IT Governance Part 1 of 2

00:44:42
https://www.youtube.com/watch?v=cU8iGQ5hUQQ

摘要

TLDRIn Dr. Richard Ruth's lecture on IT governance, he explores the challenges modern CIOs face, including funding constraints, lack of executive cooperation, and issues with prioritization of IT initiatives. He asserts that effective IT governance is essential for addressing these challenges, fostering better ownership of IT projects among C-level executives, which ultimately enhances organizational efficiency and profitability. The lecture outlines the concept of IT governance as part of corporate governance, stressing the importance of alignment between IT and business strategies. Ruth introduces four models of IT governance and emphasizes the need for strong communication and relationship-building skills among CIOs to successfully implement governance and increase corporate profits, citing a potential increase of 20% in profits from good governance practices.

心得

  • 💼 IT governance is critical for aligning IT with business goals.
  • 📈 Effective governance can lead to a 20% increase in corporate profits.
  • 🤝 Ownership from C-level executives improves IT project success.
  • ⏳ CIOs should spend about 30% of their time on governance.
  • 💰 Proper governance stabilizes IT funding and project approval.
  • 📊 Collaboration among executives enhances prioritization of IT initiatives.
  • 🗣 Communication skills are vital for a CIO's success.
  • 🛠 There are four main models of IT governance to consider.
  • 🔍 Understanding obstacles helps in implementing effective governance.
  • 🏗 Including business leaders in IT projects increases user engagement.

时间轴

  • 00:00:00 - 00:05:00

    Dr. Richard Ruth discusses IT governance, focusing on the key challenges faced by modern CIOs, including funding issues, ownership, cooperation among CXOs, prioritization decisions, and the CIO's stature in strategic business planning.

  • 00:05:00 - 00:10:00

    Proper IT governance can remove funding challenges, increase ownership and cooperation from other CXOs, enhance participation in decision-making about IT resources, and improve the CIO's standing as a strategic leader.

  • 00:10:00 - 00:15:00

    IT governance is more than just prioritizing IT initiatives with CXOs; it involves extensive collaboration and ownership at the leadership level to ensure that IT projects align with overall business goals and do not lead to funding uncertainties.

  • 00:15:00 - 00:20:00

    CIOs need to allocate around 30% of their time to IT governance to ensure proper alignment and maximize the impact of IT initiatives on business outcomes and profits.

  • 00:20:00 - 00:25:00

    Effective IT governance addresses various typical challenges for CIOs such as time management, communication skills, understanding the business model, and securing a seat at the strategy table, ultimately facilitating IT alignment with business goals.

  • 00:25:00 - 00:30:00

    IT governance is a critical aspect of enterprise governance, ensuring alignment of IT goals with business objectives, delivering value, increasing profitability, measuring performance, allocating resources, and mitigating risks.

  • 00:30:00 - 00:35:00

    The initiation of IT governance can come from either the CIO or CEO, with the CIO responsible for managing the governance process, emphasizing the need for a structured framework and collaboration among senior leadership.

  • 00:35:00 - 00:44:42

    CIOs must engage other CXOs to take ownership of IT projects, enhancing their commitment and involvement, which leads to better funding stability, improved requirements gathering, and overall higher quality IT systems that better meet business needs.

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思维导图

视频问答

  • What is IT governance?

    IT governance is a framework that ensures IT goals align with the business objectives, involving decision rights and accountability for IT budget allocations.

  • Why is IT governance critical?

    Good IT governance leads to better decision-making, increased funding stability, improved project outcomes, and higher corporate profits.

  • What are the challenges faced by modern CIOs?

    Challenges include funding issues, lack of cooperation from other executives, uninvolved participation in prioritization, and limited stature in strategic planning.

  • How much time should a CIO spend on IT governance?

    Some successful CIOs spend about 30% of their time focused on IT governance to ensure positive impacts on the organization.

  • What are the four models of IT governance?

    The four models are the classical model, Caldwell model, Ruth model, and ERM model (Enterprise Risk Management).

  • What are the benefits of having C-level ownership of IT initiatives?

    C-level ownership leads to better funding stabilization, improved user participation, and more effective project management.

  • How does effective IT governance impact corporate profits?

