Memorial Day also represents the unofficial start of summer.  Technically summer does not start until June 21^st and June 30^th represents the 181^st day of the calendar year.  But for all practical purposes 2010 is just about finished leaving little room to create and deliver new solutions and strategies that are not already in your plans.

Memorial Day represents the logical 2/3rds mark for enterprises and the potential of their actions in 2010 to have an impact on this year’s results.  The reasons behind this are simple.

U.S. companies have just finished the longest unbroken string of workdays 74 straight between Memorial day and President’s Day, the prior Federal Holiday in Mid February.  This was the ‘home stretch’ when everyone was expected to be working.  That time is gone.

The summer work schedule is fragmented with national holidays occurring every 22 days until Labor Day in September.  That coupled with the summer vacation season creates scheduling and mobilization schedules as not everyone you need may be available when you need them.

In Europe the summer holidays are often accompanied by extended vacations reducing productivity and creating resource-scheduling challenges

South of the equator, many enterprises close their books on June 30^th – the end of their fiscal year.  This means that they are well into their fourth quarter operations, wrapping up projects and preparing to execute FY 2011 initiatives.

The close of the second quarter of the fiscal year occurs at the end of June, this will mean another round of budget and financial forecasts and potentially budget cuts to shore up the third quarter and year end earnings.

The window for completing that will have a positive impact on FY 2010 results is fast closing.  Just assume that you need three months of productive experience to prove that solutions are working and take away a month for closing the fiscal year.

September 17th 2010

Is the last logical day to release new solutions

That is 76 workdays from June 1^st.  Not including taking one day for: The 4^th of July and Labor Day.  During that time only June (22) and August (22) will be months without a public holiday, but with summer vacations.  A two-week vacation during either of these two months effectively cuts the available days in half.

CIOs and IT executives facing up to this reality have a few options.

1)   Solidify the projects you have deployed before Memorial Day.  Concentrate on their deployment and benefits realization, as those are the solutions that will deliver the lion’s share of results for FY 2010.

2)   Focus resources on completing projects during the June time period when many families still have children in school.  Any project you can potentially finish in the next 20 working days should be a top priority.

3)   Come clean on projects that will either not start or finish before the last logical day – September 17^th.  If the project is not going to have a positive impact on 2010, then you have to think about the value of doing it at all.

4)   Consider sacrificing these projects, the ones that either have not started or will not finish in time, if you need to cut investment dollars as part of forecasting for the last half of the year.

5)   Start the IT strategic planning process NOW.  2011 plans and high level targets are already starting to form and now is the time to set expectations and identify projects that you will complete in 2010 but that will not generate value until 2011.

6)   Get your vacation in the calendar now and take it.  Delaying vacation until things are going good will mean delaying it for the rest of the year.  There is never a great time to be out of the office but you, your family and friends need you to take a break.

Memorial Day is a time to remember the sacrifices others have made and continue to make for everyone in the U.S.  It is also a time to step back and reflect how far we have come through difficult times in 2010 and recognize the time we have left this year to make our own difference.

I hope all of you in the U.S. have had an enjoyable and meaningful holiday.  For everyone, best wishes for the summer and success for the remainder of 2010.  Have a fun and safe summer.

The technology stack at an industry wide level can be described as consisting of four layers.  The layers, shown in the figure below, denote the different structures with different types of investment and classes of technology involved.  Change the nature of any one of these structures and you change the nature and value of IT.

The various structures in the technology stack are not new.  The figure above seeks to provide a simplified model based on a long running conversation I have had with Peter Keen about the shifting fundamentals of business technology.  The simplification of the levels and any errors are entirely mine alone.  The technology stack can be thought of as a series of structures, moving from bottom to top they include:

The Substructure comprises the physical communications and connectivity technologies required for computing.  The Internet is the ultimate substructure.  Substructure is hidden and in fact you do not realize it exists until it is compromised, for example when someone severs the cable that delivers your TV and Internet Service.

The Infrastructure covers the computing, communications, systems software, hardware and other elements running on the substructure.  This layer constitutes what we traditionally think of as IT infrastructure in includes the data centers, servers, storage, etc.

The Structure contains the business logic that you use to run your company.  These are the applications, the information / intelligence, the user interface, etc.  Structure is the way you run your business.  Structure runs on infrastructure to isolate complexity and provide scale.

Context is the ‘structure’ that creates value and meaning to your operations.  Context is what makes you unique in terms of your economic model, context, enterprise strategy, customers/markets, etc.  Context is the ‘ghost in the machine’ that brings the rest of the stack to life.

Using this simple model, we can see that over the last 40 years, technology structures have gone public – by that I mean they have moved from being services the company had to provide for itself to services that could be purchased on the market.  The figure below provides an illustrative example and some rough timing about the transition of the technology stack private to public hands.

So what?

It is interesting to note that these transitions were made in response to market forces and the nature of technology innovation that created new price performance ratios.  In many ways, the move from private to public has been a major force behind realizing scale efficiencies and the value of Moore’s law.  After all without the ability to share across enterprises, there would be little in terms of scale efficiencies and connectivity.

Transitions at the substructure and infrastructure levels are well underway and they have been shaping IT since Gartner introduced the IS-Lite Model in 1999.  The migration of infrastructure, via technology outsourcing, managed services and the cloud, is changing the nature of IT organizations, economics, and its value proposition.

When each structure goes from private to public it changes its value, capacity, capability and the structure of IT itself.  We can expect further changes in IT as structure goes public, through things like Web 2.0, software as a service and other consumer based technologies.  These forces will change the relevance of our application and data structures and their ability to deliver competitive advantage.

Context will change and some technologies that support context will shift into deeper structures, but it will never go public.  Context cannot by definition go public and have a viable and competitive enterprise.  In this regard, context is not the strategy, but the source of value that makes the strategy relevant to customers, competitors and investors.

CIOs need to recognize the changing forces created by shifts in the technology structure as they have deep and lasting implications for IT.  The impact of each of these shifts on the value of the technology, the IT organization, and the business views of IT will be covered in the next few posts.

Technology goes public changing the IT organization

Technology goes public changing IT value

The Leadership Forum breaks these choices and demands into three time periods that are the focus of the event’s interactive workshops.

Delivery results now! – What are the issues facing CIOs and the decisions the need to make for success in 2010?  It’s the close of the first quarter and enterprises have about six months to make a significant impact in this year.

Prepare for the upturn – How will you position your enterprise for success as the economy transitions from recession into recovery and growth?  Recovery follows every recession and the decisions/positions you take now determine your role in the recovery.

Navigating the next opportunities and threats – Where the future sources of value and challenges to your enterprise?  If part of the future is already here, then how do you see and understand the trends that will set the bar for the future.

Executives face a future with no clear single direction.  Economic, strategic and technology transitions will have a specific impact on your organization, its plans, capabilities and success.  CIOs in particular face a unique challenge, that of CHOICE as new lightweight delivery models and technologies give enterprises more options in creating and provisioning technology capability and capacity.

Choice can be thought of as a framework for thinking through the leadership issues we face today, in the recovery and in the future.

Cost – remains a focus as executives look to match every enterprise resource with changing revenue levels.  This is particularly important in IT where the average budget underwent multiple cuts in 2009 and resources remain tight in 2010.

Health – of the IT organization defined in terms of your confidence in IT skills and processes in light of the current balance of resources, responsibilities and results.  The majority of CIOs report that they do not have the right skills in their current organization.

Operations – the ability of IT to provide the capacity and services levels required by the enterprise.  This is a concern, as many CIOs do not have confidence in their ability to deliver results against their top business priorities and CIO strategies.

Innovation – Practical innovation at a premium to raise performance and create opportunities.  While CIOs feel that currently IT is delivering innovation, they all see the need to innovate in the way the enterprise uses information, business process and new classes of lightweight technologies like the social media creating by Web 2.0.

Capability – IT has been focused on managing resources and processes to enable the business.  However an early majority of CIOs (42%) already see IT as having a direct contribution and responsibility for raising business performance.

Execution – is where plans meet practicalities and create value. The current state of IT is fine for now, but 50% of CIOs believe IT will need to change in the future.

The table below combines the choices CIOs face across the three time periods that organize the CIO Leadership Forum.  It is offered as a tool for every CIO and IT executive to think through how they will deliver results today, prepare for the future and realize the potential of information and technology in the future.

Welcome to the CIOs in Phoenix and we all look forward to meeting the CIOs planning to attend in London.

This post concentrates on how IT raises productivity, a question provided in the comments to

IT has a central role in raising productivity because it is a source of leverage for information, communications, collaboration and management.  In other words, IT resources are available and for the most part are not consumed or used up in the execution of business activities.  That means I can readily flow more activity over the same resource base and therefore drive more productivity.

Economists will tell you that there are many ways to measure productivity.  There is output per work hour, capital, invested capital, assets etc.  For our purposes we will just use a simple idea that it is output per resource.  That will allow us to play a little fast and loose with the examples so they can be clearer.

