Understanding the Project Sponsor Role

Many executives become project sponsors, because they want a new product or a service to improve their business operations. Everyone expects the sponsors to know their role, and how they are supposed to work. While there are qualifications required to become a project manager (PM), there are none for a sponsor. The sponsor’s role is an important role, but what exactly are they meant to do? Continue reading “Understanding the Project Sponsor Role”

Attributes of Great Project Managers

Delivering successful projects is a key need for all businesses and IT groups alike. But as we all know, many projects fail or are only partially successful. Projects represent a large proportion of a business’s budget, so when projects don’t succeed a lot of money is wasted. Improving the chance that a project succeeds should be a goal of CIOs. Having the ‘right’ project or program manager (PM) increases the chances of successful project delivery. But how do you find the ‘right’ PM? And what attributes should the  ‘right’ PM have?

I came across a study from the CIO Executive Board that identified what differentiates good from average PMs. Here are some of the Board’s findings:

Skills and Experience

The first selection criteria many organisations use for candidates for PM positions is project management certification. The Board’s study found that mere certification does not predict PM effectiveness.  The results also revealed that PMs with a strong technology background do not necessarily make good PMs.  This is because, PMs with diverse experience across both technology and business areas are typically more effective. Similarly, the study found that PMs that have ability in a broad range of technology or other domains were more effective than specialist PMs with ability in only one field. The implications from these results are that organisations should look to hire PMs that have diverse sets of experience in business and technology, and not rely too heavily on certifications alone.

Knowledge of the Business

Effective PMs understand not only ‘how’ but also ‘why’. They know the goals of their projects and know how these goals fit within the overall goals of the organisation. Effective PMs understand the organisational context within which the project operates. We all have seen too many PMs, who are so focused on their own project goals and success that they ignore everything else. In these cases, even if the project meets its goals, the project fails to deliver the benefits expected.

Understanding the organisation’s goals and strategies enables PMs to broker consensus from the conflicting agendas of the various stakeholders. If PMs lack this organisational knowledge, providing them with a mentor, who has the right organisational knowledge can help increase PM effectiveness.

Managing Stakeholders

High performing PMs become ‘business partners’ and not just ‘order-takers’. Order-takers typically focus on delivering what is specified even if it is incorrect or even if the circumstances change. On the other hand, ‘business partners’ improve their own credibility and gain the trust of the project sponsor, due to their understanding of a variety of project scenarios. As a result, ‘business partners’ are able to tailor their communications and frame their problems to overcome difficulties or  find the correct way forward.

Effective PMs develop relationships across the organisation so that they understand organisational dynamics, conflicting agendas, and the different personalities of key stakeholders within the organisation. This enables these PMs to consistently avoid barriers and successfully steer through complex issues.

Smart PMs tailor their communications to suit the needs of the key project stakeholders. Technology projects have both technical and business stakeholders with quite different needs and knowledge. Good PMs can convey the project’s progress and challenges with the right level of jargon and detail to different audiences, while at the same time maintaining their engagement with the project. Technical PMs typically use language that is foreign to business people. When key decisions are not understood or endorsed by key stakeholders, this can lead to costly consequences.

Team Leadership Ability

The importance of team leadership skills is often underestimated when businesses select PMs. Effective PMs understand what the team needs and tailor their communications with the team to drive the team’s performance. These PMs correctly assess and leverage team members’ skills, and are able to gain the trust of their team members.

Poor PMs, or ‘bullies’, run the team into the ground while the project is delivered. Although PMs with a poor track record of team leadership may make some short-term visible gains, these PMs often constrain the long-term success of the project. Team morale is a good indicator of a PM’s effectiveness. Good PMs not only deliver the project outcomes, but build a team’s capabilities throughout the project.

Ownership and Commitment

According to the study, two of the top three drivers of PM effectiveness are “passion to succeed”, and an “ability to meet internal deadlines”. When selecting PMs, leaders should seek potential candidates, who show these attributes.

Good PMs understand and help define the project success criteria. These PMs then become internal project champions by demonstrating passion in delivering the project and holding themselves accountable for the project’s success. Good PMs don’t find excuses for non delivery, rather, they strive to deliver the best outcomes.

Effective PMs follow the standard project processes, but look for ways to improve these process to remove bottleneck, time-consuming step, and other inefficiencies. CIOs should support and allow effective PMs to suggest process improvements where right.