    Effective governance can yield an average of 20% higher return on assets and potentially increase profits significantly.

  • What is the role of the CIO in IT governance?

    The CIO is responsible for initiating and managing IT governance processes, ensuring alignment between IT and business goals.

  • What does the steering committee do in the classical model?

    The steering committee consists of senior IT and business executives who guide and oversee IT governance activities.

  • What is the importance of communication skills for a CIO?

    Strong communication skills enable a CIO to better engage with executives, foster collaboration, and advocate for IT initiatives.

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  • 00:00:00
    hello and welcome to today's lecture on
  • 00:00:03
    it governance I'm Dr Richard Ruth and I
  • 00:00:07
    will be talking about the four models of
  • 00:00:11
    it governance along with some of the
  • 00:00:13
    motivation for why you want to have a
  • 00:00:16
    healthy productive it
  • 00:00:19
    governance process um in your company so
  • 00:00:23
    we start with a
  • 00:00:26
    question what are the biggest challenges
  • 00:00:29
    that f face a modern
  • 00:00:33
    CIO so when we start thinking about the
  • 00:00:37
    challenges that face a modern
  • 00:00:41
    CIO
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    um there are several that start popping
  • 00:00:46
    to
  • 00:00:47
    mind um one
  • 00:00:54
    funding is an issue a lot of it
  • 00:00:58
    departments don't get the funding they
  • 00:01:00
    need to have the Strategic impact that
  • 00:01:03
    they um should be
  • 00:01:05
    having another
  • 00:01:07
    one is
  • 00:01:11
    ownership and
  • 00:01:17
    cooperation by the other
  • 00:01:21
    cxos in the
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    Company ownership of the major it
  • 00:01:27
    initiatives and the cooperation from
  • 00:01:29
    them them to cause those initiatives to
  • 00:01:32
    become successful and used the way they
  • 00:01:35
    ought to be used to get full business
  • 00:01:37
    benefit out of
  • 00:01:42
    them another
  • 00:01:47
    challenge
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    is
  • 00:01:54
    participation and again ownership
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    in the
  • 00:02:06
    prioritization
  • 00:02:09
    decisions that face the company about
  • 00:02:11
    what to do with the it
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    budget another challenges it faces CI
  • 00:02:24
    often times is just their stature
  • 00:02:33
    as a
  • 00:02:37
    leader in the
  • 00:02:40
    Strategic
  • 00:02:43
    business
  • 00:02:46
    planning activities in the company a lot
  • 00:02:49
    of
  • 00:02:51
    cios um don't see themselves or the rest
  • 00:02:55
    of the senior leadership team doesn't
  • 00:02:57
    see them
  • 00:02:58
    either as a a
  • 00:03:00
    full uh participating
  • 00:03:04
    member of how strategic business
  • 00:03:06
    planning is done in the
  • 00:03:12
    company well all of
  • 00:03:16
    these are
  • 00:03:19
    addressed in a splendid
  • 00:03:22
    Way by doing it
  • 00:03:27
    governance properly
  • 00:03:31
    if it governance is done properly your
  • 00:03:35
    funding issues will go away you won't
  • 00:03:38
    you won't be plagued with inadequate
  • 00:03:41
    funding for the things that you think it
  • 00:03:43
    needs to be doing in the
  • 00:03:45
    future the other cxos in the company
  • 00:03:49
    will be fully vested
  • 00:03:52
    owners of the it initiatives that you
  • 00:03:57
    want to see being successful on the part
  • 00:03:59
    of the company
  • 00:04:01
    they will participate with you in the
  • 00:04:06
    prioritization of how it resources are
  • 00:04:10
    being spent so that you're not in a
  • 00:04:12
    fight with them over sorry I can't build
  • 00:04:15
    what you've wanted me to build because I
  • 00:04:17
    think this other thing is more important
  • 00:04:19
    or I've seen it go the other way okay
  • 00:04:22
    I'm going to build what you're asking me
  • 00:04:23
    to build even though I know that it
  • 00:04:26
    would be better for the company if I
