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hello and welcome to today's lecture on
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it governance I'm Dr Richard Ruth and I
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will be talking about the four models of
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it governance along with some of the
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motivation for why you want to have a
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healthy productive it
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governance process um in your company so
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we start with a
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question what are the biggest challenges
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that f face a modern
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CIO so when we start thinking about the
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challenges that face a modern
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CIO
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um there are several that start popping
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to
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mind um one
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funding is an issue a lot of it
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departments don't get the funding they
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need to have the Strategic impact that
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they um should be
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having another
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one is
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ownership and
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cooperation by the other
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cxos in the
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Company ownership of the major it
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initiatives and the cooperation from
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them them to cause those initiatives to
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become successful and used the way they
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ought to be used to get full business
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benefit out of
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them another
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challenge
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is
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participation and again ownership
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in the
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prioritization
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decisions that face the company about
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what to do with the it
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budget another challenges it faces CI
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often times is just their stature
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as a
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leader in the
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Strategic
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business
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planning activities in the company a lot
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of
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cios um don't see themselves or the rest
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of the senior leadership team doesn't
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see them
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either as a a
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full uh participating
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member of how strategic business
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planning is done in the
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company well all of
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these are
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addressed in a splendid
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Way by doing it
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governance properly
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if it governance is done properly your
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funding issues will go away you won't
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you won't be plagued with inadequate
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funding for the things that you think it
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needs to be doing in the
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future the other cxos in the company
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will be fully vested
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owners of the it initiatives that you
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want to see being successful on the part
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of the company
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they will participate with you in the
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prioritization of how it resources are
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being spent so that you're not in a
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fight with them over sorry I can't build
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what you've wanted me to build because I
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think this other thing is more important
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or I've seen it go the other way okay
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I'm going to build what you're asking me
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to build even though I know that it
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would be better for the company if I
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were building this other alternative
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system over
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here and then a lot of cios are going
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well help me out here I am really good
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technically and I've had a whole career
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in being a smart technical person and
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helping to lead the IT department to do
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the important things that this company
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needs in the IT world but I'm not my
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strong suit is not corporate politics my
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strong suit is not uh Comm communicating
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with the other cxos in the country my in
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the company my strong suit is
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not
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um building relationships that are
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Cooperative with those other
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cxos again if you do it governance
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properly this will all be history
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you'll you'll take your proper place
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with the stature that you need among