Managing Project Risks

Effective PMs are skilled in anticipating the risks that will come up throughout the project life-cycle. These PMs not only identify risks, but are also effective in developing strategies to mitigate these risks. Effective PMs also communicate these risks to other stakeholders, to gain support for the mitigation of these risks.

The study found that there was a large difference in the ability to anticipate and manage risks between the top and bottom performers. So it would be advisable to use this as a filter in selecting PMs for critical projects.

Grace under Fire

Projects are stressful; a smooth running project is a rarity. Good PMs can maintain their cool and stay level-headed in times of crisis. They maintain composure and guide their teams through the myriad of crises and challenges that projects encounter.

Problems Solving and Quick Learning

The best PMs are experts at solving the problems that a project encounters. These PMs deal with insufficient or ambiguous information and are quick learners who rapidly draw lessons from unfamiliar situations and concepts. The best PMS are able to modify their own behaviour based on these lessons learnt.

Driven to Success

Good PMs are ambitious and success oriented. Organisations need to recognise this and create development pathways for PMs to progress to more senior roles. If organisations fail to look after good PMs, they will find challenges and opportunities elsewhere.

Summary

Project success depends on having the right project managers in place. I hope this article has given you useful guidance on the attributes of successful PMs that you can use in the PM selection and development process.

What other attributes you have found that characterise good PMs? Please let me know.

IT Leaders Guide for Making Effective Board Presentations

For any company executive, fronting up to a board meeting and presenting is a daunting challenge. You work hard all year but the board sees you only a couple of times during that time. You have to package everything you do in a brief presentation. CIOs have an additional challenge. Boards are rarely interested in technology. They don’t understand the jargon.

If you don’t present well or fail to engage the board, it does not matter how efficient you are or how good your proposal is. Worse, a poor impression may even derail a career. In such an environment engaging effectively with boards, making good impressions and getting that funding request approved can be a major challenge.
Over my career, I had to present to the boards several times in different companies. This article, based on my experience and that of colleagues, aims to offer guidance to CIOs and other IT executives who want to win the board game.

Role of the board of directors

Before starting to put together a board presentation, it is important to understand the role of company board of directors. The board chooses the chief executive and approves the appointment of senior executives. The board’s role is to direct and control the company. The board must understand how proposed actions will impact the company’s performance.  Direction setting includes overseeing strategic planning and major decisions. The control function requires that the board watch the company activities, systematically managing risks and compliance.

In short, the board is focused strategic planning, major decisions, performance monitoring, risk management and senior management capability.  Typically, the boards don’t get involved in the details of execution, which is the responsibility of the CEO. Hence the board has to be satisfied with the ability of the CEO and his leadership team.
Every interaction with the board is an opportunity to show that you are a capable business leader; they can trust your judgement and have confidence in your ability to lead and execute. If the board trusts your business judgement, you will have greater influence and your recommendations will be viewed favorably  It’s an opportunity to shine but there is also the real risk of revealing your weaknesses. This just emphasises the importance of the interaction. The challenge becomes even more acute as a typical IT executive may only get one or two opportunities to get in front of the board. Typically board presentations are only 15 to 30 minutes or less. As a result, it is vitally important to get it right.
Board presentations fall into three categories.

  1. First is the ‘state-of-the-union’. Here an executive is giving an annual update for the business unit.
  2. Second is a ‘request for approval’ for a new project or initiative.
  3. Third is the ‘please explain’. The board wants more information on an issue / risk or event that could impact on business performance.

Board members are generally not technology literate. For technology investments, the CIO needs to show how the technology would improve business performance e.g. customer service, profits, revenues, compliance etc. They want to know if the benefits from the new initiative exceed the technology and implementation risks. The CIO has to satisfy the board that the risks are understood and effectively controlled.

Winning tips

Preparation

Now that we understand the board’s role and focus, it is time to begin the preparation.  It is a mistake to underestimate the preparation time. I remember planning a preparation 3 – 4 months before the scheduled board meeting and this is not unusual. Status updates and proposals are scheduled to give presenters ample time to prepare, while the ‘please explain’ request can arise with a short notice.