Here are ways in which enterprises can use IT resources and capabilities to improve productivity:

• IT can automate processes and activities shifting those activities from resource constrained people to less constrained and higher capacity systems.  Much of the internal automation of HR and other administrative processes are examples.
• IT can shift work from internal to external resources such as customers, suppliers and other interested parties.  Such a move raises productivity particularly when those external resources have the information and motivation to perform those tasks better than your people.
• IT can accelerate cycle time for internal processes by improving coordination and workflow.  Shorter cycle time means that more work units can flow across the teams
• IT can raise the quality and availability of external products and services as well as internal operations.  Here information combined with preventative maintenance and continuous improvement locks in gains.
• IT can expand trading/operational hours and access without requiring additional resources.  Online stores, customer help facilities and other services provided over IT are examples.
• IT can raise the value of products and services with minimal increase in the cost of providing those products and services.  Information is the key, particularly when applied to offer personalized or differentiated service.

These are some overall ways in which IT can raise productivity.

Please provide your own examples and thoughts, as I am sure this just touches the surface.

Given the range of options I would like to suggest focusing on one thing – Cycle time.  Reducing cycle time not only raises productivity by increasing throughput, but in doing so it raises the quality of the results (fewer errors) and the customer satisfaction (prompt & responsive)

While the argument is an old one, the basic assumption for more than 30 years as the business and IT needed each other and therefore they would find a way to make it work.

At the WTN Fusion conference in Madison Wisconsin I challenged that assumption and tried to point out that today more than ever the business could in fact divorce IT, throw it out of the enterprise, and live fairly well as a single company constantly seeking technology based services.

It is important to put this argument in context.  First, I fully recognize that divorce is a significant, painful and regrettable situation.  This discussion does not make light of the pain, complexity and life altering change that comes about in the dissolution of a marriage or another committed relationship.

So lets define what we mean by the business divorcing itself from IT.

A business divorces itself from the IT organization when they provision technology and solutions through delivery models not built around your core IT organization. The IT function is not eliminated in a divorce, but their role is dramatically reduced much like the spouse who gets visitation rights.

Business executives consider a divorce when they find that there are irreconcilable differences based on the gap between expectations and reality are so great that the enterprise no longer needs to have the function as part of its operation.

Historically, executives did not have divorce as an option as the captive IT organization was the only source of technology.  This led enterprises to invest in ‘turning around IT’ in order to make up for past under investment or neglect.  Please note that the link requires a registration.

Divorce is a recent option for business as for years they were dependent on their captive IT organization to provide enterprise technology.  Sure there were other sources of IT services – service bureaus, etc.  but they were not a viable alternative for the range of technology services a modern organization had to build.

Business has more choice in provisioning technology than they have every had before either via the cloud, software as a service, public Internet and an expanding market of consumer applications.  While you can criticize the viability of these choices today, there can be no doubt that technology providers are investing in creating more choices for businesses gaining access for technology

Why does this matter to CIOs?

Well first the business is open to considering other options beyond the captive IT organization.  There is an appetite for an alternative delivery models, particularly when you consider the speed and energy executives took up the IT doesn’t matter arguments a few years ago.

Second many organizations are already separating themselves from IT.  Look at the use of services provisioned via the web, consumer technologies and end user developed applications.

Third you may already be signaling to the business that IT is losing interest in them when they outsource critical functions like application development and business facing activities to others.

So how do you avoid divorce?

Simple, if the irreconcilable differences based on gaps between business expectations and what IT delivers.  Recognize that IT processes and practices have to change as the business leaders expectations change from managing cost to creating results.

This starts with changing IT management practices from managing activities and proving that you are not wasting the company’s resources to managing for results and driving performance at speed and scale.

Here are some posts about that topic:

• Connecting activities with results on a single piece of paper

• A few ways CIOs and IT executives make it easier to separate business from IT

• Its easier for IT to value activities over results

• An alternative way to define IT project results

May you live long, prosper and happily ever after.

It is a year of transition according to CIOs who still see 2010 as a tight year for their enterprise and IT organization.  This is according to the 2010 CIO agenda based on the insights of more than 1,600 CIOs and summarized in the CIO agenda report and summary blog post (link).

Transition creates change and opportunities.  These opportunities threaten the status quo and challenge the enterprises ability to respond.  In 2010 the transition will be uneven impacting different global industries and local geographies making how you handle these transitions very personal and specific to your situation.  The transitions facing CIOs in 2010 include:

• Economic transition from recession to recovery
• Strategic transition from focusing on cost cutting efficiency to raising productivity
• Technology in transition from heavy weight to lighter technologies

Additional information thoughts on each of these transitions can be found by following the links about.

How you respond to these transitions, the changes you make to your organization, its metrics and measures, its relationships and priorities will determine your success in 2010.  It will also define the position and expectations of IT for the next five years.

That is a pretty bold statement.  Here is why I think it is accurate.

• First off, much of the work traditional IT has been completed.  We have automation, integrated and driving information across the enterprise.  Future value will not come by repeating that recipe opening the door for CIOs to reposition IT in terms of these transitions.
• Second, the business demands for IT solutions will respond to demands for new solutions that drive growth in the recovery and productivity improvements.  These demands fit IT’s ability to raise business performance better than demands for cost cutting.  CIOs who recognize this opportunity to apply IT in more innovative ways that create new reasons for customers to choose your company and new ways to deliver that value with greater effectiveness.
• Lightweight technologies will change the performance curve of information technology.  Lightweight technologies create solutions based on scalable services available via the Internet.  The move to lighter weight technologies will reward IT organizations that are responsive in terms of cycle time, cost and capacity.

Leading organization are already making these and other moves to lead in times of transition, changing IT at the same time as the enterprise is changing itself.  A significant early majority of CIOs already view IT as being directly responsible for changes in business performance, signifying that they know the rules of the game have changed.

What does that mean for your enterprise and your responsibilities in IT?   Well it means several things.

• Start managing results before managing resources.  The business lives on results and it is no longer sufficient to say you are doing a good job because you can prove that you are not wasting the company’s money.
• Consider changing the nature and structure of the IT organization to give it a lean performance orientation.  (more on that latter)
• Recognize and build the skills you will need for tomorrow and back fill what you don’t have with managed services.

Embrace the transition for what it is.  A chance to change and shed expectations that are no longer valid and define new ones that fit a greater focus on recovery, productivity and the leverage created by lighter weight technologies.

The time to think about and position these transitions is now as we complete the first quarter because before you know it summer will be upon us, the year will be more than half done and we will face another planning cycle.  Better set the stage now than scramble to update strategies and plans based on yesterdays rules.

The business rational for productivity is clear.  During the recession organizations tried to cut costs faster than revenues declined.  Many were successful preserving earnings in the downturn following this strategy.  This strategy placed IT a heart of reducing unit costs and resource levels to better match revenues.

Cost cutting concentrates on the denominator of the performance  eq1uation, see below.  Productivity is the opposite focusing on how to create more value by doing new things and increasing the value of existing practices.

However, as the economy turns up executives have demonstrate an ability to lock in those efficiency gains by changing the productivity of the enterprise.  If they do not, they face a ‘peak earnings’ quarter where increasing revenues inflate quarterly earnings that cannot be sustained over the long run.  The result is an apparent paradox of record earnings followed by apparently disproportionate fall in stock values.

Stock prices fall on the news of a record quarter because investors know that such earnings levels are not sustainable.  Investors are right if executives remain focused on cost cutting and control because rising revenues and a strengthening economy will force them to add costs back into their model to support the recovery.    They have to because during the recession all they did was dehydrate their operations, they did not change the way they work, so the only thing they can do is add back costs as revenues return.

Adopting a productivity focus that changes the way we work is the only path to being able to lock in productivity gains and earnings that drive stock prices.

Productivity and efficiency sound like the same thing, but the differences are important as summarized in the graphic below.

Productivity is particularly important to CIOs and IT leaders as it creates room for IT to be more than a commodity, cost cutting and consolidation service.  Achieving productivity gains requires changing the way people work so they work smarter, achieve more, deliver greater quality and realize the value of their efforts.   Those goals are all qualitatively different then cutting costs with IT.

I believe that CIOs will have to answer the following question when reporting their 2010 accomplishments:

How has IT raised enterprise productivity?

IT has the tools, it manages the information, communications and applications that determine the way the enterprise works.  Therefore they are critical source of creating and leveraging productivity gains.  It is also a critical source of IT’s business impact and value.

Productivity is a universal good that creates value in growth and protects earnings in down markets.  Regardless of your situation—making productivity one of your key goals for 2010 reflects a positive transition in your enterprise strategy.

Stock market analysts and economists postulated that the US and Western Europe would go into recession, but China and its domestic growth rate would keep Asia in positive territory.  Those views turned out to be incorrect as the global financial crisis hit everyone, everywhere hard.

The issues of decoupling is back on the table as it seems that while we all went into this recession together, its possible that in the recovery Asia is decoupled from the west.  This means that while the West experiences a sluggish economy, domestic demand in India and China will lead to a rapid recovery.

