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With all the hype around “Big Data,” we explored CIOs’ perspectives on this topic in recent IT Odyssey* interviews. While most IT leaders acknowledged the potential value of customer and supply chain analytics, many questioned the return on their current (and past) data warehouse and business intelligence (BI) investments. We believe that before aggressively engaging Big Data, CIOs must better increase the yield from current information and BI investments.
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A restaurant industry CEO bemoaned, “IT is under siege from users demanding more data, better information (whatever that means) and more BI tools. We already spend a fortune on data warehouses, our proliferation of data marts and over 100 analytic tools someone had to have. While people tell me about individual great insights, only two execs have consistently proven real, measurable economic benefits produced by all this expense. Now they want something called ‘Big Data.’”

Over the past year, CIOs interviewed in IT Odyssey were asked which IT investments have had the poorest return. Over 35% named their data warehousing/data mart and business intelligence efforts (DW/DM & BI). Another 30%+ felt they didn’t know if these relatively large investments were paying off. Both these groups could cite individual efforts with positive business return but questioned whether the broad level of investment was justified.

The final 30% was more varied. Some felt providing DW&M & BI was a necessary cost of doing business. Others declared that such investments had brought a spectrum of dramatic returns and game-changing differentiation such as the following:
- A manufacturing division saw a 10%+ gain in revenue and a 30% increase in profit by targeting an enhanced product, pricing and term offering to a customer subset.
- A distributor found 15% of its “prized” customers had TCO costs that had grown faster than revenue.
- A retailer cut inventory and working capital by16% + and increased revenues in certain markets at certain times of the year.

Four Barriers to Increased Yield
A manufacturing CIO said, “With a mandate to do more with less, we have to examine every IT expense. Dashboards have given management insight. BI has given logistics great value. But despite 20 years of efforts with massive data stores and analytical tools, we can’t show broad return. Given our spend, something has to change.” Such a typical concern begs the question of why more enterprises aren’t getting better returns.

CIOs describe four barriers to greater yield:
1. Bad or conflicting data: Most enterprises still lack comprehensive master data management; mergers and reorganizations have left the inherent data resembling a flea market bazaar. Limited confidence in the data’s origin or meaning too often leads to real truth searches rather than exploring meaningful insights.

2. Data and information isn’t in the culture: Some organizations have strong information or data decision cultures. But many successful companies or functions base actions on social collaboration, relationships, experience, inherent knowledge, or process. Increased use of data requires major behavioral change.

3. Analysts aren’t driving business decisions: Many companies have highly skilled analysts, management accountants or strategists who examine markets, products, customers, costs, engineering, manufacturing, etc. But these people often have limited influence over daily business decisions, or they don’t understand the nuances at the practical level.
4. Decision makers don’t have the time, understanding or inclination: Years ago, banks wanted tellers to access customer profile data so the teller (who had no idle time with customers in the queue) could cross-sell the whole bounty of financial supermarket products. But the experiment generally failed because there was a mismatch between the way the data or analysis was made available and the workflow of the tellers and customers. In many cases today, the way the data is presented doesn’t match the way that deciders act or make decisions.

A distribution CIO lamented, “Vendors showing business executives fantastic insights based on neat tools that mine vast databases is like passing catnip in front of a cat. The ITO builds and maintains the DW/DM & BI. Unfortunately, most users dribble in and out for a few months. The company is left with a major expense, orphan efforts and only a few winning stories.”

But given the positive returns some companies have realized, CIOs must either assign resources to get a higher return by addressing the barriers above or begin a process to rationalize DW/DM & BI investments.

Strategies that aren’t viable include: continuing business as usual, abandoning such efforts, assuming the influx of digital natives will embrace DW/DM & BI, or assuming there will be a new Big Data panacea. While further training or awareness is often mentioned as a remedy, few CIOs felt their training regimens had achieved a lasting impact.

CIO CALL TO ACTION
Of the CIOs who have DW/DM & BI concerns. those who feel they are now making progress on increasing yield suggested the following practices:
• Examine the situation (in a constructive, non-accusatory manner) with senior executives, business leaders, analysts and involved vendors to build awareness of the DW/DM & BI expense, and potential vs. actual returns.
• Perform a use and yield assessment across intended users or functions to determine which DW/DM & BI activities are adding value and which have issues. Break the assessment down by intended user and data segments. Identify specific barriers, such as those mentioned above.
• Do a triage assessment to determine which DW/DM & BI activities should be dropped, scaled back, enhanced or accelerated. Eliminate some of the data garbage and BI tools (via portfolio management) that have accumulated for the past 20 years. This requires a major initiative and support from senior execs, the CFO and business leaders.
• Introduce the concept of charging a “yield” surcharge on DW/DM & BI activities that pays for the ongoing training, mentoring and promotion of analytic activities.
• Modify the format and style of the DW/DM & BI efforts to better connect them with the ways decision makers actually do their work. Examples include tying the DW/DM & BI efforts directly to business leadrs’ workflow or providing the capabilities through mobile devices.
• Organize mentoring teams to accelerate the use of intelligent analytics.
• Provide incentives, rewards and recognition for successful approaches.