  1. Understand the board submission process – Companies have well-defined processes and protocols to be followed for board submissions. Take time to understand the process, what is the accepted format (text document or PowerPoint, cover sheet), what are the pre-submission approval processes (e.g. CEO sign-off, leadership team run-through), what are the deadlines for submission. Getting these wrong can derail your presentations before the starting gate. Talk to others, get copies of the previous submissions. The company secretary is an authentic source and is also responsible for the board agenda.
  2. Understand what is on the board agenda – Make sure you understand what is on the full agenda. Research the current business priorities and challenges and talk to the other presenters to understand their proposals. If proper, coordinate your message with that of the others. This will avoid repetition (or worse contradictions) and help the team express a consistent message.
  3. Research board members – Try and understand more about the board members, their background, special interest or expertise and technology knowledge. Find out who are more active or influential around the board table and their focus areas. Try to understand their capacity to understand technical information.

Content

Whether you are an IT leader or Marketing leader the board looks upon you as a member of the senior leadership team. Always keep this in mind for the board interactions.

  1. Align the message to the board’s interest and needs – Align your message to themes like company strategic goals, effective governance and risk control, business growth and efficiency, customer service etc. These will resonate better than release upgrades, infrastructure investments, virtualization and service-oriented architecture, etc.
  2. Eliminate jargon and use business language – Use of jargon is the quickest way to lose the board’s interest. What is obvious to the technology literate younger generation may be incomprehensible to many board members. Talk about how IT (or the current proposal) is supporting or enabling business, helping improve customer experience, reducing time to market. Better still get the business sponsor to co-present business proposals. Talk about how you are addressing risks via compliance, disaster planning and governance.
  3. Sell opportunities at the executive table first – If you have new ideas or approaches discuss these with the CEO and business executives first. You may have to do significant groundwork to get them on board with new opportunities. If they agree, it is quite likely the CEO will discuss it informally with the Chairman or other board members. One has to defend ideas at the board table, not raise new ones.
  4. Keep at high level but prepare for a deep-dive – The board presentations are brief. 15 -30 minutes is what is on the agenda. In reality, it could be shorter. Keep the message at the strategic level but be ready with facts and figures to back it up. Board members tend to ask lot of questions, so prepare for these. Get help from CEO and CFO to find out what questions to expect.
  5. Research the company history– Board members can have long memories. Check if this idea/ proposal has been tried before, and, if so, was it successful? Did the projects deliver? Why not? How will it be different this time? Failure to research and address these questions may mean a lack of approval or a delay.

Get ready to deliver

  1. Rehearse and rehearse again – With time short and pressure high don’t leave anything to chance. Make sure you are on top of all the presentation material and the facts. Try a dry run with your team and the executive team if necessary. Get their opinion and revise.
  2. Write down questions and answers – It is easy to forget answers when under pressure. Write down the questions and answers and keep them at hand. Practice Q & A with your team.
  3. Prepare a two-minute version – Board meetings can be unpredictable. Presentation time can be cut drastically. State your purpose clearly and be ready to succinctly summarise your report / proposal. Seek to gain support for one key point that moves the board in the desired direction.
  4. Get ready for interruptions – Questions can start as soon as you stand up. They have read your submission. Don’t let these questions derail your presentation. Pause, breathe and smile before answering each question. Turn negative questions into positive answers. At all costs avoid blaming anyone. Stick to the facts.

Follow these tips and you are on your way to winning the board game. All the best for your next presentation! For a further discussion on how you can effectively engage with the board, please contact author.

Secrets of Climbing the Career Ladder!

Many people I meet ask me how to get ahead in their job. They ask me, what is the secret to career success?  Why it is that out of two people with similar skills and experience in an organisation one moves ahead, while the other stays behind? In this article I shall share what I have learnt from my own career experiences and what I have observed from others.

Bring the Right Attitude to the Job

If you have the right attitude to the job your colleagues and bosses will notice you. Managers will prefer to choose employees to work with who are positive, rather than those who complain all the time or criticise others for their perceived failings.

However, bringing the right attitude to the job is not just about being positive. Many people don’t make the effort to understand what their role is or what the job is meant to achieve. You should ask yourself, how does my job fit within the service delivery or the value creation process? For example, if you are an analyst is your job just gathering requirements or it is about understanding needs and devising alternative solutions to meet these needs? If you are a service desk person, is your job answering calls or it is about proving service so that other people can get on doing their job with minimum delay? Understanding the job means understanding what is valued by your customers, managers, and colleagues; not just reading the job description.

