Business Executive Series #4

Business Imperative, Corporate Alignment

Representative goal statement – “I need IT to spearhead a strategic business initiative replacing the new (core processing) system and align IT with our cultural values.”

This particular theme is one that I’ve encountered a few times in my career, where the delivery of a new technology engine was the major enabler of  critical business objectives. The cultural values dimension was added to emphasize that the delivery would be done in a way that was consistent with the values of the company.

Why was this necessary? By definition, aren’t all programs at a company executed in a way that is consistent with its values?

It was necessary primarily to mitigate risk. A large IT program has different sourcing options, with widely varying impacts on the people in IT. Therefore, potential attrition, performance and morale issues posed a significant risk to the success of the program. Making the statement at the highest level of the organization that the program would  be consistent with cultural values made a commitment to the people in IT that the impact on them would be considered and they would be treated right.

To make this commitment explicit and credible, both the business objectives and cultural values need to be made explicit and integrated from the beginning (“Get it Right and Do it Right”). Simultaneous engagement of the executive team is required for their articulation of business objectives and cultural values and to jump-start the immensely important Organizational Change Management workstream.

In thinking about the differences between this specific theme and other “merely” major projects, the creation of  this set of integrated objectives stands out as the most important one and that is where my focus will be, along with some thoughts on Organizational Change Management.

As an investment (albeit a large one that seldom has a positive NPV), this process begins via the IT Business Value Discovery function meeting with executive business leadership. The good news is that the business already knows that there is a problem. They are suffering because of the insufficiency of a legacy system to respond to changed business needs. There is already consensus by executive leadership that the business will be unsuccessful unless the system is replaced.  The challenge is to articulate what the new capabilities need to be – not what they aren’t – so that the gap can be clearly defined.

Given that core systems generally aren’t “owned” by one executive, this process requires a broad set of conversations to capture all the dimensions of business objectives. Also, this circumstance also makes it difficult to find a single executive sponsor – although I strongly suggest that this be the case (the COO or a line-of-business President will do nicely). The addition of  a company culture Subject Matter Expert as a resource for the conversation about core values with the business execs is also recommended.

In these conversations, the three main goals are as follows:

·      Solicit high-level business objectives

·      Validate core values and behaviors

·      Obtain input on program governance

The high-level business objectives may come from a common set at a company level or may be at the function or line-of-business level. In either case, the objective of the conversation will be to drill down the next level of the value discussion around service quality, cost, risk and time-to-results. These should be able to be explicitly linked to the overarching goals.

Based on the representative goal statement, I am presuming an existing set of core values, with specific behavioral dimensions for each. If none exists, the executive leadership team will need undertake a program of work to create one (not a trivial amount of work) and may choose to introduce it to the organization as a part of the major business initiative being undertaken.

The governance topic should be fairly straightforward. The executive committee has to have oversight, with the senior IT and business operations resources partnered as the program leads. The close involvement of the executive team in this process establishes program legitimacy and decision-making at the highest level of the organization. This will be particularly important when questions or challenges arise, particularly those related to behaviors and core values.

From this information, a first-cut scorecard should be created and socialized with the executive leadership team to validate the business goals & objectives, the specific behavioral dimensions of culture with which the effort will be consistent and how that will be measured.

It will be quite a bit of work to get this right and there will be several iterations. The sample scorecard in the Library illustrates the sort of information and structure that is recommended. Remember that this will be used to determine the solution rankings later and form the basis for the metrics by which the overall success of the program will be judged.

A brief note on the scorecard itself. As a past mentor of mine was fond of saying, “All models are wrong; some models are useful.”

The same is true of scorecards. The challenge is to develop them to a point that is suitable for purpose – not to perfection. The sample scorecard was derived from qualitative executive interviews and evolved to a point that was more quantitative. More metrics were eventually added, along with a weighting for each attribute. The weighting by the executive team was a particularly important effort because it determined the relative importance of each category and drove the final decision.

From an OCM perspective, direct linkages between the dimensions of value of the solution and business objectives, and the solution and cultural values will need to be made and clearly communicated. Initially, the communication simply commits to following the cultural values and the dimensions that are particularly applicable and then can explain how they are manifested in the scorecard as it matures. This provides the transparency that IT folks will be looking for in the decision-making process and set the standard for future communications.

Ongoing, this program will leverage OCM techniques and program management methodologies that I have described in other posts, so I won’t rehash them here.

I will, however, note that there will be questions and challenges – not necessarily from a business goals perspective, but from a cultural one. It’s particularly important that senior leadership encourages this and takes an active role in the discussions. It is though this process that variations on the cultural values and behaviors that have evolved over time can be re-connected to their original intent and strengthened.

 

 

IT Costs – Everybody’s Favorite Topic

CEO Query: Every year, my IT costs rise. Why is that – especially considering that implementing technology is supposed to cut costs?

There are probably several reasons for IT cost going up each year. The first is internal demand. If your company is growing, IT supports more employees each year and although the unit cost of IT services is probably declining, it cannot decline at a rate sufficient to overcome the additional demand. One effective approach to reducing this type of growth is to have – and enforce – uniform demand policies for commodity IT services.

The second reason is a function of the company being in business over time. As you acquire more customers, even if new IT-based business capabilities are not added, data grows by the number of new customers and the ongoing transactions from existing ones.  One approach to reducing this type of organic growth is to have – and enforce – data and information retention policies.

The third reason is a function of investments in IT made by the business (a.k.a. “projects” or “new services”) as they become operational. Unless the solution delivery cost is shed, the service delivery cost will grow each year as these investments are delivered and the solutions delivery cost will remain the same, thus causing overall IT cost to grow and/or a greater percentage of it dedicated to the “run the engine” costs of service delivery.

The solution to this reason is fairly complex and can be addressed in the context of a managed services model where solution delivery cost is made fully variable and the service delivery cost unit cost has a guaranteed yearly decrease for commodity services and the new service cost is considered in the upfront business case. Both IT and the business must be diligent in ensuring that if this new investment replaces an existing one, that the work to retire the old service is completed to avoid ongoing redundant cost.

Also, be aware that projects having a large IT investment component tend to focus on that and neglect to track the post-implementation benefits side of the business case (e.g. If the IT investment enables the call center to cut 40% of its headcount and save $50M, did that actually occur? You might be surprised at the answer unless you ensure that the project has a mechanism in place for showing the benefit in next year’s budget for the call centers or customer service function.).