There are already signs that this is happening.  U.S. exports to China are up.  The BBC this morning was discussing the Indian Central bank plans for removing government stimulus in the face of a projected strong growth rate.  At the same time, unemployment, weak consumer demand and potential national defaults in Europe loom large.

If Asian and Western economies are decoupling in the recovery then it has some significant impact on Western economic policy and corporate strategies.  First, a decoupled world means that there is no one country or region at the front of the train pulling the world forward.  In a coupled world, that used to be the U.S. whose domestic growth fueled demand for imports from Asia and therefore global growth.

Decoupling reduces the potential of Asia leading the way in a recovery as domestic Asian companies feed their own growth.  This has been one of the under reported stories of China during the recession which has concentrated on building both domestic demand and supply.  This is not to say that Asian growth will feel a drag from weaker growth in the west.  It is to say that a decoupled global economy will work by new rules.

Under this scenario, growth in the East will not necessarily translate to growth in the West as many Western companies now produce and service global companies out of Asia.  Sure Western companies will earn financial returns meeting local Asian demand with Asian supply, but that will do little to simulate western domestic demand or employment.  Here are a few thoughts on what to look for in a decoupled recovery:

• Asian growth rates running 4% or more ahead of rates in the  West.
• Return of commodity price pressures for industrial inputs in general and food in particular
• Rising Asian interest rates that drive higher interest rates in the West as Asian central banks seek to combat inflation and the West needs to retain Eastern investment to fund rising government debt
• Continued weakness in global shipping levels and container rates, as East-West product movements transition to East-East shipments
• Stronger inter-Asian M&A activity vs. Western M&A as companies view to buy market share and access to a growing market
• Targeted Asian acquisition of long-term growth play in the West, particularly companies that are part of the bedrock of global economic growth.  Telecoms perhaps, engineering companies, logistics and transportation

Remember these are just theories.

Maybe this is just an idea driven by human nature.  After all we can feel poor when we see our neighbor’s doing well.  The opportunity to feel this way is more prevalent in a recovery than a recession where group think sees everything going in on direction – down.

We live in a global economy with complex and interconnected flows of goods that has produced growth that has lifted millions out of poverty as well as created economic crisis that impoverish us all.  Economic decoupling in the recovery is just one of the scenarios that we need to consider and evaluate.

This post concentrates on how you use the information to reveal the plan in a way that demonstrates IT’s contribution.  The post will use the sample action plan, shown in the figure below, to illustrate this point.

Plunking down this piece of paper or presenting it as a slide in a Powerpoint deck all at once communicates that IT is complex, engages in many activities and therefore must be costly.

Being introduced to the action plan all at once gives executives the impression of a bureaucratic or administrative approach.  The full plan requires them to read all the way across the plan to understand why they are investing in IT.

ITs contribution to business value should be direct and tangible and it can be when CIOs choose to communicate their plans based on business results rather than operational activities.  Making those connections is as easy as folding a piece of paper.

You may have noticed that the example above is divided into four columns of equal width.  This is deliberate, as the first step is folding the action plan according to the instructions outlined in the figure below.  I apologize for the simplistic instructions.  I know that CIOs can fold a piece of paper into four columns, but I err on the side of being clear and graphical.

Folding the action plan gives you the flexibility to reveal the plan in stages rather than showing the entire piece of paper all at once.

Savvy CIOs discuss what they are going to do in a structured way and avoid common communications mistakes that give the impression that IT is a back office, administrative function.

They start communicating the connection between objective and result.  This is achieved by folding in the middle two columns, shown in the figure below, and having a discussion concentrating on what you are trying to achieve (objectives) and why that is important (the results).  That connection is the business context for the change program.

The value-based view should be the first and most frequently communicated connection within the plan.  Folding the plan in this way enables you to have direct discussion of the connections between the objectives and the tangible results they will achieve.

This is often not the case particularly after the plan is approved and management attention turns to execution.  Then the view changes to one concentrating on activities and gaps show in the figure below

The activities view often dominates CIO and IT executive discussions.  Ask them what IT’s priorities are and they will talk about IT activities and projects rather than the value they create.  This view is understandable as activities dominate the day-to-day management agenda.

However, just because you spend time on activities does not mean that the activities are valuable.  Rather the results they create are the source of value.

Too often CIOs introduce themselves and IT in terms of the projects they are doing rather than the results they are partnering to create.  The message executives take away from the activities view is “We are from corporate and we are here to help.”

A folded action plan creates a tool for connecting IT activities with results.

Sure it’s a simple tool based on what you learned as a child.  But this simple tool makes the connections between IT objectives and results clear and physically tangible.  It allows the CIO to reveal the connections between objectives, issues, actions and results in stages rather than bombarding the audience with complexity and assumed cost.

Balanced scorecards, portfolio management and transformation programs all have their role, but I would suggest that the savvy CIO starts simple and keeps it simple, as simple as a single folded piece of paper.

“People are our most important … (asset, resource, strategy, etc)” This is one of the more familiar phrase executives and managers will say, particularly in light of the past year when people, their ideas and their personal sacrifices contributed so much to company survival.  2009 was a year where your people made the year as customer demand fell, bankers tightened credit and the economy contracted.

People are more than the most important asset/resource/etc – they are the source of current operational performance and future competitive advantage for the following simple reasons:

It’s a person and your people.

“People are our most important … (asset, resource, strategy, etc)” This is one of the more familiar phrase executives and managers will say, particularly in light of the past year when people, their ideas and their personal sacrifices contributed so much to company survival.  2009 was a year where your people made the year as customer demand fell, bankers tightened credit and the economy contracted.

People are more than the most important asset/resource/etc – they are the source of current operational performance and future competitive advantage for the following simple reasons:

People get things done.  When I was a commercial lender one of my customers told me, “you know mark, people write checks” meaning that people made the decision if you were going to get paid, not a computer system, nor the terms on a piece of paper.

People are adaptable. Despite what management guru’s say, people do change and they are the most adaptable resource a company relies upon, particularly in IT.  Don’t believe me, then just go into your server room and ask the hardware to be more adaptive!

People have the knowledge and ideas you need. Innovation and improvement come from people and their insight, knowledge and experience.  Your people are closest to your operational problems, they know where best to cut costs, where the value really is in your operations.  Too often we pay lip service to their knowledge with the corporate ‘feel good’ suggestion box rather than listening and acting on their knowledge and insight.

People make sacrifices. People can see, believe and sacrifice for the future where your customers, suppliers and executives can only see the short term.  Many organization’s asked their people last year to freeze salaries, accept lower benefits and work harder for the good of the company – and people responded while others took advantage of the situation.

So what? Isn’t this all stating the obvious to the point that its become a cliché?  The cynic would say that such statements are a prelude to large executive bonuses, layoffs or plant closings and while they may be correct that does not make it right.

During the past year we have asked a lot from the people we know at work, at home and in the community.  By in large we and the people we know have responded with courage, heart, intelligence and collaboration.

Now is the time, after the holidays and during the darkest part of winter to turn around and recognize, thank, welcome and acknowledge the people who have made the past year as tolerable as possible.

Chances are that they will not expect it, but they deserve it.  They will recognize that you are giving them your most important resource – your time, your attention and your heartfelt emotion – all of which are your most important asset, resource, strategy, etc.

So what? Isn’t this all stating the obvious to the point that its become a cliché?  The cynic would say that such statements are a prelude to large executive bonuses, layoffs or plant closings and whiel they may be correct that does not make it right.

During the past year we have asked a lot from the people we know at work, at home and in the community.  By in large we and the people we know have responded with courage, heart, intelligence and collaboration.

Now is the time, after the holidays and during the darkest part of winter to turn around and recognize, thank, welcome and acknowledge the people who have made the past year as tolerable as possible.

Chances are that they will not expect it, but they deserve it.  They will recognize that you are giving them your most important resource – your time, your attention and your heartfelt emotion – all of which are your most important asset, resource, strategy, etc.

That ethos involves IT getting investment budget to build new systems with little direct involvement or commitment for generating the returns on that investment. There can be no greater separation that puts both sides at odds with each other.

Traditionally benefits realization is the responsibility of the business with IT responsible for enabling those benefits through technology solutions.

This type of relationship worked when IT solutions moved the enterprise from manual to automated processes from the back office through the front office.  IN these cases, the value potential of automation was so great, that benefits realization was less of an issue.

Unfortunately as IT solutions cover more processes, the opportunity zone between benefit potential and investment level has narrowed adding new stress to the benefits realization equation and widening the gap between the business and IT.

In the face of this gap, executives have sought to add more process overhead to an already weak process.  Management overhead practices include:

• Incorporating complex financial based measures when calculating IT investment returns and decisions.

• Engaging in costly and time-consuming change management activities to sell the business on the new solution

• Implementing new scorecards and management metrics in order to concentrate management attention.

Closing the benefits realization gap requires sharing rather than shifting responsibilities for investment, solution and benefits realization activities.  Here are a few points to consider:

• Benefits realization starts with defining a realistic business case that becomes the future management operating model rather than an instrument that is abandoned after the investment decision.