If you understand your job, stay positive, and show initiative, you are more likely to move ahead.

Get Things Done

Doing the job well is important, however as many employees do not properly understand the tasks assigned to them, the quality of their work suffers.  In order to avoid this situation, make sure you understand the task assigned to you. Sometimes your manager may assume that you understand what is expected from you, even though you do not. You should consult manager or other colleagues to clarify what is expected of you and then make sure you meet your commitments. Don’t over-promise and under deliver. Instead, get better at prioritising work; not everything that is urgent is important. Find time to get the important, but non urgent, items done.

However, don’t spring surprises on your manager or your colleagues. If you are running behind in your tasks or you encounter unexpected difficulties, inform your manager first. If you spring surprises up on your manager, you will lose the trust of both your manager and your colleagues, . If the manager cannot rely on you to get the job done, this will give them less reason to promote you.

Take Ownership

If you are on a stalled project, do you wait for someone to take the initiative to fix a problem and get things moving along? Leaders don’t wait for others to act, assume blame, or take charge. Instead, leaders take responsibility for the problem, even when it is not their fault. Taking ownership empowers you to achieve results. In most places I have worked, those who are most likely to succeed are proactive in finding and solving problems and act with increasing autonomy. Every job has several problems that are waiting to be fixed.  Find the problems, which you can fix, and go the extra mile by taking ownership of these problems. Taking on extra responsibilities will make you stronger and more action-oriented.

Improve Yourself

Self-improvement is a key to professional success. There are many different skills required for managerial roles, some of these you may have others you may not. Always look for ways to improve your skills. For many technology professionals, technical skills can only take you so far. To succeed, you must have an understanding of how the business operates. If you are aware of how areas, such as customer service, sales process, accounting, marketing and credit, work, you will better be able to relate to the business executives. This will improve your communication skills within the organisation and enable you to provide better solutions to problems.

Keep an eye on new developments in your profession. In the fast moving technology arena, new technologies, new methodologies, and new techniques are changing the way work gets done. If you stay abreast of developments in your area of interest, this will help you to identify the skills or knowledge you will need to improve your work and achieve success.

Be open to feedback from others. Feedback will tell you where you need to improve. If you fail to accept mistakes  or become defensive, your colleagues will stop giving you feedback.

Take the opportunity to participate in structured development programs with job rotations, if your organisation offers these. Otherwise, volunteer for assignments that will help you broaden your role or skill base. From my experience, opportunities that take you into completely new areas can often be the most rewarding. Experience different functional roles or participate on cross functional teams. Major projects or transformation activities open up a number of new opportunities that may not otherwise be available. Make use of these opportunities to gain new skills.

Ultimately, the best way to check if you are improving is to take the ‘resume test’. If at the end of the year you can honestly add 1-3 new achievements or capabilities to your resume, you are doing well.

Understand Your Manager’s Job

Managers do not consider employees for promotion solely on the basis of how well they do their current job. Managers will also assess how well you are likely to perform at the next higher level/s. Employees are promoted when they are seen to be ready to the job at the next level. Jobs at higher levels require different capabilities to what are needed to succeed at current level. If you understand what your manager’s role is and what skills or knowledge is required at their level, you can aim to acquire these skills and demonstrate them in your current role. When your manager is absent, you could volunteer to act in their role, or you could take on assignments that let you further develop the skills required for managerial positions.

Develop Relationships

In order to achieve success, you need to build relationships with a wide range of people in your organisation. Relationships with people both within and outside your own department can help you develop a better perspective about your role and the business. As a result, you will hear about opportunities and problems earlier than you normally would. Building positive relationships with your colleagues will also better enable you to balance different agendas and priorities.

Get Noticed!

Let your network know about your team’s success. There is a balance between sharing your team’s success story and bragging, so don’t overdo it. Let your successes speak for themselves (with a little bit of assistance from you).

Promotions don’t usually take place based on one person’s opinion, your manager, your peers, and other executives all influence the decision. In order to get ahead, you need to do more than what is expected from you. If you are seen as one who takes ownership and gets things done, you will be noticed.

Good luck! Remember, successful people shape their own luck!

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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.”