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those doing IC business planning in the
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company uh and will be a valued um
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member of that
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team okay so this is quite a
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promise this is the promise of it
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governance now the next question that we
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have for discussion here is what is it
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governance some people might Define it
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governance as just getting the other
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cxos in the company to help you
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prioritize what systems you should be
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spending money on no if that's all it
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governance is to you then I make some
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predictions basically all these won't
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work
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right if the only thing it governance is
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to you is getting the cxos together on a
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quarterly basis or monthly basis or
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however often you do it so that they can
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work
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through the priorities and help you
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prioritize which it initiatives you
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should be putting your resources into if
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that's the only thing you're doing with
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it governance you're still going to have
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funding problems major ones you're not
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going to be cultivating the ownership
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and the cooperation you need on the part
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of the other
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cxos you're not going to get them to
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really participate in a constructive way
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I mean most of them are not going to
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show up for that meeting I mean if
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you're doing this you would you will
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know that they're not coming to your
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meetings and and you won't actually have
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a very active role in this part of
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what's happening in the company so it
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governance has to be more than just
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collecting together the senior
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leadership of the company so that they
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can help prioritize and determine
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funding for major it spends what are the
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costs of it governance a lot of time on
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the part of the
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CIO some of the best cios that I've seen
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best being defined as those
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having um the greatest stature by the
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rest of the senior leadership team and
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the most impact on building stockholder
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equity in the
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company um are cios that tell me things
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like I spend about 30% of my time on it
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governance now think about that for some
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of you that would be a radical
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thought you're already putting in what
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60 hours a week maybe 70 80 in some
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cases let's just say 60 so if you're
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spending 30% of your time on it
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governance are these cios really
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spending on the average 20 hours a week
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each and every week of their lives doing
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it governance yep that's their claim and
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I would claim that's time well spent
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that that reflects proper priorities on
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the part of the
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CIO we'll justify that as we go along
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all right
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so we asked do you really believe the
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promise of it governance well probably
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not for most people viewing this video
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at this point many of the things that
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I've been promising you based on these
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initial introductory remarks you're
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sitting there with a certain amount of
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incredulity as you watch this and go I
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don't think so well been doing this a
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long time watched a lot of cios helped a
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lot of
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cios um I'm I'm telling you what my
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experience and observations
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are so hang with me and let's think
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about this together and let's see if it
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governance can't be something more than
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um what what perhaps you've been
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struggling with so
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far so what are the major challenges and
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issues and obstacles that face a typical
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CIO um or if you're not a CIO if you're
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title as IT director but you're the top
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it person in the company okay but what
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are the major obstacles that face you
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well time we've talked about
