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Industry Congress Keynote
Herding cats; getting your ducks in a
row; aligning IT initiatives with the
business - and other clichés
Terry White
CXO Advisor
terryw@cxo-advisor.co.za
23 May 2012 (death slot)
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Agenda
Ah, let’s just see what happens!
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Let’s talk about ‘alignment’
The cat sees the
dog!
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Let’s talk about ‘alignment’
Cat decides to do
something about
dog
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Let’s talk about ‘alignment’
The cat and dog
square off
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Let’s talk about ‘alignment’
Here comes
trouble!
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Let’s talk about ‘alignment’
Or maybe not…
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Let’s think about stereotypes
Every day, without
fail, this cat and dog
go for a walk
together
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How relevant is IT?
Never done the ‘I’
And the ‘T’ is a commodity
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So what should IT do?
ACT!
Applied
Competitive
Technologies
Technically focused CIOs have a limited future
60%
Application /
use of
technology
to achieve
business
results
20%
Using
technology to
achieve
competitive
differentiation
20%
Managing
and
governing
technology
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The qualities of a CIO: www. enterprisecioforum.com
“Courage – to reimagine IT;
Clout – to guide IT through a period of creative destruction;
Astuteness – to build on good results”
Sources of CIO success
IT related: 12%
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So how do we deal with alignment?
Without mentioning technology…
…or costs
Maybe some ROI
And never any jargon
… except financial jargon
It’s always a commercial issue
Costs are one side of the equation
But many IT projects have no ROI
A sure way to switch off the executive
A sure way to switch on the executive
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Cost
Return Cost / Return
Choosing which projects to do
How do we choose IT
initiatives that align with
business strategy /
objectives?
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How do we apply some clarity and purpose to our IT
portfolio decisions?
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First some homework
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What business really wants from IT
• CEOs and General Managers say:
Deliver IT without fuss,
get involved in business improvement
and give us appropriate leadership
This forms the basis of the 3 Role Model:
• IT without fuss (ITWF)
• Improve business results (IBR)
• Information Leadership (IL)
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Budgeting for the three roles
Momentum line
IT B
ud
get and In
vestm
ent
The funding needed for IT to maintain business momentum
exactly as it is:
• No additions or subtractions
• No new users, branches, processes etc.
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Broad categories
Momentum line
Run the IT Engine
Improve
Business
Results
Defend business momentum
IT without fuss
(IT for IT)
Improve Business
Results
(IT for business)
Information
Leadership
(IT for change)
Improve IT
IT B
udget
Strategic
Opportunity
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There are 16 categories of IT budget
IBR
Respond to
external forces
Service the business
Improve the business
Differentiate
the business
Run the engine
ITWF
Broken Regulation
IT services supply
Engine
service
Improve
Different
infrastructure
Business value driven
Differentiate using IT
Strengthen
IT
Strengthen
Engine
IL
Looming threat
Change the
strategy
Meaning Attention
Change the competitive environment
Momentum line
Should do
Can do
May do
Must do
Doing
IT B
ud
get and In
vestm
ent
Service
Improve
Differentiate
Fix
Deliver
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Comparisons can be revealing
Both spend the same…
Which is better according
to this benchmark?
Organisation 1 May (Differentiate)
Organisation 2 May (Differentiate)
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What do we expect from our IT investments?
Each category of the portfolio has different result expectations
Service
Improve
Differ-
entiate
Fix
Deliver
ITWF IBR IL
Should do
Can do
May do
Risk Cost Time
Sustainability Risk PoA
PoA
Tactical Risk
PoA Strategic Risk
Strengthen
IT
Strengthen
Engine
Meaning Attention
Momentum line
Must do
Doing
ROI = IRR + >40% **
ROI > IRR
ROI = Breakeven? Benefits realisation Baseline
Risk Cost efficiency Time
Hit rate >70%
PoA
Time < 2yrs
Hit rate > 50%
PoA
Horizon 1-3 yrs
Hit rate > 30%
PoA
Horizon – 1-20 yrs
PBP CVA PoA
BTL- PBP CVA
Risk NPV/Time
Risk Cost, PoA Ops CVA
Historical CVA Ongoing Benefits TCO
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Your portfolio is step one in project mapping & budgeting
Period 1
Period 2 Period 3
5
18
13
16 19
3 15
12
7
17 6 9
10 11
The Budget
4
2
1
14
20
8
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Position initiatives by class
• What type of project? (IT, Business, Strategic)
• What is the business imperative? (Deliver, fix, service…) 3 4
2
5
18
13
16 19
15
12
7
17 6 9
10 11
14
20
8
1
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0 20 50 10 20
0 30 40 10 20
0 40 30 30 0
40 5 20 5 30
60 10 10 0 20
5 30 40 20 5
0 0 50 0 50
10 10 30 10 40
0 30 10 40 20
0 60 0 40 0 0 60 0 40 0
Differ-
entiate
Exp
Ret Risk PoA Urg Strat
Paths of
Action Urgency
Expected
Return Strategic Fit
Risk
Mitigation
What utility do we expect from each initiative?
These are the „class rules‟
which weight what we expect
from each area of IT activity
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Estimating the utility contribution per initiative
0 40 20 40 0
0 30 20 10 40
10 40 20 30 0
30 10 40 0 20
x
x
x
x
Init.
Utility
40 5 20 5 30
0 60 0 40 0
0 30 40 10 20
0 60 0 40 0 0 24 0 16 0
12 5 8 0 5
0 24 0 12 0
0 9 8 1 8
Initiative
score
Class
utility rules
Initiative
contribution
Initiative 1 ITWFX
Initiative 2 ITWFI
Initiative 3 IBRX
Initiative 4 IBRC
Initiative ID Initiative
Class
40%
26%
36%
30%
Exp
Ret Risk PoA Urg Strat
Paths of
Action Urgency
Expected
Return Strategic Fit
Risk
Mitigation
Ranking results
Utility
Initiative 1
Initiative 3
Initiative 4
Initiative 2
Pure ROI
Initiative 4
Initiative 3
Initiative 1
Initiative 2
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Now add a bit of magic
Rank initiatives by approved ‘utility rules’
Alignment achieved!
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Projects/initiatives can be scored and prioritised
IBR
Differentiate
IBR
Improve
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Utility can be compared
across roles and classes
It is possible to define cut-offs by
utility, or by
affordability
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In summary
Utility trumps ROI and cost
Utility rules per class set business expectations and improve
understanding
Initiatives are not projects until they are budgeted for
You set your project budget by scoring the utility contribution per
initiative and multiply by the utility rule for the class of initiative
Initiatives that don’t make the cut, stay in the initiative portfolio
Benefits realisation plans revolve around expected utility
Alignment to business priorities and strategy is a given
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Thank you – any questions?
Terry White
terryw@cxo-advisor.co.za