• Concentrating the on quantifiable changes in operational performance rather than achievement of qualitative strategic initiatives.  If you can declare victory without the data to show success, then you are managing.

• Recalibrating business applications of technology on clearly defined business problems or opportunities in order to leverage existing assets as the days of ‘rip and replace’ are fading.

• Incorporating IT into daily management and improvement disciplines to create continuous change rather than requiring the enterprise to lurch from strategic initiative to initiative.

Benefits realization is perhaps one of the more complex and far-reaching areas separating the business from IT.  Existing business case and benefits realization models are losing their effectiveness and need to be replaced – more on those models in latter posts.

CIOs and business executives need to share benefits for business results else they will continue to ask if they can pay you tomorrow for the business case today rather than having IT be the spinach for business performance.

This is part of a series on the ways in which IT separates itself from the rest of the enterprise.  The first/keystone post can be found at this link

• Economically from recession to recovery and growth
• Strategically from a focus on cost cutting efficiency to raising enterprise and IT productivity
• Technology transition from heavier weight technologies to lighter weight technologies such as virtualization, cloud computing and web 2.0.

CIOs report that 2010 IT budgets are projected to be flat increasing by a weighted global average of 1.3 percent in nominal terms, compared with 2009 levels where IT budgets declined 8.1 percent.

2009 was the most challenging year for IT since the survey began in 1999, and CIOs had faced multiple budget cuts wiping away four years of budget increases, giving CIOs basically the same level of resources as they had in 2005.  While there are some signs of recovery in the 2010 projections, these will not overcome last year’s cuts.

2009 was the most challenging year for CIOs in the corporate and public sectors.  These CIOs faced multiple budget cuts, delayed spending and increased demand for services with reduced resources.  While technologies are transitioning from “heavy” owner-operated solutions to “lighter-weight” services, CIOs are, in turn, transitioning IT beyond merely managing resources to taking responsibility for managing results.

These transitions give the enterprise and IT the opportunity to reposition themselves and exploit the tough corrective actions taken during the recession.  CIOs see 2010 as an opportunity to accelerate IT’s transition from a support function to strategic contributor focused on innovation and competitive advantage.  They have aspired to this shift for years, but economic, strategic and technological changes have only recently made it feasible.

These survey findings show that, in the near term, business expectations and CIO strategies appear stable, with a continued focus on business process improvement, cost reduction and analytics (see Table 1).

Business expectations are shifting from a focus on greater cost-based efficiencies, to achieving better results based on enterprise and IT productivity.  These productivity gains will come from collaborative and innovative solutions that take advantage of the new “lighter-weight” services-based and social media technologies, including virtualization, cloud computing and Web 2.0 social computing.  This transition can be seen in the top 10 technology priorities for CIOs in 2010 where business intelligence, the No. 1 technology the past five years, dropped to the No. 5 priority.

These strategic, “lighter-weight” technologies are of increasing importance to the CIO.  Exploiting them provides the cost, capacity and capability gains needed to define, source, create and deploy information- and process-intensive solutions that will reshape IT and its future role.

Moreover, the technologies that CIOs are prioritizing in 2010 are technologies that can be implemented quickly and without significant upfront expense, instead of investing millions of dollars to get millions in benefits, with these technologies, up front investments are measured in thousands of dollars to get those same benefits.

Lightweight technologies, implemented properly, create the opportunity for IT to change its role and the operational performance of the enterprise.  Asymmetric technologies like virtualization, cloud and Web 2.0 enable companies to get out from under a front-loaded heavy investment model that limits IT’s agility and flexibility.

While enterprises will transition at different rates and times, every CIO faces the need to raise productivity, create new capabilities and use the recovery to drive fundamentals of the current agenda and the repositioning of IT.  Such transitions will not happen overnight but they will start with the decisions and directions established in 2010.

This year’s survey collected data in the middle of the economic changes in the fourth quarter of 2009.  As such, it provides a snapshot of CIO plans, priorities and budgets for 2010 as they stood at the end of the fourth quarter of 2009.  They represent Gartner’s best current indication of CIO plans at this time.

Defining an internal customer was part of the ‘customer/quality movement associated with business process re-engineering when everyone needed a customer.  This may seem odd but when IT says the business is their customer it tells the business that IT is a support function, distant as the real customer is the one generating revenue.

There is only one customer for the enterprise and all of its component parts – the one that generates company revenues.  Realizing that there is one definition of the customer brings the enterprise together; concentrating management attention and resources is critical to remaining competitive.

This is in marked contrast to allowing each enterprise function to declare its own customer who may or may not be the “end-customer.”  One can understand the need to focus delivering value, particularly in departments that are removed from direct interaction with end customers.

You are my customer, which means that you have another customer that may be the end customer or may not, but either way I am not involved with them.  My processes serve you, the internal customer and you are responsible for adding value to my work to pass onto your customer.

When IT defines the business as its customer, it signals to the rest of the enterprise that IT is a support function rather than an integral part of the customer value proposition.

Taking your focus off the customer separates the organization into a series of intermediate customers and supplier relationships that can easily separate the enterprise across functional lines.  This creates the complexity, bureaucracy and opacity that are hallmarks of too many modern companies.

“I have done my job.  Its not my responsibility.  I satisfied my customer” are all valid statements in an enterprise subdivided along end-customer and intermediate customer lines.

Dividing the enterprise along internal customer lines facilitates choice in terms of which activities can be supported internally and sourced externally.  There is nothing wrong with outsourcing, but segmenting the enterprise along internal customer/supplier lines may cause people to think small in terms of outsourcing decisions.

IT’s customer is the same as the rest of the enterprise – the customer who chooses your products and services.  Focusing on the real customer concentrates IT on creating real value, a point Hunter and Westerman make in their latest book book link and  my review.  Concentrating on the real customer involves refocusing on a few things including:

• Reconnecting IT solutions to customer value through concentrating on customer problems and opportunities that are the sources of customer value.

• Extending IT’s involvement in the enterprise to include information and business process in addition to application systems as not every customer issue is best resolved through changing applications.

• Adopting end-to-end business performance metrics supported by IT operations and solutions.

• Adopting a customer visitation program to get IT executives involved in customer acquisition, sales and service processes, particularly where your offering is integrated into your customer’s processes.

• Bringing the front end of IT together with the front end of the product/service development cycle to build new solutions concurrently rather than passing requirements between the two groups.

The only customer is THE CUSTOMER, particularly now and particularly for IT as customers must choose your offerings and IT systems play a critical role in making that choice.  You cannot win repeatedly with customers and in the marketplace when part of your business is off serving internal customers that do not necessarily mean serving the real customer.

This post is part of a series on the ways in which IT separates itself from the rest of the enterprise.  The first/keystone post can be found at this link

A nuisance is relative and very relevant to the relationships among any groups.  From the business perspective a nuisance is often a change in IT systems or reports that they see as relatively simple to do, almost to the point of being trivial.  An example is changing the way sales and inventory are reported from aggregating at the warehouse level to the individual store level.

From a business perspective it seems simple enough, its not strategic, the business will not stop without it.  But every time the business wants to see the data that way, they will wonder what ever happened to that request.  The open request creates a nuisance for the business.

From an IT perspective, the request to change the report structure or one of a myriad of other request is simple enough but it is also small.  This type of project often goes onto a maintenance list prioritized against one another and demands for more strategic projects.  The open request is also a nuisance for IT.

It is easy for both parties to overlook the list of nuisances.  Business and IT executives undervalue these individual small requests when prioritizing them against larger investment projects complete with business cases.  The natural inclination is to assign resources to the investment portfolio and address enhancement projects on a best effort basis.

Unfortunately best efforts are not good enough and the gap between what the business needs and feels is simple enough for IT to deliver and the small projects that IT eventually assigns resources to eat away at IT’s credibility and undermine its strategic value.

The result is that while IT may be delivering great strategic advantage at the top of the organization, but that value is undermined throughout the rest of the organization as they are still waiting for these day-to-day projects.

This situation is most evident when IT is completing a major project like an ERP implementation or upgrade.  In this case the backlog of nuisance projects can easily overwhelm an IT organization that has become accustomed to large complex implementations.  Adding more management is not always the answer as even when program management offices allocate resources to maintenance activities they are seen as secondary to the main project portfolio.

Being strategic involves more than having a seat at the strategic table or leading enterprise transformation.  It means creating and delivering value across the enterprise and at all levels.

Some techniques that can help include letting the business prioritize their day-to-day needs through instituting a job jaror concentrating on raising the IT organizations throughput and productivity.  In either case CIOs and IT executives need to pay attention to what may seem to be a nuisance that undermine trust necessary to be a trusted strategic partner.

These talks are particularly important in IT for two reasons.  First IT has had a very tough year in 2009 facing duel pressures on budget and increased demand for services.  Second, IT has often been at the tip of the spear, so to speak, in making cost cutting moves in the enterprise.

Unfortunately, IT’s contribution often goes unstated or understated in these discussions.  CEOs talk about operating results, sales, the cost savings and the future strategy/value.  IT has played a pretty important role in achieving each of these, but can easily go without comment not because there is no contribution, but because the CEO does not have a script that does not bring these achievements to the CEO’s mind.