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that communication skills relationship
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building
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skills proper understanding of the
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business model the the levers and the
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business strategy a seat at the table so
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that you're part of the team who plans
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the business strategy those all become
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challenges that face a CIO you have to
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have those in order to do it governance
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properly okay the question is which of
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those challenges and
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issues and obstacles are addressed or
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resolved by proper it governance I would
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argue all of them are so here's another
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definition of it governance
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to achieve success in this information
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economy governance of it is a critical
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facet of Enterprise governance so at
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this point we see that it governance is
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actually just a
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subset of corporate governance or an
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Enterprise governance good it governance
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assists Enterprise leaders in their
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responsibility to ensure that it goals
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align with those of the business all
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right so now we've introduced this
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notion of it
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alignment so proper it governance helps
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accomplish it alignment that's an
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interesting
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realization I would argue you can't
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actually do it alignment without a good
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robust healthy it governance
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process and uh it delivers
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value we'll talk a little bit about what
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that value is again in terms of value
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here we're talking about increased
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profit profs in the company so by doing
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it governance right you going to see
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significant increases in corporate
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profits okay its performance is measured
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you won't be guessing at what those
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profit increases are you'll have
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measured them its resources are properly
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allocated and its risks mitigated okay
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so there's an interesting definition of
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it governance now question who initiates
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it governance well the answer
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traditionally is one of two people in
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the company either the C initiates it or
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if the CIO is sleeping at the switch the
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CEO May initiate it again if the CEO has
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come to you and said you need to be
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doing it governance or you need to be
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doing it better or we need to be doing
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it differently or shouldn't it
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governance be doing something for us
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that ours isn't
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um none of those are really good news
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for the
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CIO um it basically means you've got to
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do something to pretty significantly
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revamp your it governance
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process and the last question on this
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slide is who manages it governance well
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regardless of who initiated it it's the
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cio's job to manage it now there's an
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interesting website out at itgi that's
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it governance in institute.org
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um there's a lot of interesting
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information out there that you might
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find useful uh it's a good reference for
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it governance all right so I hear from a
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lot of cios when they start to get the
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picture that it governance is going to
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take a huge amount of their time and
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effort um they sometimes toy with the
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idea of well why should I go there why
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should I do it why should I make my it
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governance program that big or that
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involved um and they want to they want
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to do a sort of a skinny version of it
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well let me talk for a minute about
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being more purposeful and systematic
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about
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involving uh the line users at the cxo
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and head of business unit levels in
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taking ownership of IT projects one of
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the issues that gets res solved when you
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do that is the fact that you're going to
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get better funding
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stabilization now what do we mean by