  • 00:04:27
    were building this other alternative
  • 00:04:30
    system over
  • 00:04:31
    here and then a lot of cios are going
  • 00:04:35
    well help me out here I am really good
  • 00:04:38
    technically and I've had a whole career
  • 00:04:41
    in being a smart technical person and
  • 00:04:44
    helping to lead the IT department to do
  • 00:04:47
    the important things that this company
  • 00:04:50
    needs in the IT world but I'm not my
  • 00:04:53
    strong suit is not corporate politics my
  • 00:04:57
    strong suit is not uh Comm communicating
  • 00:05:00
    with the other cxos in the country my in
  • 00:05:03
    the company my strong suit is
  • 00:05:05
    not
  • 00:05:07
    um building relationships that are
  • 00:05:10
    Cooperative with those other
  • 00:05:13
    cxos again if you do it governance
  • 00:05:16
    properly this will all be history
  • 00:05:19
    you'll you'll take your proper place
  • 00:05:24
    with the stature that you need among
  • 00:05:28
    those doing IC business planning in the
  • 00:05:31
    company uh and will be a valued um
  • 00:05:35
    member of that
  • 00:05:37
    team okay so this is quite a
  • 00:05:40
    promise this is the promise of it
  • 00:05:44
    governance now the next question that we
  • 00:05:46
    have for discussion here is what is it
  • 00:05:49
    governance some people might Define it
  • 00:05:52
    governance as just getting the other
  • 00:05:55
    cxos in the company to help you
  • 00:05:58
    prioritize what systems you should be
  • 00:06:01
    spending money on no if that's all it
  • 00:06:05
    governance is to you then I make some
  • 00:06:07
    predictions basically all these won't
  • 00:06:10
    work
  • 00:06:11
    right if the only thing it governance is
  • 00:06:14
    to you is getting the cxos together on a
  • 00:06:17
    quarterly basis or monthly basis or
  • 00:06:20
    however often you do it so that they can
  • 00:06:23
    work
  • 00:06:24
    through the priorities and help you
  • 00:06:28
    prioritize which it initiatives you
  • 00:06:31
    should be putting your resources into if
  • 00:06:34
    that's the only thing you're doing with
  • 00:06:35
    it governance you're still going to have
  • 00:06:37
    funding problems major ones you're not
  • 00:06:40
    going to be cultivating the ownership
  • 00:06:43
    and the cooperation you need on the part
  • 00:06:45
    of the other
  • 00:06:46
    cxos you're not going to get them to
  • 00:06:49
    really participate in a constructive way
  • 00:06:51
    I mean most of them are not going to
  • 00:06:52
    show up for that meeting I mean if
  • 00:06:54
    you're doing this you would you will
  • 00:06:55
    know that they're not coming to your
  • 00:06:58
    meetings and and you won't actually have
  • 00:07:01
    a very active role in this part of
  • 00:07:03
    what's happening in the company so it
  • 00:07:06
    governance has to be more than just
  • 00:07:09
    collecting together the senior
  • 00:07:10
    leadership of the company so that they
  • 00:07:12
    can help prioritize and determine
  • 00:07:16
    funding for major it spends what are the
  • 00:07:20
    costs of it governance a lot of time on
  • 00:07:24
    the part of the
  • 00:07:26
    CIO some of the best cios that I've seen
  • 00:07:29
    best being defined as those
  • 00:07:32
    having um the greatest stature by the
  • 00:07:36
    rest of the senior leadership team and
  • 00:07:38
    the most impact on building stockholder
  • 00:07:42
    equity in the
  • 00:07:43
    company um are cios that tell me things
  • 00:07:47
    like I spend about 30% of my time on it
  • 00:07:50
    governance now think about that for some
  • 00:07:53
    of you that would be a radical
  • 00:07:55
    thought you're already putting in what
  • 00:07:57
    60 hours a week maybe 70 80 in some
  • 00:08:01
    cases let's just say 60 so if you're
  • 00:08:04
    spending 30% of your time on it
  • 00:08:07
    governance are these cios really
  • 00:08:10
    spending on the average 20 hours a week
  • 00:08:13
    each and every week of their lives doing
  • 00:08:16
    it governance yep that's their claim and
  • 00:08:19
    I would claim that's time well spent
  • 00:08:21
    that that reflects proper priorities on