Standard IT scorecards, metrics and status reports do not provide the CEO with the best script for talking about IT’s contribution and value creation in the enterprise.  Too often these scorecards and metrics are resource focused – talking about how IT is a good steward of their budget and operations.  Uptime, projects on budget and schedule, infrastructure capacity, budget reductions and operational efficiencies, etc. are important contributes made by IT.

These are all real contributions but ones that are hard for a CEO to explain easily compared to the contributions made in the lines of business.  CEOs need a script, not to put words in their mouth or mind, but to put IT’s accomplishments in an appropriate context on that the CEO can speak about readily and off the cuff.

The context for IT that CEOs need is the same as context for the rest of the enterprise – business performance.  So what is in the business performance script that IT needs to provide for the CEO?  Here are a few thoughts:

IT’s contribution to future performance – measured in terms of the transformational projects IT completed.  Traditionally these are measured in terms of the size of the investment budget and the status of individual projects.  Measures script the CEO to talk about how much IT is spending.  Invert this through talking about the sum of the potential value created estimated by the sum of the business cases for these projects and a list of the new capabilities created from these investments, their take up and benefits realization.

IT’s contribution to current performance – measured in terms of tangible changes in operational performance.  This is an area frequently not addressed in IT metrics, but how has IT operations and projects accelerated cycle times, improved customer satisfaction, reduced waste and provided the capacity necessary to run the business.  Many of these benefits are measured in terms of changes in the company’s balance sheet or ability to generate free cash flow.

IT’s plan for future transformation – described in the ways the business will be tangibly different in the future and how those differences accelerate the enterprise’s strategy.  This area is often stated in generalities rather than specifics that the CEO can readily comment on.

IT’s operational performance – is often expressed in terms that are interesting but not compelling to the CEO.  Here the script should concentrate on how IT was able to increase its productivity in terms of the ability to deliver greater results and value with the same resources.  Look at the volume of changes, requests, transactions etc that IT supported with the same or reduced resources.  Recognize that productivity gains give IT the capacity it needs to deliver value in the future.

How are you scripting your CEO?

What is the ammunition you are giving your CEO to talk about as they discuss the enterprise’s accomplishments including the accomplishments of IT?

Getting the CEO to discuss IT accomplishments and goals as readily as the accomplishments of other organizations within the enterprise is one goal for the start of the New Year.

Some related posts:  ITs value exists over time

Its time for you and your teams to get a little amnesia at the start of the New Year. Particularly this year given that 2009 was the toughest year in at least the last 50.   Here is why.

CIO’s and enterprise executives faced a series of tough decisions in 2009 that cost people their jobs, cost the enterprise investment projects and forced other less than desirable changes.  CIOs on average reported that their 2009 IT budgets were ‘adjusted’ at least two times during the year – meaning that expectations and plans needed to be adjusted multiple times.  All of these adjustments, coupled with the overall economic pressures erode trust and collaboration across the enterprise and within the teams.  That is why it may be time for some amnesia, so everyone can move the organization forward.

The start of a new calendar and fiscal year provides the opportunity to have amnesia as what was done in 2009 is done.  Here are a few ideas to give your self and your team a little amnesia to free

Recognize that you are where you are – now that sounds pretty Zen but in fact it’s true.  It means that its time to forget about how you got to your current state, who is responsible for it, who should be rewarded or disciplined for it.  Everyone is starting from the same place – the here and now, so move forward rather than spend time and energy looking backward.

Define the metrics and measures you want – the start of the year means new goals and objectives.  It also means that you have the opportunity to reset the conversation and define how you will be successful.  Too often we keep the same metrics year to year even when we need to reach a different result.  Not only is keeping the same metrics boring, but it also tells everyone that you have no new ideas.

Try something that your not sure will work or has failed in the past.  IT people can be among the most conservative in your organization, seeking to reduce risk and maintain security at just about any cost.  This makes many in IT fearful of new things, particularly things that they are not sure about.  As Frank Herbert wrote in the Dune Novels “Fear is a mind killer.”  Trying something new stretches the organization and opens the door to new things.  Recognize that it’s a new year and things that might not have worked in the past may work now under different circumstances.

These are just a few ideas and I am sure that there are more.  But remember it’s the start of a new year, and without a little amnesia its pretty likely that 2010 will be a replay of 2009.  So go ahead let go of the past and move into the New Year with a clean or at least cleaner slate and see what you can do.

Happy New Year and all the best wishes for 2010.

2009 was a tough year for enterprise IT between budget cuts, new pending regulation and the demand for IT services, many CIOs are glad to see that the year is passing.  However few predict that 2010 will be much better.  While most see economic recovery, few see a return to growth – defined by revenues returning to pre-2008 levels.

The transition from economic recession toward recovery will continue to apply pressure on enterprises to be more productive and innovative as simply doing ‘more of the same for less’ will not be sufficient.  So here are a few things we might see in the coming year.

• Virtualization will increase as CIOs virtualize the rest of the parts of the data center that can be virtualized.  This prediction is kind of a no-brainer, but it will be something that we should see in 2010.

• Video adoption and usage will continue to grow in common use, particularly the use of low fidelity computer-to-computer video.  This growth will outstrip adoption of high fidelity videoconference rooms and the like as people simply want to talk to one another.

• CIOs will gain greater responsibility for corporate performance management by leveraging their ability to analyze operational data to answer more complex questions than reporting information contained in a data warehouse.

• A major company, one with revenues greater than 8 billion dollars will make a significant move in to Cloud Computing by putting their infrastructure in the hands of a public cloud.

• The cloud services marketplace will see the collapse of one of its service providers and consolidation among mid-tier players.

• Twitter will continue to flourish, but it will lose some of its cache in the popular media.  This would be a welcome sign as everything ‘tweet” related has been overhyped this past year.

These are just a few thoughts and ideas, no guarantee that they are accurate or will actually come pass, but predicting is fun.  What do you think we will see in 2010?

On a personal note, I want to thank everyone who has been reading the blog this past year.  January 7^th will be the one year anniversary of the blog, so please send along comments on what you would like to see discussed.

Remember what Yogi also said – the future aim’s what it used to be.

CIOs faced the need to balance increased demand for IT services and solutions at the same time IT budgets were cut more than 10%.  In the face of these challenges many CIOs showed their business acumen and leadership – restructuring IT and how it works to enable it to work smarter rather than just working harder.  This required CIOs to do more than just ‘dehydrate IT’ removing money in much the same way that they remove water to make instant coffee.

CIOs at these enterprises have changed IT and the nature of its work.  These CIOs are well positioned to lead the enterprise and IT as the economy transitions from recession to recovery.   These CIOs should take pride in their achievement and reposition IT and its contribution in the enterprise.

Here is my wish list for CIOs for the coming year.  Just a few things that I hope CIOs will be able to get to continue their success in the coming year.

• The ability to enhance the skills of their personnel both in terms of their business acumen and technical skills.  People are the most important determinant of IT success and CIOs should give themselves and their teams the gift of great skills.

• A clear set of priorities from the business.  IT cannot be all things to all people at all times and without a clear set of enterprise priorities, IT resources are fragmented limiting IT’s positive value in the enterprise.

• Strong collaborative relationships with their business partners and service providers.  About half of the IT budget on average is committed to these relationships and many CIOs have commented that service levels and performance has declined in the past few years.

• A new financial and metrics model that reflects IT’s business contribution rather than its budget consumption.  IT has evolved dramatically since it became part of mainstream enterprise operations.  However, IT financials remain largely stuck in a 1980’s view of controlling capital and operating expenditures.  CIOs need a new model that reflects IT’s contribution to changing enterprise performance.

I am sure that there are more things on your personal wish list, but it’s a good start.  As we end 2009 I want to congratulate everyone on the end of a tough year and wish you, your organizations and your families the best for this holiday season and the coming year.

Back when I prepared my first project estimate.  I do not remember the exact number but I do remember the precision of the estimate – down to the dollars and cents.

My boss immediately rounded it up the next ten thousand dollar level.  When I asked him why, he said it’s a good round number.  The lesson was carrying out estimates to the penny gave a sense of false precision.

Well the opposite it true.  Nice round numbers can also be a sign of weak management, particularly in terms of setting sales, operating budget and other financial goals.

We all saw this in 2009 when people were asked to cut their budgets.  How much?  Lets start with 10% — after all everyone can find 10% ‘savings/waste’ in any budget.  If that’s true then you do not have very good managers and a poor planning process.  Weak managers announce across the board cuts treating everyone the same.

Good managers define a goal in terms of the dollar amounts needed and the changes that can create those changes.

The same goes for revenue goals.

Think about your goals for next year.  If your goal is to increase revenue by 3.5% or to grow it 2% faster than the economy consider yourself lucky.  Chances are these goals are based on real thought and understanding of the marketplace.  It is more than likely that there is a plan attached to such a goal outlining which customers, markets, geographies you should go after.  All of this supporting material tells you that management knows what its thinking about.