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funding stabilization
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well how often has it been that you've
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had some very large it initiative get
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approval for funding from the CFO and
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you start into it and partway into it
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you're not very far along and the
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CFO cancels the funds or post phones
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them for another year and you sort of
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have to put that project on
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hold well that's an example of unstable
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or destabilized it funding if you're
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doing it governance rarely will you see
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that happen if ever because the CFO no
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longer is allowed to view an IT project
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as an
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expenditure instead CFO now has to view
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major IT projects
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as consensus Decisions by the company
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leadership for how investment in the
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future the company is going to be built
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makes it much more difficult for the CFO
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to zero out a budget line item on the it
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budget that way also Let's uh looking at
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the second bullet here better end user
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involvement means better system
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requirements feedback less criticism
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let's review what the life Cy
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of a major IT project looks
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like so we start
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with a business
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Concept in other words we want an IT
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system built because it's going to
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provide the following business Advantage
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it's going to make sales increase in the
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new e-commerce system or it's going to
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improve efficiencies in the way we do
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production or it's going something
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something that's valuable to the
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business that's the business
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concept right so once the business
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concept
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is um is verbalized is uh proposed you
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now do uh requirements analysis
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this is where your system analysts start
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meeting with the business line people
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and they're trying to put together a set
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of requirements specifically what is
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this it System supposed to
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accomplish this then gives way to the
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specs what are the specific
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specifications um that have that the
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software has to
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accomplish um this will list the
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features Etc all
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right this then is going
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to come up for the funding
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decisions so let's say by the time we do
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the specs we're sitting here looking at
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this and go well this Project's going to
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cost 305 million or $35 million or $350
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million I mean whatever the size of your
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company is that makes an IT project look
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like a big IT
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project um so
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now what well you go to the CFO
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sometimes at this point and the CFO goes
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what I don't have that much money what
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if I only gave you half as much so now
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back to the drawing boards figure out
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how we could reduce the specs um so that
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we can get this thing funded I mean
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however that process works in your
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company but basically this is the
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funding
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question then from here we do the
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development
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this is where the software and Hardware
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people go to work to build the
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system okay so this is where the if you
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will the coding happens to use an old it
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term then after
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development we're going to go through
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some set of
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testing now I don't want to get into a
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lot of detail here but we do
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verification we do validation we do end
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user acceptance testing you have test
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plans for that you have it's on the
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schedule you make all this happen you're
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you're verifying against um the specs
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and you're validating against the
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business requirement and the end user
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testing is trying to determine is this