  • 00:08:24
    the part of the
  • 00:08:25
    CIO we'll justify that as we go along
  • 00:08:29
    all right
  • 00:08:30
    so we asked do you really believe the
  • 00:08:32
    promise of it governance well probably
  • 00:08:35
    not for most people viewing this video
  • 00:08:37
    at this point many of the things that
  • 00:08:39
    I've been promising you based on these
  • 00:08:42
    initial introductory remarks you're
  • 00:08:45
    sitting there with a certain amount of
  • 00:08:47
    incredulity as you watch this and go I
  • 00:08:50
    don't think so well been doing this a
  • 00:08:53
    long time watched a lot of cios helped a
  • 00:08:56
    lot of
  • 00:08:57
    cios um I'm I'm telling you what my
  • 00:09:01
    experience and observations
  • 00:09:04
    are so hang with me and let's think
  • 00:09:07
    about this together and let's see if it
  • 00:09:10
    governance can't be something more than
  • 00:09:14
    um what what perhaps you've been
  • 00:09:17
    struggling with so
  • 00:09:18
    far so what are the major challenges and
  • 00:09:21
    issues and obstacles that face a typical
  • 00:09:26
    CIO um or if you're not a CIO if you're
  • 00:09:29
    title as IT director but you're the top
  • 00:09:31
    it person in the company okay but what
  • 00:09:33
    are the major obstacles that face you
  • 00:09:35
    well time we've talked about
  • 00:09:37
    that communication skills relationship
  • 00:09:41
    building
  • 00:09:44
    skills proper understanding of the
  • 00:09:47
    business model the the levers and the
  • 00:09:50
    business strategy a seat at the table so
  • 00:09:54
    that you're part of the team who plans
  • 00:09:56
    the business strategy those all become
  • 00:10:00
    challenges that face a CIO you have to
  • 00:10:03
    have those in order to do it governance
  • 00:10:12
    properly okay the question is which of
  • 00:10:15
    those challenges and
  • 00:10:17
    issues and obstacles are addressed or
  • 00:10:20
    resolved by proper it governance I would
  • 00:10:22
    argue all of them are so here's another
  • 00:10:26
    definition of it governance
  • 00:10:30
    to achieve success in this information
  • 00:10:32
    economy governance of it is a critical
  • 00:10:36
    facet of Enterprise governance so at
  • 00:10:39
    this point we see that it governance is
  • 00:10:42
    actually just a
  • 00:10:44
    subset of corporate governance or an
  • 00:10:46
    Enterprise governance good it governance
  • 00:10:50
    assists Enterprise leaders in their
  • 00:10:52
    responsibility to ensure that it goals
  • 00:10:55
    align with those of the business all
  • 00:10:56
    right so now we've introduced this
  • 00:10:58
    notion of it
  • 00:11:00
    alignment so proper it governance helps
  • 00:11:03
    accomplish it alignment that's an
  • 00:11:07
    interesting
  • 00:11:10
    realization I would argue you can't
  • 00:11:12
    actually do it alignment without a good
  • 00:11:15
    robust healthy it governance
  • 00:11:19
    process and uh it delivers
  • 00:11:22
    value we'll talk a little bit about what
  • 00:11:24
    that value is again in terms of value
  • 00:11:27
    here we're talking about increased
  • 00:11:28
    profit profs in the company so by doing
  • 00:11:31
    it governance right you going to see
  • 00:11:34
    significant increases in corporate
  • 00:11:37
    profits okay its performance is measured
  • 00:11:41
    you won't be guessing at what those
  • 00:11:43
    profit increases are you'll have
  • 00:11:44
    measured them its resources are properly
  • 00:11:47
    allocated and its risks mitigated okay
  • 00:11:50
    so there's an interesting definition of
  • 00:11:54
    it governance now question who initiates
  • 00:11:57
    it governance well the answer
  • 00:12:00
    traditionally is one of two people in
  • 00:12:02
    the company either the C initiates it or
  • 00:12:08
    if the CIO is sleeping at the switch the
  • 00:12:12
    CEO May initiate it again if the CEO has
  • 00:12:17
    come to you and said you need to be
  • 00:12:19
    doing it governance or you need to be
  • 00:12:20
    doing it better or we need to be doing
  • 00:12:22
    it differently or shouldn't it
  • 00:12:24
    governance be doing something for us