Contrast this with the goal to grow the business by 10%.  A nice round number, but one that has little meaning, even less analysis and about as much forethought as standing in front of the refrigerator with the door open wondering what you will have for a snack.  This is what makes a round number a sign of weak management.

Now you might say, giving a team a goal without defining the means to achieve it is ‘empowerment’.  My simple reply is yeah right, its not.  This is blame storming which is another sign of weak management.  This is particularly the case when you ask if your operating/ investment budget is allowed to increase by a close to similar amount.  If the answer is no, then you know that senior management – the goal giver – has either no understanding of the goal, no faith in you as a manager, or does not care about sustained success.

Nice round numbers make sense when they combat the weakeness of false precision and remind people that we cannot know things with certainty.

Nice round numbers become a sign of management weakeness when they become targets to throughout without forethought or planning.  Their round so they are easy to grasp.  They are tempting for weak managers and weak management teams.

You can combat nice round numbers in several ways:

• Ask what the real target is in terms of dollars/euros and cents – what is the real goal you have to achieve not a round percentage?
• Ask which drivers need to change to achieve the goal.
• Ask about the logic behind the target, the resources that will be committed to making the goal?

These sound like simple things but often we are put in the position of ‘goal taking’ rather than plan and sense making.  One of the signs that you are taking a goal is that nice round number.

What is your experience?

How do you respond to when your given such a goal?

I was talking with a CIO about how they planned to rationalize their application portfolio.  They simply had too many applications.  The CIO wanted to reduce duplicates where possible and eliminate un-used applications wherever possible.  The result would be a reduced set of applications delivering more consistent services to the business at a lower cost, risk and support requirements.  The results seem pretty straightforward and very results focused.

The CIO talked about the process they would use to decide which applications to eliminate.  It involved a logical but lethargic set of inventorying and assessment activities that create lists that are prioritized and then presented to a steering committee to make final recommendations.  This type of process, conducted across the entire application portfolio was pretty resource intensive and therefore expensive, but the potential benefits were significant.

The CIO conducted a pilot reviewing about 10% of the portfolio – more than 700 applications.  The results of the pilot were mixed with only about one in ten applications reviewed facing termination.  The CIO said that the pilot worked and in the coming year they would review all of the applications.

When I asked if they expected that 10% termination rate to continue?  The answer was no, actually the rate should go down to less than 5%.

A 10% termination rate would just barely make the business case; a 5% rate would not.  This begged a follow-up question, and then what are you going to do?

The response was, we will conduct the review because that is what we said we would do.

The CIO and their team valued conducting the activity in its own right, versus recognizing that the activity would not achieve the result they hoped for.  That is an example of valuing activities over results.

Now you can argue that there is value in retiring 5% of your applications, there is value in going through the process of inventorying and grading your applications and there is value in showing the business IT’s willingness to manage its cost structure.  However, there is also value in finding another way to get the intended cost savings as this technique while operationally sound is not economically effective.  There is also value in the activities that are being postponed because IT and business resources are reviewing applications – the vast majority of which the decision is ‘no decision.’  Finally there is reputational value in the CIO and IT executive team showing that they are willing to go after results not just execute planned activities.

A results oriented CIO and IT organization would balance these alternative values in the decision to continue with this process, rather than simply moving forward because it was in the plan.

This is just one example of IT valuing activities over results.

Why is this important, well think about what the decision to continue activities that are not going to get the intended results says about IT to its business peers?

Leading IT according to resource management bases IT strategies on an either/or paradigm.  Either IT creates value, fueled by increased budgets and investments; or IT cuts its own and enterprise costs to meet falling budget levels.  Such a binary strategy isolates IT from the rest of the enterprise, giving rise to thinking about IT as a set of purchased commodity services, rather than a view of technology as a strategic resource.

CIO experience in the past decade shows the limitations of continuing an either/or based strategy. The first decade of the 21st century has been a tough with two recessions, mediocre IT budget growth and increasing pressure on IT as a commodity service.  These factors, among others, indicate that current IT models are losing their potency and relevance.  Executives and CIOs want and need a new model for IT.

Leading for results defines a new strategy based on a both/and paradigm.  In 2009, leading CIOs proved that IT could deliver both cost reductions and innovation breaking the either/or nature of IT.  In 2010 enterprises need both in order to deliver current results and position themselves for the recovery.

In a recovering economy, enterprises need both productivity and capability.  They do not want to, nor should they be forced to choose either one or the other.  IT can deliver both by managing results in a coherent strategy that recognizes the differences between productivity and efficiency as well as the differences between capability and commodity services.

Managing resources established IT’s role in the enterprise operations.  Managing results extends that role and makes it strategic to information-based and business process centric strategies.  The CIO that delivers both productivity and capability strengthens the enterprise and IT’s role in it.  A CIO delivering either one or the other leaves the future of IT to business choice, competition and chance.

Seems that they did not see IT’s health based on the capital replacement cycle as something that was sustainable

That got me thinking, what if we have an IT-Less Recovery?

Everyone is looking for signs of economic recovery and wondering what the recovery will look like.  Economists are talking about the shape of the recovery.  Will it be “V” shaped, “W” shaped, “U” shaped or “L” shaped?  By the way the last shape means that there is no recovery.

Executives are talking about where growth will come from in terms of increased consumer spending, business investment, export demand, etc.

Most people believe that the recovery will be jobless, particularly in its early stages as investment and hiring lag an uptick in economic activity.

The same thing can happen with IT, particularly this time around for the following reasons:

• IT investment levels generally lag an economic recovery by a year in a normal recovery cycle.  This may be the case particularly this year as CIOs predicted the recovery to come in the third quarter of 2010 – which means that investments in growth will not play into the IT budget until 2011 or 2012.

• Companies have most of the core IT systems they need to transact business in a growth environment – this limits the need for IT investment in new systems to support growth.

• IT organizations are virtualizing their IT infrastructure to gain greater capacity  – limiting the level of required infrastructure investment as server capacity utilization increases.

• Companies have the option to acquire new applications and functionality through alternative delivery models like Software as a Service, which shifts resources from IT and to service providers.

Not all of these things will happen at the same time, with the same intensity for every organization.  But its clear that IT is in a different state at the edge of this recovery than its been in the past.

The possibility of an IT-less recovery needs to figure into CIO and business plans and reshape the nature of IT investment and its role in the enterprise.

The leading IT journalist is right, IT investment will increase because infrastructure will wear out, capacity consumed, and failures occur.  CIOs should not wait for an upturn in the infrastructure investment cycle.  That re-enforces the view that IT is a commodity and begs the question when the infrastructure should move to more scalable solutions.

The potential for an IT-less recovery is real and its potential to persistence into 2011 will confound IT leaders looking for traditional IT investment cycles.

Do I believe that the relationship between business growth and IT is broken?

No,

But, it is changing based on the evolution of technology, the success we have achieved over the last 10 years, and increasing business leverage of information and technology.

Understanding these changes will be crucial in defining the next stage in enterprise and IT evolution.

The BBC World Service is an example as they are using Face book as their primary customer engagement application.  BBC World Service announcers routinely ask questions of that audience as a follow-up to a particular story.  For example, a story on elections in a country is followed by the closing “What do you think?  Tell us what you are doing?”  The announcer closes these statements with ‘go to our page on Face book and have your say.”  Latter in the program the announcer provides feedback by reading posts as a way of showing that BBC is paying attention.
There are multiple lessons from BBC’s use of Face book around how to engage consumers of broadcast media and create a loop that builds stickiness.  But, the lesson for this post is about the choices the BBC made in creating the applications it uses to engage its listeners on a global basis.

Notice what they did not choose to do.  They did not choose to build a proprietary or custom system to engage customers. The BBC did not choose to purchase and install package software to manage these customer relationships.

The BBC decided to lease, ostensibly for free, their major customer engagement platform from Face Book a company that did not exist 5 years ago.  BBC does not own Face book, or control the technology that drives the site or their page.  The BBC chooses not to engage their internal IT department to provide this service in a significant way.  Check it out on Facebok BBC World Service

The BBC chose a lightweight technology.

This gives the BBC ready access to an audience that does not require extensive customer acquisition or training costs.  They are getting consumer-engaging functionality that is broadly available on a platform that customers already know and many already use in as part of their daily routine.

In other words they are getting the functionality they need at a radically different cost structure.  Lightweight technologies have a unique value proposition from a customer, revenue and technical perspective

The BBC World Service provides a ready example of what will increasingly become possible as executives exercise their choice and choose lightweight technology.

Collins defines five stages of decline prior to the company’s failure.  Thinking about these characteristics it should be possible to provide insight into changes in the enterprises attitude and use of IT that would be indicative of these stages.  This is more of a thought experiment than a detailed analysis and it builds on the materials published in the book.  So with thanks to Jim Collins and apologies if I get it wrong here goes.

Stage 1: Hubris born of success – A stage where company success and momentum insulates companies from poor decisions or the loss of management discipline.

