR etc) is the next level of maturity. Optimising costs by adjusting refresh cycles or managing risk reward trade-offs is the final level of sophistication.

Managing the IT capability

IT capability is what IT can do for the business. Improving IT capability is about keeping up with the business demands and reducing the gap between demand and IT delivery. The IT capability stages of maturity are:
  • Technology provider – IT as an order-taker who can be counted upon to provide basic technologies and applications that the business requires.
  • Technical experts – IT as providers of technology services. IT is invited to provide technical inputs and expertise. Typically at this stage IT has limited business understanding.
  • Business partners – IT are included in developing business plans and solutions. IT has a good understanding of business and can engage with the business well. IT is proactive and is able to propose innovative solutions. However, the difficulty in going from good service providers to this level should not be under estimated. According to Bob Lewis, innovative CIOs are operating at this level. As Mazda CIO Jim Dimarzio writes in his CIO article, “Being in the room, however, did not automatically equate to involvement.” Jim had to develop the IT capability to effectively engage with the business and contribute to business processes and priorities.
  • Corporate core – IT is considered a core capability and a source of competitive advantage. IT has a track record of innovations that are a major source of competitive advantage.

Managing IT as a business and managing for value

I believe both these strategies are closely related. When IT is run effectively as a business it creates significant value.  The stages of maturity are:

  • Cost centre/cost focus – IT understands and manages the cost of the services well. Cost and quality of service are seen as important. Expenditure is controlled and technology life-cycle costs are considered in investment decisions.
  • Customer /benefits focus – The focus of IT engagement changes from cost to value or business benefits. Formal tools such as business case/Return on Investment (ROI) are used. Services are designed with customers’ needs in mind.
  • Portfolio approach – More sophisticated approaches are used to select investments using portfolio management and value management techniques. IT has effective measures of customer service. Mechanisms such as chargeback are used for fair distribution of IT costs and as a way of changing consumption patterns.
  • Value Centre – The organisation systematically optimises its value using portfolio management, risk trade-off and alignment with strategy. IT demonstrates a different mindset. IT has a strong stakeholder focus and is aligned to organisations’ value drivers where technology is seen as a tool rather than an end.

Conclusion

In closing, I quote Bob’s advice, “Don’t act like a separate business. Do the opposite — be the most internal of internal departments. Become so integrated into the enterprise that nobody would dream of working with anyone else.”