  • 00:12:27
    that ours isn't
  • 00:12:29
    um none of those are really good news
  • 00:12:33
    for the
  • 00:12:34
    CIO um it basically means you've got to
  • 00:12:38
    do something to pretty significantly
  • 00:12:40
    revamp your it governance
  • 00:12:43
    process and the last question on this
  • 00:12:46
    slide is who manages it governance well
  • 00:12:48
    regardless of who initiated it it's the
  • 00:12:50
    cio's job to manage it now there's an
  • 00:12:54
    interesting website out at itgi that's
  • 00:12:57
    it governance in institute.org
  • 00:13:01
    um there's a lot of interesting
  • 00:13:04
    information out there that you might
  • 00:13:05
    find useful uh it's a good reference for
  • 00:13:09
    it governance all right so I hear from a
  • 00:13:12
    lot of cios when they start to get the
  • 00:13:15
    picture that it governance is going to
  • 00:13:18
    take a huge amount of their time and
  • 00:13:21
    effort um they sometimes toy with the
  • 00:13:25
    idea of well why should I go there why
  • 00:13:27
    should I do it why should I make my it
  • 00:13:30
    governance program that big or that
  • 00:13:34
    involved um and they want to they want
  • 00:13:36
    to do a sort of a skinny version of it
  • 00:13:38
    well let me talk for a minute about
  • 00:13:40
    being more purposeful and systematic
  • 00:13:43
    about
  • 00:13:45
    involving uh the line users at the cxo
  • 00:13:49
    and head of business unit levels in
  • 00:13:52
    taking ownership of IT projects one of
  • 00:13:57
    the issues that gets res solved when you
  • 00:14:00
    do that is the fact that you're going to
  • 00:14:02
    get better funding
  • 00:14:04
    stabilization now what do we mean by
  • 00:14:06
    funding stabilization
  • 00:14:10
    well how often has it been that you've
  • 00:14:13
    had some very large it initiative get
  • 00:14:18
    approval for funding from the CFO and
  • 00:14:20
    you start into it and partway into it
  • 00:14:22
    you're not very far along and the
  • 00:14:26
    CFO cancels the funds or post phones
  • 00:14:29
    them for another year and you sort of
  • 00:14:31
    have to put that project on
  • 00:14:33
    hold well that's an example of unstable
  • 00:14:37
    or destabilized it funding if you're
  • 00:14:41
    doing it governance rarely will you see
  • 00:14:44
    that happen if ever because the CFO no
  • 00:14:48
    longer is allowed to view an IT project
  • 00:14:52
    as an
  • 00:14:53
    expenditure instead CFO now has to view
  • 00:14:57
    major IT projects
  • 00:15:00
    as consensus Decisions by the company
  • 00:15:03
    leadership for how investment in the
  • 00:15:06
    future the company is going to be built
  • 00:15:09
    makes it much more difficult for the CFO
  • 00:15:11
    to zero out a budget line item on the it
  • 00:15:16
    budget that way also Let's uh looking at
  • 00:15:18
    the second bullet here better end user
  • 00:15:21
    involvement means better system
  • 00:15:23
    requirements feedback less criticism
  • 00:15:26
    let's review what the life Cy
  • 00:15:30
    of a major IT project looks
  • 00:15:32
    like so we start
  • 00:15:35
    with a business
  • 00:15:42
    Concept in other words we want an IT
  • 00:15:45
    system built because it's going to
  • 00:15:47
    provide the following business Advantage
  • 00:15:50
    it's going to make sales increase in the
  • 00:15:53
    new e-commerce system or it's going to
  • 00:15:56
    improve efficiencies in the way we do
  • 00:15:58
    production or it's going something
  • 00:16:01
    something that's valuable to the
  • 00:16:03
    business that's the business
  • 00:16:05
    concept right so once the business
  • 00:16:08
    concept
  • 00:16:10
    is um is verbalized is uh proposed you
  • 00:16:15
    now do uh requirements analysis
  • 00:16:29
    this is where your system analysts start
  • 00:16:31
    meeting with the business line people
  • 00:16:34
    and they're trying to put together a set
  • 00:16:36
    of requirements specifically what is
  • 00:16:38
    this it System supposed to
  • 00:16:41
    accomplish this then gives way to the
  • 00:16:46
    specs what are the specific
  • 00:16:49
    specifications um that have that the
  • 00:16:52