Hubris in IT can manifest itself in a breakdown of investment and technology management disciplines.  Executives approve IT investments based on belief or without rigorous business cases would be an indicator of operating in this stage.  This is particularly the case for investments that do not support the company’s core business.

Stage 2: Undisciplined Pursuit of More – Follows the first stage with the company overreaching in order to drive growth and expansion.  In this stage, the company expands too fast, outstripping their operational and management capabilities.

IT’s pursuit of more is seen in multiple and competing business unit initiatives pursuing growth.  Without discipline rising investment levels do not take into account increasing complexity and cost which executives assume will be covered by increasing revenues.  They are a symptom of the second stage.

Stage 3: Denial of Risk and Peril – a rise as there is a disconnect between early warning signs conflict with external signs of continued success.  This is the characterization of stage three as the realities of expansion catch up with the rising cost, complexity and exposure to market forces.

From an IT perspective, this stage represents a widening gap between lagging financial indicators and leading operational and market metrics.  CIOs entering this stage will see their IT budgets shift away toward increased focus on current operations as support requirements consume resources.   Executives will begin to doubt the ‘value of IT’ as they challenge the need for costs that seem to be rising faster than revenues.  Cost cutting efforts in general and outsourcing in particular may be common as companies look to change the cost of maintenance and support without reducing requirements for this type of work.

Stage 4: Grasping for Salvation – occurs when the reality of the company’s situation can no longer be attributed to other factors.  At this stage, many organizations reach for a vision or radical transformation to reverse their circumstances.

For IT, this stage is the realm of transformational change wrapping radical operational improvements in new systems and processes.  The hope is that change will erase systemic weaknesses using a single integrated application system and infrastructure.  Such sliver bullet solutions mobilize IT resources, giving IT an apparent new relevance coming from the prior stage.

A company may go through multiple attempts at transformation initiated either by waves of new executive leadership, or changing attitudes and strategic visions.  According to Collin’s findings, transformations that bring the enterprise back to their core business model and disciplined management have the greatest chance of success.

Stage 5: Capitulation to Irrelevance or Death – occurs based on the number of years spent in stage 4 as each transformation and false start erodes both financial performance and associate moral.  You can think of Stage 5 as being a period when the company is that last to know that it has lost its relevance.

For the CIO and IT, this stage can seem similar to stage 3 as management takes whatever actions it can think of to improve performance – often in the form of cutting IT costs, outsourcing, and the like.  Talent is the big difference in this stage as good talent knows when its time to move on.  CIOs in stage five report challenges attracting and retaining market leading talent – leading to reduced expectations for IT.

The progression through these five stages is not inevitable.  As the CIO or IT leader you are perhaps the first to see the operational breakdowns associated with moving from stage to stage.

Recognizing these changes and highlighting the situation is part of your contribution to the executive team.  Do this by making the general characteristics and descriptions operational clear and explicit.

Here are some thoughts on how to look at the last 60 days.

• The business impact of IT is already 90% locked in for 2009, so if you were expecting to have a big business impact finish in the fourth quarter then you should have deployed those solutions no latter than the end of the second quarter June 30^th.  If you are hanging your hat on a major release in the next 60 days – recognize that all of that business benefit is coming next year.

• You need to triage the work your team is doing right now to make sure you are delivering the most important priorities with the scarce time you have left.  Now is not the time to be having resources chasing down small projects, things that do not matter, things that will become business irrelevant.  If you still have three or four significant projects out there for delivering in 2009, cancel all of them that are more than two weeks behind schedule and divert those resources to the most important stuff you need to deliver.

• Tie your remaining work to the core drivers of the business.  What are you doing now and how does it relate to revenue, customers, free cash flow, reducing capital, building capacity and creating capability.  What is the change in business performance based on IT?

• Start your messaging for IT’s accomplishments now.  In your status meetings, in your conversations with IT professionals point out the work you have done, the value you have created.  You are going to need that recognition and motivation for the final push.

• Validate business expectations for your 2009 accomplishments and the expectations for 2010.  This can be a bit tricky, but you need to anchor the business in what IT has done, because for all practical purposes the year is over from a business perspective.

• Lay the foundations for a fast launch for 2010.  Look to connect current work with the revenue, customer and operational goals for 2010.  You know those goals in some detail now; position the work you do now for when it will really have its benefit – 2010.

• Take a hard look at your organization, its productivity, its flexibility and the fit with the anticipated challenges in 2010.  Use these remaining days to get your organizational muscle stronger, and get your organization in the right position for next year.  That may require some tough decisions, better you make them now, than have them made for you.

• Finally, recognize that these 60 days fall in the middle of significant holidays around the world.  Make sure your reserve some time for you, your personal life and family as these things will be there well after the 60 days are done.  Make sure your people are doing the same.  After all its only work.

2009 has been a tough year and one of budget cuts coupled with increased demand for IT.  The focus of leaders is always on results and the time to complete those results is now.  The time to be realistic is now.  The time to take the tough decisions to prepare for next year is now.

60 working days and counting

“Complexity?  Where do I put it?  I can tell you where I would like to put it!”

For many enterprises the question is just strange, as they do not think about complexity, its impact on customers or costs.

They treat the business symptoms of complexity with ad hoc solutions that create benefit but accrue complexity.

Consider the source of the complexity and the range of options you have to address it.  In many cases you can raise customer service and reduce cost by handling complexity in different ways including:

• Customers and Associates – they are assumed to be a source of complexity, but actually people are the most flexible resource. We do this when we fundamentally do not trust customers or our people.  They are best able to manage situational complexity where work is not structured or has routine patterns.  Use human adaptability to simplify business processes, products and systems.  This has been part of the success of Nordstrom and Amazon.

• Produces, services and channels – accrue complexity like a runaway credit card accrues interest.  Viewing products in isolation creates almost overlapping features, functions and marketing programs.  Executives accept complexity all in the name of revenue believing they can maintain margins by squeezing operations.

Product simplification not only reduces complexity but also raises the quality of revenue, customer service and cost structures.  British Airways and Tokio Fire & Marine each simplified this aspect of their business with significant results.

• Business Processes and Products – create complexity when they become a means of management control rather than creating customer value.  The result is elaborate processes, multiple exceptions and complex decisions.  These are hallmarks of complex business processes.  Business process complexity can be reduced through re-engineering and transitioning processes into reusable services.

• Business process complexity is a symptom of complexity in other aspects of the business.  We learned in the 90’s that a bad process, re-engineered at best shifts the problem to another process – moving rather than resolving complexity.  In these cases, go to the root cause process complexity.

• Measurement and Incentives – manifest complexity, as people want to be measured for the work that they do, not what everyone else does.  This creates conflicting or competing measurements.  Cut through them by establishing enterprise wide metrics with different performance targets for associates.  This will get you back to the basics and eliminate overlapping activities and management overhead.

In general, put complexity where it makes the most sense, not where you feel a short-term pain.

• Look first at the root case – often associated either with product/channel complexity or poor workforce skills.  Address these points with product simplification or simply giving your people the skills they need.

• Resolve complexity with simplification and scale by eliminating redundant practices, old business rules and duplicate IT systems.  Taking these actions concentrates business activity into the right operations raising service levels and skills.

• Change IT system last, unfortunately this is the first for many executives, as writing a check and setting complexity in silicon is the easiest thing to do.  Instead of creating new applications and specialized workflows executives should look to break business activities/decisions into fewer large grain business services.

Complexity is taken as a given in modern business.  Multiple products, customer segments, operations – that must be complex.  This is a reality for executives who address issues in isolation.  Take a step back and ask – what is causing the complexity?  And if we have complexity where should we put it?   Your customer service and cost structure depend on the answer to both questions.

While the issues may not be surprusing, the themes that emerged from the discussion shed light on the changing nature of the CIO’s role, the realities of IT and the challenges faced by the enterprise.  Here are a few thoughts based on the ensuing three hour conversation.

• CIOs are executives and they were more interested in the management of these issues rather than their specific solutions.  The role of the CIO has grown from being head technology expert to lead executive of the IT group.  This is shown by the degree to which CIO saw business and IT leadership and management as an area of strength.

• IT’s operational requirements are rising, while its strategic potential remains unchanged.  Despite those who say that IT does not matter, the degree to which it is engrained in the day-to-day business continues to grow in depth, complexity and criticality.  This is seen in the CIOs view of infrastructure and infrastructure management as a strength.

• IT and the enterprise does not recognize its unique position as the only cross functional organization with direct operational responsibilties.  An understnding of why IT can be both a major source of leverage and under constant service and cost pressures remains rare.

• Emerging technologies are interesting but not integral to enterprise and IT success.  The market for hype remains strong and it continues to generate skepticism.  While the CIOs were interested in new technologies, most recognized that they were updated models of things that already exist.

Specifically around each of the major issues here is a short summary of what the CIOs discussed:

• Security is a two part issue.  The more important of the parts is increasing demands on information sharing and security.  As collaboration demands increase, the need to share the right information with the right people rises faster in complexity.  This coupled with legislation concerning information such as the U.S. Patriot Act further complicate this issue.  The other part is simply the continued pressure to keep systems secure, protected from attack and the increasing sophistication and frequency of those attacks.