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going to be acceptable to the end users
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are they really going to use
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it all right then then we go to the
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implementation phase which these days
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tends to go by the term change
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management this is the point where the
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users the intended users of this new it
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system have to change the way they've
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been doing things otherwise your it
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system becomes shelfware how do you
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manage that change how do you get the
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intended users to start using the system
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to quit doing it the way they used to do
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it and start doing it the way they are
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supposed to start doing it
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for
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example um a lot of cios today have some
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recent experience and rolling out a CRM
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system well CRM
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systems um need the customer service
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people and sometimes the salese to
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provide uh constant input of what's
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happening during the conversations with
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customers what happens if they're not
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taking the time to do that you're see
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CRM system is going to be able to
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accomplish a very
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minor uh part of what it could have
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accomplished um that would be an example
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of where change management wasn't done
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very
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well all right and then after change
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management uh we have the maintenance
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phase followed by eventually
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retirement okay so this is what the life
00:20:27
cycle looks like for an IT system now
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let me ask a question
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here which ones of these stages of the
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life cycle would get
00:20:43
better if the CIO had some other cxo in
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the company to own the project not just
00:20:52
sponsor it again we're not talking about
00:20:54
sponsorship we're talking about owning
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it this is their project and you're
00:20:58
coming along as a CIO in support of
00:21:02
their project okay so the sales guy is
00:21:06
taking ownership of the new sales
00:21:09
tracking and forecasting system or um
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the customer service guy the C if his
00:21:17
boss is a COO the COO is taking
00:21:19
ownership of the new CRM system or
00:21:22
whatever so on and so forth um
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so do you sometimes have difficulty
00:21:34
getting the sort of cooperation that you
00:21:36
need from the the line business people
00:21:42
to put the right valuation on the real
00:21:46
business value of this new
00:21:49
project um if you don't you're not
00:21:52
normal uh that would be a typical
00:21:55
challenge that faces a CIO early on in
00:21:58
and trying to define the value and
00:22:02
therefore the
00:22:03
justification and do the proper
00:22:05
prioritization for whether or not this
00:22:07
project gets Built Well if that project
00:22:11
is owned by somebody from the business
00:22:13
unit this is going to get a lot easier
00:22:16
to do because all of a sudden you have
00:22:19
somebody from the business unit working
00:22:22
with you to
00:22:24
do the
00:22:26
valuation of what the business value is
00:22:29
going to be for the company how about
00:22:32
the requirements analysis how how often
00:22:35
have you
00:22:38
seen a situation where you send your
00:22:41
system analysts over to talk to somebody
00:22:43
over an Ops about what the requirements
00:22:46
of this new system is supposed to do and
00:22:48
it kind of goes like this I mean you're
00:22:50
scheduled to be there from 9: to 10: the
00:22:52
guy shows up a half an hour lady says
00:22:54
you know I have a don't have a lot of
00:22:55
time for this today you have a few quick
00:22:57
questions for me
00:22:59
and he's he's out of there 10 minutes
00:23:00
early off to his next appointment and
00:23:02
what was supposed to be an hour long
00:23:03
meeting is a 20 minute long meeting and
00:23:05
the next one just sort of gets canceled
00:23:07
or postponed and pretty soon your
00:23:09
systems analyst people are trying to do
00:23:11
the best they
00:23:12
can with not enough
00:23:15
information and uh that's again Not
00:23:19
Unusual all right so what's the
00:23:23
difference if the person you're meeting
00:23:25
with if the senior level manager that
00:23:28
you're meeting with uh is over in Ops
00:23:31
and the COO is the owner of this project
00:23:33
all of a sudden that senior level ops
00:23:37
manager is not viewing this as an IT
00:23:40
thing and this is just sort of an
00:23:42
interruption in his day he's now viewing
00:23:45
it as a major initiative that belongs to
00:23:50
his
00:23:51
boss he's going to be a lot more
00:23:54
engaged in making sure that the
00:23:56
requirements get done right and and so
00:23:59
this part is also going to
00:24:02
improve specs same
00:24:06
deal same issues as getting the
00:24:09
requirements and that's going to
00:24:12
improve now how about the
00:24:14
funding well how often are cios trying
00:24:18
to make the case to the CFO sort of just
00:24:21
the two of
00:24:22
them and uh and trying to get approval
00:24:25
for funding and the CFO goes you know I
00:24:27
just don't have the money in the budget
00:24:28
this year we we're just going to have to
00:24:30
put that off to a later
00:24:32
year well what happens if that coo
00:24:36
owner is in that meeting with you the
00:24:39
CFO and the co o owner is arguing for
00:24:43
funding of the project and he's laying
00:24:45
out the business case and and now the
00:24:49
CFO is doesn't just have to say no to
00:24:53
the cioo which is usually a fairly easy
00:24:55
thing to do but he's got to now say no
00:24:56
to the COO
00:24:59
that's a lot harder thing to do plus the
00:25:02
COO has a much bigger budget than the
00:25:04
CIO does and therefore there's a lot
00:25:08
more maneuver room inside the Coo's
00:25:10
budget to find that
00:25:12
money um if this is an important enough
00:25:15
project for the COO so funding is
00:25:19
improved and funding stabilization as
00:25:22
we've already said how about the
00:25:24
development or coding
00:25:26
part you know what
00:25:29
nobody outside it wants to play in this
00:25:33
space so this is going to be just the
00:25:36
same whatever would have happened during
00:25:39
the development the technical
00:25:40
