Leadership is seriously absent in governance

I gave a presentation to the NZ SAP User Group meeting this week. My topic was IT Value Management and my objective was to present the case for managing value from IT, rather than just managing IT, and to show the behaviours needed to achieve it and why this must start at the top.

Research by MIT's Center for Information Systems Reseach identified how firms successfully drive value from the use of IT and generate returns on their IT investments that are up to 40 percent greater than their competitors. These IT savvy firms have three obsessions:

1. Fixing what’s broken about IT. Behind a spaghetti IT architecture is a broken accountability framework and decision-making model (in other words, governance). There must be agreement and commitment on how the organization will operate and how resources will be focussed on enterprise initiatives rather than product silos. This determines the high level requirements for a digitized platform.
2. Building a digitized platform that standardizes and automates core data and processes. They start by identifying what is not changing and can be reused over and over again.
3. Exploiting the platform for profitable growth. Executive leadership leads organizational change to drive value from the new asset (the digitized platform).

For more about this, check out Weill & Ross' outstanding book for C-level executives, IT Savvy: What Top Executives Must Know to Go from Pain to Gain. (Businesses should hope their competitors do not read this book.)

On the eve of my presentation, a timely news article aired on national television that New Zealand’s governance bodies are increasingly out of touch with the organisations they are meant to guide. Dr Liliana Erakovic, of the University of Auckland Business School, says her studies on board processes and practices shows New Zealand has a problem with some under-achieving governors who are not prepared to offer leadership.

"Even more concerning is the lack of knowledge and understanding of major customers/suppliers, company dynamics, organisational processes and practices, staff and users within organisations - along with the absence of passion and some governors juggling too many board positions to be effective,"she says.

Contrast this with the three obsessions of IT savvy firms and you can see that under-achieving boards are a major barrier to a firm becoming IT savvy. Dr Erakovic's conclusions help explain the difficulty we have getting the subject of IT value management on the board agenda.

"Boards should be actively involved in the strategy formation of that organisation, yet many governors don’t know enough about the organisation and its major stakeholders, and are not active in enquiring about more information – sometimes because they simply don’t think it is their job to ask for information outside the board papers," says Dr Erakovic.

Strategic IT direction is a board responsibility. The Val IT governance framework provides useful guidance for boards and it can even be used to improve an organization's overall governance processes.
Behaviours must change at the highest levels if firms can ever hope to leverage IT to outperform their competitors. Strong, leadership commitment to strategic governance is needed to:

• Align IT decisions with business objectives so that the right investments are selected and managed throughout their full economic life-cycle;
• Monitor the performance of the IT portfolio;
• Ensure clear accountability for achieving benefits and the requisite business and IT-enabling changes.

News on ISACA's Value of IT Investments survey

Pick more winning IT investments and get the story straight from the horse's mouth, as it were:

ISACA have just issued their news release, Nine-country ISACA Survey: Two-thirds of Companies Not Fully Measuring IT Value, Neglecting Competitive Advantage, about the survey I mentioned in my post yesterday, Businesses failing to capture IT value.

The good news is that 76 percent of the survey respondents are aware of the Val IT framework.

The bad news is that only 44% have some kind of framework or guidelines in place to select the investment that will result in the highest value. What do the remaining 56% do? Even seasoned gamblers have a system.

Businesses failing to capture IT value

In this recent NBR article, which refers to a survey by ISACA and quotes John Thorp, one can identify at least five key issues that are preventing organizations from realizing value from their information system (IS) and information technology (IT) investments:

• The failure to establish a shared understanding of what constitutes value across the enterprise.
• The failure to focus on and measure the realization of benefits.
• The failure of business stakeholders to own the realization and measurement of benefits, and assign appropriate accountability for the changes needed to realize the benefits.
• The failure to adopt effective value delivery practices, such as Val IT, to manage IT-enabled investments as a portfolio of investments, to include the full scope of activities required to achieve business value, and to manage investments through their full economic life-cycle.
• The failure of boards and CEOs to accept accountability for the performance of their value delivery practices.

Organizations that persist with current value delivery practices cannot reasonably expect to achieve value from their IT-enabled investments, except by chance. In fact, they would problably do better if they gambled the investment in a casino! (A Cranfield Univerity study of the IS investment processes of large companies found that just 27% of projects delivered the benefits that justified the investment. This statistic has remained largely unchanged in 30 years despite the advancements in technology and IT professional practices - the things that IT can control.)

Introducing effective value management requires commitment to a change in behaviour and it is needed from the very top. John Thorp has more to say about this in his blog, Managing Change - The key to Delivering Value: "Individual board members and executives are being asked to change their behaviour – behaviour that they may feel has served them well in the past."

"It is difficult to get a man to understand something when his salary depends upon his not understanding it." - Upton Beall Sinclair, Jr. American novelist and polemicist, 1878-1968