• Economic conditions are pulling CIOs in two directions at once.  Cost management and cost control remain high on the list.  Most of the CIOs in the discussion had already done first or second rounds of cost cutting so the discussion turned to how to restructure IT.  Innovation was the other direction as IT faced increasing demand for new and updated solutions to reduce business costs and create new value sources.

• Collaboration and social networking is fast rising on the CIO list of issues.  There is near universal desire to be more collaborative within the enterprise and CIOs recognize the potental of these tools.  However, this new style of computing – the wiki-Facebook- blog approach works in ways that traditional IT practices cannot handle.  This creates stress in the IT organization and user community.

• CIOs see their contribution to these issues as providing the personal and organizational leadership.  Rather than diving in themselves to address the issues personally, CIOs relayed stories of how they established leadership processes that focused the enterprise and IT organizstion, reduced organizational friction to get the right people on the project, and measured and monitored the results.

Perhaps what was the most surprising was the fact that the discussion did not turn into a complaint session of everything that is wrong with the CIO role.  There was no group pity party, rather a gathering of executives working through the complex issues they face in IT as well as in their enterprise. More detail on these aspects in latter blog posts.

As things turn around and IT demand increases, the threat of commoditization will return.  It is an argument that is now a red herring.  The issue facing CIOs and IT execs is not commoditization, but choice.  Not their choice, but the increasing choice business executives have and will have in provisioning IT services and solutions.

Business executives have unprecedented choice.  A scant ten years ago, the captive IT organization was about the only game in town for a business that wanted to innovate with technology.  Since that time, venture capital and technology companies have invested billions to create technologies that create alternative approaches to the traditional IT organization.

It is ironic.  Technology companies have used funds generate from traditional IT to create solutions that challenge traditional IT.  I am talking of course about the increasing capabilities of cloud, software-as-a service, managed services, other service based computing models and other alternative delivery models.  This should be expected as solutions that bypass traditional IT enable tech companies to address the business directly – a larger potential profit pool than the IT budget.

So what is a CIO to do?

Forget about becoming a commodity and think about how the business chooses you as the preferred provider of technology solutions.  Leading from the fear of commoditization is a race to the bottom defined by best value in terms of lower price/performance ratios,

Leading from the perspective of choice requires more.  Think back, you did this to some degree when combating outsourcing threats by pointing out your lower overall costs, the things that you did cheaper than the outsourcer, the things that no outsourcer would do, etc.  However, combating the outsourcing threat was more of a commoditization argument – particularly if concerns about “security and risk” were used in your argument.

Being the option of business choice requires a positive decision based on a positive argument not one driven by the threat of risk or loss.  That requires CIOs to do the following:

• Commoditize the stuff that does not matter, the things that are not essential to driving scale or speed in the business, the things that do not contribute to competitive advantage or capability.

• Concentrate on raising IT productivity from two perspectives:  the business power/impact of your solutions and the resource efficiency involved in creating these solutions.  Business choice is driven by the value you create which needs to be greater than the prospective value offered by your commercial competition.

• Give the business an experience working with IT:  impressions matter when choice is on the line.  Commercial competitors get to hide their mistakes you do not.  That means that how you do your work, how the business feels about working with you are important factors in business choice.  Think about how you work with your customer and if someone treated you that way – would you choose to work with them in the future?

• Be frugal in every aspect of IT: every enterprise is under pressure to manage cost regardless of economic conditions. Being frugal demonstrates that you are spending the company’s money as if it is your own.  This means looking for ways to reuse components, reduce cycle times, and gain greater leverage out of your technical and other resources.  Don’t be cheap, which plays into the commodity argument.  Recognize the difference between cheap and thoughtfully frugal.

With global corporate IT budgets declining an average of 5% and many CIOs saw cuts of 10% or more.  CIOs predict a tight budget year in 2010.  This raises the question of what IT will look like when the recovery comes.

Now that economic conditions are starting to stabilize, CIOs are taking fresh look at their IT organization, its capabilities, capacity and productivity.   After taking on significant budget cuts, freezing staff levels, deferring maintenance and taking other actions, CIOs have to ask have they cut into IT muscle and bone.

It’s a critical question, because few if any CIOs believe that IT budgets are going to return to double-digit growth rates.  If resources are not returning to IT, then the question is what kind of IT will the CIO lead in 2010 and beyond?

CIOs who changed their cost structure to boost productivity and efficiency through changing the way IT worked are less at risk.  They restructured IT matching resources with revenues raised their productivity, and supported IT capability, capacity and credibility.

CIOs who responded to requests to cut their budgets by cutting based on budget categories cut spending without changing cost structure.  You have likely bombed IT back to the ‘data processing age’ as that is about all the resources you have left.  For example, supporting infrastructure, maintenance, break-fix and minor enhancements.

Bringing IT back from the data processing age requires rebuilding capabilities, skills, trust and skills.  Those things all cost money, which will be unlikely to flow into IT until there is a major performance failure – the kind that triggers an IT turnaround.

Should you be worried about that?  Not really as the first step in a turnaround typically relieves the CIO and IT executives of their responsibilities.

That’s great but what about those facing a recovery as refugees.  That may be melodramatic but what can they do now?

Start by using the last three and a quarter months of the year – the LAST 68 business days of 2009 (counting from 9/21/09) to implement the process improvements, restructure governance decision-making and re-organizing IT to work smarter rather than harder.

This can take the form of charting an IT productivity group, to giving each employee 5% to work on teams to improve process performance (Link) You have to increase productivity if you hope to restore your capability, capability and credibility.

That will be tough for those who answered the mail, as they will be tempted to scramble in the last quarter to deliver something.  However, the heroics of doing ‘more with less’ are not sustainable compared with driving core productivity improvements.

Which matters more, pulling some last minute miracles that only prove that you can still get results by starving IT resources, or concentrating on changing the way you work from working harder to working smarter.

This blog entry recaps each of the trends with the first bullet a summary of McKinsey’s view of the trend and the second a summary recommendation.  The details are in the individual blog posts that are cross linked to the title of the trend.

Globalization is under fire - a declining trend

• Increased protectionism and reduce global trade are reducing the global flow of people, goods and services – according to McKinsey.
• IT is a global industry with global networks of suppliers and customers that does not seem to be slowing down.

Resources Feeling the Strain - a stable trend

• While resource and commodity prices pulled back during the recession, the fundamental forces driving these prices have not changed.
• CIOs need to be at the core of enterprise productivity improvement initiatives where they can use information, automation and technology to change resource consumption patterns, improve resource productivity, and operational excellence.

Trust in Business is Running Out - an accelerating trend

• The recession, its root causes and other factors have eroded consumer and public trust in businesses which raises the cost and lowers the brand value.
• Trust is information-based and use IT to communicate, deliver and demonstrate your ability to help consumers form and evaluate their expectations for your products and services.

A Bigger Role for Government - an accelerating trend

• Governments have played a significant role in stimuluating the recovery and re-regulating industries. Do not expect them to shrink back from these roles.
• IT will be at the forefront of an expanded public sector, either in the form of new systems to support new programs or additional regulatory and compliance requirements for enterprises.

Management as a Science - a stable trend

• Information and decision support technologies will continue to transform management and prevent the ‘decisions’ that led to the financial crisis.
• Management will replace the transaction as the primary focus of IT which will need to bring social technologies and web 2.0 to change the way we manage.

Shifting Consumption Patterns - an accelerating trend

• Consumption patterns are shifting as U.S. consumers pullback in the face of recession and debt in favor of Asia countries and older consumers.
• Use IT to reach Asian and other fast growing markets (see trend below) as well as inject information and technology to improve the access and usability of products and services to the 50+ crowd who still has the resources to sustain consumption.

Asia Rising - a stable trend

• Asian economies continue to rise in importance and growth as both a supplier and consumer. They will become about a quarter of the world economy dominated by India and China.
• Asia is not one economy or even one region. Use IT to ‘lighten’ your Asian business model to address the specific cultural, geographic reach, and supply chain considerations.

Industries Taking New Shape - an accelerating trend

• Industries are changing in the face of the recession that widens the gap between strong and weak rivals and continued disaggregation of industry structures. This requires a two tier strategy: seize immediate opportunities created by the recession and look for ways to redefine the industry in your favor.
• CIOs need to concentrate on raising enterprise effectiveness through raising IT effectiveness as company’s that are able to achieve their goals are the ones able to reshape the industry.

Innovation Marches On - a stable trend

• Resist the initial desire to cut back on R&D in the face of tough economic times. Rather continue investment, even through operational cuts, as innovation separates companies when the economy comes out of the recession.
• CIOs need to concentrate on raising IT productivity in order to be able to response to a diverse set of opportunities at speed and scale. Without increased productivity and reduced cycle time, IT becomes a bottleneck for innovation.

Price Stability in Question - an accelerating trend

• Economic forces are at play with a high probability of changing price stability either leading to inflation or deflation.
• IT recommendation: regardless of the direction firms need to build their pricing power using information and technology to better target, engage and meet customer needs.