development of the system is still going
00:25:42
to happen exactly the same way the CIO
00:25:45
is going to be calling all the shots or
00:25:46
one of his it directors or project
00:25:48
managers and the folks in the business
00:25:51
unit are rarely going to be involved in
00:25:52
this other than to give feedback on how
00:25:58
prototypes are coming along so if you're
00:26:00
doing some sort of Agile development
00:26:03
some sort of iterative
00:26:05
prototyping process as each of those
00:26:08
prototypes gets done they're going in
00:26:11
front of the COO now this is not
00:26:13
something he doesn't have time for you
00:26:15
can't get on his calendar this is a
00:26:16
primary initiative that he's responsible
00:26:19
for so he's going to be there he and his
00:26:21
people will be there helping you to
00:26:23
evaluate this making sure that what's
00:26:26
good about the Prototype gets recognized
00:26:28
and what's not good about the Prototype
00:26:30
gets noted and therefore changed way way
00:26:34
early not something that you have to do
00:26:37
after you've implemented this and you're
00:26:39
wondering why the change management
00:26:40
isn't going very
00:26:42
well okay so how about the testing part
00:26:46
well the verification and validation
00:26:48
will remain unchanged but the user
00:26:50
acceptance testing which is going to
00:26:52
boil over into the change management
00:26:54
program now this is going to get a lot
00:26:57
better why
00:26:58
well if what you're doing is let's say
00:27:01
Fielding a new CRM system to customer
00:27:03
service
00:27:08
people if they're not real impressed
00:27:10
with a system it's pretty hard to get
00:27:13
them to use it because they're viewing
00:27:16
this as an IT
00:27:18
initiative ah but now if the COO their
00:27:21
boss's boss's boss owns this
00:27:24
thing there's a lot of emphasis inside
00:27:27
customer to use this new
00:27:30
system they are they are now going to
00:27:32
see their performance reports directly
00:27:36
impacted by how well they're cooperating
00:27:39
with helping to make the boss's boss's
00:27:41
boss successful and all the bosses
00:27:43
between them and him or her um
00:27:46
respectively all right so we're going to
00:27:48
see change management get a lot easier
00:27:51
how about the maintenance phase well
00:27:53
there's going to be less of it why cuz
00:27:57
we did a better job way up here on the
00:27:59
requirements and the specs
00:28:02
part and even during development with
00:28:05
those prototypes getting them properly
00:28:07
evaluated so that we're building the
00:28:09
right system first time out of the box
00:28:11
there's less maintenance to do here so
00:28:13
this is actually going to be improved
00:28:15
fewer resources higher quality okay and
00:28:20
who cares about
00:28:22
this
00:28:24
so when we look at the whole life cycle
00:28:27
of a major it expenditure and we
00:28:32
asked we asked the question what does
00:28:35
ownership by another cxo
00:28:38
do to improve the quality and usability
00:28:44
and business value of the systems that
00:28:47
it is providing for the company it's
00:28:50
huge it's huge once you see this
00:28:55
picture it would be downright
00:28:58
irresponsible for a CIO not to pursue
00:29:01
this model so now that raises the
00:29:04
question how do you go about getting cxo
00:29:09
ownership um that takes some doing in a
00:29:13
lot of organizations they don't
00:29:16
want sometimes I certainly have seen
00:29:19
this many times uh that coo or that CMO
00:29:23
or that VP of sales uh doesn't want the
00:29:26
added responsibility
00:29:28
and the added accountability of a major
00:29:31
new business initiative there's got to
00:29:33
be something in it for them that's so
00:29:36
powerful and so compelling that they do
00:29:39
want to take ownership of that so that's
00:29:42
part of what the CIO has to do here is
00:29:45
have the discussions that are going to
00:29:47
sell this to the business unit owner so
00:29:51
as the C goes through this process as
00:29:55
the the process of gaining ownership for
00:29:57
the these major expensive it initiatives
00:30:02
we're going to see both the increased
00:30:04
perception and reality of it meaning the
00:30:09
CIO here being a quality service
00:30:14
provider also the perception and the
00:30:17
reality that the CIO or whatever the
00:30:20
title is of the top it person in your
00:30:23
organization has an executive business
00:30:26
mind does the rest of the leadership
00:30:29
team in the company look at you that way
00:30:31
now do they see you as having a well
00:30:35
honed ftuned executive business mind or
00:30:39
do they kind of think of you as that's
00:30:41
just the IT guy and it's going to
00:30:43
increase the perception and reality that
00:30:46
the CIO is an executive team player
00:30:50
obviously you're not just the IT guy you
00:30:53
become a central part of the leadership
00:30:56
team of the company they can't do
00:30:58
without you they know you're
00:31:00
indispensable as part of the leadership
00:31:02
team not just indispensable as the guy
00:31:04
who provides Good IT services all right
00:31:07
so now let's consider the downsides and
00:31:10
cautions in a little bit more
00:31:14
depth uh obviously it's going to take
00:31:16
more time and energy up front but it's
00:31:20
important to recognize that even though
00:31:21
it takes more time and energy up front
00:31:23
it's going to take less redo and wasted
00:31:28
time and resources in the long run um
00:31:32
and more likely provide successful
00:31:35
systems that are achieving higher
00:31:38
business
00:31:39
Advantage it requires effort to hone
00:31:42
executive communication
00:31:44
skills I've worked with a lot of cios
00:31:47
over the last decade a lot of cios and I
00:31:52
understand that for the most part I mean
00:31:54
as a group cios could use um more
00:31:58
executive communication skill so that's
00:32:02
something that you'll have to work on
00:32:03
developing it's very good for your
00:32:07
career uh progression for your
00:32:11
compensation for your longevity at your
00:32:14
current company or for Superior
00:32:18
opportunities with other companies so
00:32:20
it's a it's a very valuable professional
00:32:23
skill to be working on but you're going
00:32:25
to have to develop that um
00:32:28
for most of you a a good bit a good bit
00:32:31
farther and deeper as a skill set than
00:32:35
you may have done up to this
00:32:37
point must be presented in a positive
00:32:40
light where it might be perceived as
00:32:42
dodging responsibility so you can't you
00:32:46
can't be like a bull in a China closet
00:32:49
here you can't just walk up to the other
00:32:52
cxos and go hey you really want to take
00:32:54
ownership of this major new initiative
00:32:58
um and 95% of all the money that's going
00:33:00
to be spent on this is going to be spent
00:33:02
inside it but I want you to take
00:33:04
ownership of this cuz it has these great
00:33:06
advantages to it that's not going to
00:33:09
work or rarely would that work um so
00:33:14
it's going to sort of be like a dating
00:33:17
relationship I mean you know you don't
00:33:19
you don't walk up if you're a guy you
00:33:21
don't walk up to a girl or if you're a
00:33:23
girl you don't walk up to the guy and
00:33:25
go hey you want to go out for a date get
00:33:28
married afterwards I mean that's is not
00:33:29
the way that happens um it's a process
00:33:33
it's a courting
00:33:35
ritual um as both sides get more used to
00:33:40
the idea and what's in it for them and
00:33:43
become increasingly committed to the
00:33:45
proposition that's more the way it
00:33:47
feels in engaging the business unit
00:33:52
owners and taking ownership of these
00:33:54
major it initiatives yep a lot of work
00:33:58
but it is worth it and it is the job of
00:34:00
the CIO to do that and for the other
00:34:04
people on your it governance board
00:34:07
meaning the other senior leaders in the
00:34:11