    software has to
  • 00:16:54
    accomplish um this will list the
  • 00:16:57
    features Etc all
  • 00:17:00
    right this then is going
  • 00:17:04
    to come up for the funding
  • 00:17:08
    decisions so let's say by the time we do
  • 00:17:11
    the specs we're sitting here looking at
  • 00:17:12
    this and go well this Project's going to
  • 00:17:14
    cost 305 million or $35 million or $350
  • 00:17:17
    million I mean whatever the size of your
  • 00:17:20
    company is that makes an IT project look
  • 00:17:22
    like a big IT
  • 00:17:24
    project um so
  • 00:17:29
    now what well you go to the CFO
  • 00:17:32
    sometimes at this point and the CFO goes
  • 00:17:34
    what I don't have that much money what
  • 00:17:37
    if I only gave you half as much so now
  • 00:17:38
    back to the drawing boards figure out
  • 00:17:41
    how we could reduce the specs um so that
  • 00:17:44
    we can get this thing funded I mean
  • 00:17:45
    however that process works in your
  • 00:17:47
    company but basically this is the
  • 00:17:50
    funding
  • 00:17:51
    question then from here we do the
  • 00:17:55
    development
  • 00:18:00
    this is where the software and Hardware
  • 00:18:02
    people go to work to build the
  • 00:18:04
    system okay so this is where the if you
  • 00:18:08
    will the coding happens to use an old it
  • 00:18:14
    term then after
  • 00:18:17
    development we're going to go through
  • 00:18:20
    some set of
  • 00:18:23
    testing now I don't want to get into a
  • 00:18:25
    lot of detail here but we do
  • 00:18:28
    verification we do validation we do end
  • 00:18:30
    user acceptance testing you have test
  • 00:18:33
    plans for that you have it's on the
  • 00:18:36
    schedule you make all this happen you're
  • 00:18:39
    you're verifying against um the specs
  • 00:18:43
    and you're validating against the
  • 00:18:44
    business requirement and the end user
  • 00:18:47
    testing is trying to determine is this
  • 00:18:49
    going to be acceptable to the end users
  • 00:18:51
    are they really going to use
  • 00:18:53
    it all right then then we go to the
  • 00:18:57
    implementation phase which these days
  • 00:19:00
    tends to go by the term change
  • 00:19:03
    management this is the point where the
  • 00:19:07
    users the intended users of this new it
  • 00:19:11
    system have to change the way they've
  • 00:19:13
    been doing things otherwise your it
  • 00:19:15
    system becomes shelfware how do you
  • 00:19:18
    manage that change how do you get the
  • 00:19:20
    intended users to start using the system
  • 00:19:23
    to quit doing it the way they used to do
  • 00:19:24
    it and start doing it the way they are
  • 00:19:27
    supposed to start doing it
  • 00:19:29
    for
  • 00:19:30
    example um a lot of cios today have some
  • 00:19:35
    recent experience and rolling out a CRM
  • 00:19:38
    system well CRM
  • 00:19:41
    systems um need the customer service
  • 00:19:45
    people and sometimes the salese to
  • 00:19:48
    provide uh constant input of what's
  • 00:19:51
    happening during the conversations with
  • 00:19:54
    customers what happens if they're not
  • 00:19:56
    taking the time to do that you're see
  • 00:19:58
    CRM system is going to be able to
  • 00:20:01
    accomplish a very
  • 00:20:03
    minor uh part of what it could have
  • 00:20:06
    accomplished um that would be an example
  • 00:20:09
    of where change management wasn't done
  • 00:20:11
    very
  • 00:20:12
    well all right and then after change
  • 00:20:15
    management uh we have the maintenance
  • 00:20:18
    phase followed by eventually
  • 00:20:24
    retirement okay so this is what the life
  • 00:20:27
    cycle looks like for an IT system now
  • 00:20:32
    let me ask a question
  • 00:20:36
    here which ones of these stages of the
  • 00:20:39
    life cycle would get
  • 00:20:43
    better if the CIO had some other cxo in
  • 00:20:49
    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
  • 00:20:56
    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
  • 00:21:14
    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
  • 00:21:30
    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
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