Bottom Line
Assuming that people will actively use the DW/DM & BI capability is naïve. This resource must be viewed and managed as an IT-branded service with the proper level of support, promotion and financial evaluation.

Business Impact
Intelligent analytics can have a dramatic impact on enterprise success, or it can become a major under-contributing expense. CIOs must work with business unit leaders to develop a measurable benefits realization program, which should improve enterprise outcomes – i.e., revenue, market share or profit growth, or deeper customer engagement.

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*IT Odyssey: Each year, Bruce J. Rogow independently conducts face-to-face visits with more than 120 IT executives under the banner of his company IT Odyssey. As a Gartner Executive Programs affiliate, he summarizes his observations and thoughts based on what he is hearing.

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During a recent community event held in Austin, Texas, CIOs gathered to discuss how they govern their application portfolios. They discussed their current governance processes and considered introducing pace layers (a Gartner concept for managing core vs. differentiated and innovative business applications) to more effectively govern investments that differ in delivery approach and impact. The discussion revealed one key finding: CIOs tend to use multiple methods of governance but not for the reasons we expected.
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IT governance is often focused on matching enterprise needs to IT organization (ITO) capabilities. With limited resources, prioritization of ITO effort is necessary to determine where (and how) available funds will be invested. But all requests are not created equal.

Many of these CIOs described how they prioritized large capital projects or regulatory efforts above innovative or differentiated efforts due to pressure from senior business leaders. In their organizations, innovative applications continued to lose the battle for resources because a quantifiable business case was not apparent.

The Gartner Pace Layer Model (see “How to Use Pace Layering to Develop a Modern Application Strategy”) was designed to recognize differences related to speed-to-market, agility, investment levels and other characteristics. By segmenting efforts into Systems of Record, Systems of Differentiation, and Systems of Innovation, organizations can be more responsive to changing business needs. But these segments require different governance models.

Struggling to Govern
As we introduced this topic to the CIOs in Austin, we hypothesized that organizations using multiple governance models had learned how to adapt processes to these pace layers. In polling the participants, we learned that nearly all were using multiple governance models to manage their application portfolios. Further, the CIOs revealed that they employed different processes, architecture, funding, development practices and levels of business engagement in managing resource portfolios. But none had segmented their portfolios into the pace layers we described. One CIO said that multiple governance methods had been introduced through mergers and acquisitions, business unit autonomy, silos and other avenues. All the CIOs were struggling to gain effective control across these methods but continued supporting their business users. “I let these different governance models remain unchanged,” said one of them, “but I need to get them all talking to each other.”

Less, Then More
All the CIOs acknowledged the need to govern differently for systems of innovation. They acknowledged that innovations typically need to launch quickly, use new architectural platforms (e.g., Web or cloud) and leverage agile development techniques with or without the involvement of the ITO. Investments might cost less, and funds might be dispersed in smaller increments with less return on investment focus. They also acknowledged that innovations require different processes because business customers often view the ITO’s governance processes as overly cumbersome. “We shifted to agile development processes two years ago to focus on innovation and rapidly changing business models,” said one of them.

The CIOs were excited by the concept of pace layers to help them achieve effective governance. They realized they could introduce new and more flexible governance structures for innovation and differentiation by segmenting their portfolios and implementing one strong governance model to address systems of record. Taking this approach would enable them to achieve the control they need for traditional systems, while gaining the enterprise’s confidence and trust in delivering innovation.

But achieving this goal requires a fairly high level of organizational maturity (with respect to governance) to manage these variations. Since CIOs are struggling to manage multiple models that have evolved in their organizations, they must first focus on implementing strong governance for their systems of record. Then they can address governance in other layers.

CIO CALL TO ACTION:
CIOs should do the following:
• Define governance processes that are used consistently for systems of record (e.g., ERP, CRM, financial systems).
• Assess organizational maturity via benchmarking (e.g., Gartner ITScore) to determine if the organization is ready to adopt more advanced governance processes.
• Develop variants to governance processes to address systems of differentiation and systems of innovation, incorporating a greater emphasis on strategic value.

Bottom Line
CIOs need mature governance processes and segmented portfolios to achieve overall success with pace layers.

Business Impact:
CIOs who successfully work with their business partners to develop segmented governance processes can more quickly deliver differentiating and innovative solutions to drive business advantage.

Additional Insights:

• “How to Use Pace Layering to Develop a Modern Application Strategy” (Research)
• “Gartner’s Application Pace Layer Model: Governance and Change Management” (Research)
• “ITScore Overview for Application Organizations” (Research)
• “Practical Governance” (EXP Research)
• “Capability Assessment Tool for Practical Governance” (EXP Research)
• “Toolkit: Five Steps for Defining Effective Enterprise Architecture Governance” (Toolkit)