corporation their times already short
00:34:15
and their plates are already full and so
00:34:18
the question is how are you going to get
00:34:20
them to become engaged in another
00:34:25
responsibility um obviously there's
00:34:28
going to have to be something in it for
00:34:29
them so we want to suggest this is
00:34:32
somebody's definition of it governance
00:34:35
it is the decision rights and
00:34:37
accountability framework for encouraging
00:34:39
desirable behavior in the use of it what
00:34:43
does that mean decision rights in other
00:34:47
words who gets the right to make the
00:34:51
decisions about what happens with the it
00:34:55
budget well let me go back to the board
00:34:57
here and show
00:34:59
you um something that I think is
00:35:03
important for a CIO to
00:35:06
realize okay back to the basic business
00:35:09
equation Revenue minus expenses equals
00:35:17
profit let's just say you're a billion
00:35:19
doll
00:35:21
company and you're running a 10% profit
00:35:25
margin what that means is that your
00:35:27
expens
00:35:29
are adding up to 900 million and you're
00:35:31
producing 100 million in
00:35:35
profits now typically the it budget is
00:35:39
going to be running somewhere in the
00:35:40
neighborhood of 3% of Revenue it's going
00:35:44
to depend on the type of Industry that
00:35:47
you're in on the size of the company on
00:35:50
your strategy but as a general rule uh
00:35:54
we normally expect when we're looking at
00:35:56
a billion dollar company to see about 3%
00:35:59
revenues uh being put into it all right
00:36:03
so 3% of a billion the it budget here is
00:36:08
going to be running about 30
00:36:15
million now 30 million is what
00:36:18
percentage of 100
00:36:20
million 30%
00:36:27
in other words the it budget is 30% of
00:36:31
the
00:36:32
profits in this situation but that's not
00:36:36
at all
00:36:36
atypical so the question is when you're
00:36:40
approaching the other senior
00:36:43
leadership you could really be asking
00:36:46
the question are you important enough
00:36:47
around here to decide what's supposed to
00:36:50
happen with
00:36:51
30% of the company's profits huh wow
00:36:54
that's a lot different question
00:36:58
that's a hugely different question and
00:36:59
that's really getting to this notion of
00:37:01
decision rights who has the right who
00:37:04
has the obligation who's important
00:37:06
enough around this place to be involved
00:37:10
in deciding what's going to happen with
00:37:13
30% of the company's profits or what
00:37:17
would be 30% of the company's
00:37:19
profits all right and the accountability
00:37:23
framework the question here is are you
00:37:27
as part of the leadership team
00:37:29
interested in being part of the
00:37:31
company's leadership who's holding the
00:37:33
CIO accountable for what he or she is
00:37:37
doing with 30% of the company's
00:37:42
profits in other words are you important
00:37:44
enough around here to be part of the
00:37:47
senior leadership group who's providing
00:37:51
this necessary accountability over such
00:37:53
a significant chunk
00:37:57
of of our expenditures all right so when
00:38:01
we put it like that it governance
00:38:05
becomes something that is justifiable to
00:38:08
the rest of the leadership team in terms
00:38:10
of their involvement in the process
00:38:12
whatever that process is going to look
00:38:14
like we'll talk about that process later
00:38:16
in this lecture all right so the next
00:38:19
question is this what's the business
00:38:21
imperative for it
00:38:23
governance and how strong is that
00:38:25
business imperative well a few years
00:38:29
back the MIT folks completed study that
00:38:35
took them three years they looked at
00:38:37
250 different companies of all sizes
00:38:40
small medium and large in 23 different
00:38:46
countries and it was really a study all
00:38:48
about it
00:38:51
governance and what they were looking at
00:38:54
is who's doing it who's not doing it
00:38:56
what is the difference based on the
00:38:58
particular industry sector they're in in
00:39:00
terms of the profitability of those
00:39:03
companies that are doing it governance
00:39:05
versus those companies that are not
00:39:06
doing it which ones are doing it the
00:39:08
best what does that look like so that
00:39:10
was
00:39:11
really U the the focus of this study and
00:39:16
as you can imagine the results were eye
00:39:20
opening they showed that good governance
00:39:22
yields an average of 20% higher return
00:39:26
on assets while
00:39:27
another way to say that is 20% increase
00:39:31
in what otherwise would have been the
00:39:33
profits so a 20% increase in
00:39:36
profits so in this
00:39:39
example if we do it
00:39:42
governance properly and we just have an
00:39:45
average
00:39:46
return we're going to see the profits of
00:39:49
the company go from 100 million a year
00:39:51
to 120 million a year simply because we
00:39:55
did it governance right now now for some
00:39:57
of you you're going huh where's that
00:40:01
money coming from how is that going to
00:40:03
happen well hold
00:40:05
on
00:40:07
we if you've already watched the it
00:40:10
alignment lecture you know where that
00:40:11
money is coming from uh we've already
00:40:14
explained it in there um but for the for
00:40:17
the sake of this lecture we're just
00:40:19
talking about it governance and here's
00:40:20
an interesting study that says oh by the
00:40:24
way it really does work it really does
00:40:27
make business sense to do
00:40:30
this all right so part of the
00:40:33
cio's um argument to the
00:40:37
CEO why
00:40:39
should we be doing it governance why
00:40:43
should we get the whole leadership team
00:40:45
involved in
00:40:46
this well do you want a 20% increase in
00:40:49
profits and oh by the way that's 20% if
00:40:52
we just have an average
00:40:54
implementation what if we do even better
00:40:58
in the way we do it governance than the
00:41:01
average well then we should expect to
00:41:04
see that number go not 20% higher but
00:41:06
something greater than that
00:41:09
higher all right so now let's talk about
00:41:13
ways to do it governance there are four
00:41:15
basic models that we teach at The
00:41:19
Institute for CIO Excellence there is
00:41:21
the classical
00:41:23
model there is the Caldwell model there
00:41:27
is the Ruth model and there is the ERM
00:41:31
model for Enterprise risk management now
00:41:36
what we have with this set of these four
00:41:39
models is basically the standard
00:41:41
methodologies and practices used
00:41:44
throughout um business and industry for
00:41:48
how it governance is done and most
00:41:51
companies are using one of these four
00:41:53
models they may not know it but they are
00:41:56
um but but but most are purposefully
00:41:59
using one or more of these
00:42:01
Models All right so on this next
00:42:04
slide um we see that the
00:42:07
classical uh model for it governance has
00:42:11
the following components it includes a
00:42:14
steering committee of senior it and
00:42:18
business Executives and by the way
00:42:21
that's the only thing that's common to
00:42:24
all four models of it governance is they
00:42:26
all have this executive steering
00:42:29
committee sometimes we call it the it
00:42:31
governance board we also are going to in
00:42:34
the classical model and the classical
00:42:36
model only set up these self-directed
00:42:39
work
00:42:40
teams um made up of both it people and
00:42:44
business people we're going to establish
00:42:48
boundaries of what each of the
00:42:49
self-directed work teams can and should
00:42:52
be focused
00:42:53
on uh one of these self-directed work
00:42:56
teams is going to be um an architectural
00:43:00
Council that sets corporate it
00:43:03
standards um and then we have these six
00:43:07
principles and I'll just flip the slide
00:43:10
up here for you to look at those and
00:43:12
then I will talk through this on the
00:43:26
board
00:43:56
e
00:44:26
e for
