Anyone working in information technology today feels the opportunities for creating and enabling lasting value, and the CIO helps define those opportunities so that they can be turned into realities. That's what this book is about. Humanity has discovered an evolutionary tool that allows us to realize our true potential—intellectually, artistically, socially, and above all, creatively. But we must be circumspect as we explore the uses of this new tool that works as an extension of our own minds. Living as we do on the edge of an evolutionary horizon, we must learn to respect the two native forces that have pulled human creativity in opposite directions since the beginning: (1) the drive to understand more about ourselves and our world, and (2) the desire for safety and security. Some part of us craves the entirely new; another part longs to be safe and is uncomfortable with change.
No senior executive feels the disjointed pull of these two forces more than the chief information officer,[1] who seeks to create new frontiers of strategic information technology value for the enterprise while working in an environment of service and stewardship for other people's interests. New strategic frontiers demand that the CIO take bold, decisive risks as new technologies offer competitive opportunities. Service and stewardship responsibilities demand that the CIO also take care of the day-to-day needs of people that depend on more basic information technology resources to perform what the enterprise requires of them.
Other forces distinguish the world of the CIO from executive team peers. More than any other member of the enterprise, the information technology professional works with products and services built according to designs that represent the most current understanding of the ways our world is organized. While people from other functional areas of the enterprise work within organizational structures marginally evolved from the beginning of the industrial age, IT organizations embody the principles that underlie information technology products and services—selfreferencing, chaotic, morphogenic systems. The CIO must work to reconcile IT's more mature, inclusive perspective on the enterprise with the traditional views of peers that prefer the illusory safety and security of departmental silos that use command and control management policies.
Then there's the matter of the emerging role of the CIO in terms of the myriad expectations of the many people throughout the enterprise, which often boils down to a simple three-word question of focus: Business or technology? This book acknowledges and addresses these disruptive forces by incorporating a few basic premises in each chapter.
Premise 1: The business of the IT organization is technology, and the business of the CIO is the business of the enterprise. As such, the best practice CIO works and makes decisions in a realm of strategy, customer value creation, cost and performance management, and outsourcing partnerships while building and maintaining an IT organization that can develop and manage enterprise technology that enables strategy.
Premise 2: As a new executive role with an evolving set of responsibilities and expectations, CIOs cannot prepare themselves to learn what they need to know about the business of the enterprise without the help of non-IT experts. In addition to the chapters written by experienced, practicing CIOs acknowledged for their excellence, this book includes chapters written by performance management, accounting, and customer relationship management experts familiar with leveraging IT value.
Premise 3: The CIO is an investor of enterprise resources accountable for realizing a return on those investments. This premise acknowledges that the rest of the executive team depends on the CIO's specialized understanding and insights of information technology value opportunities. All the chapters discuss how the CIO can realize a return on IT investments—including the investment of IT's many intangible resources.
Premise 4: All enterprises are unique, and their IT organizations must align to the specific needs of the enterprise. Each chapter includes considerations for small, medium, and large enterprises across all sectors. Inherent in this premise is the understanding that all enterprises have one thing in common—success depends on the articulation and implementation of a clear business vision and strategy. As such, the IT organization must be aligned with the enterprise vision and strategy so that it can align its products and services to realize strategic objectives. Each chapter discusses ways that the best practice CIO works to align IT products and services to fit enterprise vision and strategy.
Premise 5: All CIOs live and work in a competitive world, and customer relationship management excellence has become one of the most important competitive advantages in all sectors. The chapters in this book consistently address the importance of the IT organization's internal and external customers, and the book includes an entire chapter on customer relationship management best practices.
Premise 6: There can be no comprehensive treatment of the CIO's role as leader of the IT organization at this point in the development of this new executive office. At the same time, building on Premise 4, there are common elements to CIO best practices that apply to enabling strategic value from IT in any enterprise:
Aligning information technology with evolving business needs and devising IT strategies that mesh with enterprise strategy
Designing and maintaining an enterprise architecture that reflects and enables enterprise strategy
Organizing, motivating, and managing IT organizations to focus on agile strategy execution and deliver consistently outstanding performance
Strategic cost management practices for IT Finance that transparently reveal the operational costs of IT services to the CIO and IT customers
Strategic performance management practices that align the work of the IT organization with enterprise strategy
Customer relationship management practices that reflect enterprise strategy as the build value for internal and external IT customers
Carefully selected outsourcing relationships managed according to enterprise strategy
Calculating and managing for continuous improvement for the return on investments of tangible and intangible IT resources
The chapters in this book incorporate all these premises with a deliberate sequence that reflects the movement of strategically interpreted information technology value creation from the core of IT organization throughout the enterprise. Just as when an object hits the surface of a calm body of water and waves of influence propagate concentrically from the point of impact, this book begins at that point of impact—interpreting enterprise strategy in terms of how the IT organization can enable the strategy and deliver enterprise value through information technology resources.
CHAPTER 1 EXECUTIVE SUMMARY
Chapter 1 lays the foundation for the entire book by describing how the CIO and the IT organization use information technology resources to drive enterprise strategy starting with the relationship between IT strategy and enterprise strategy. The chapter discusses how to formulate an IT strategy for the high-change environments and then addresses practical strategic guidelines for designing IT systems and tactical methods for the IT organization.
From this foundation, the second part of Chapter 1 describes ways that the best practice CIO communicates enterprise and IT strategies to IT organization staff members with a focus on participatory teamwork for accomplishing work according to schedule. Part 2 also directly addresses elements of risk in the decisions CIOs make for their enterprises and IT organizations and provides guidelines for addressing those risks. The chapter ends with a comprehensive system for evaluating new projects from inception through implementation.
CHAPTER 2 EXECUTIVE SUMMARY
Continuing with Chapter 1's theme that the goal of every good CIO is to align IT strategy to enterprise strategy, Chapter 2 describes the ways that the CIO optimizes the strategic interrelationships of four key tools— enterprise architecture, IT governance, IT project portfolio management, and IT organizational development—to align and execute the IT contribution to the realization of enterprise strategy and bridge the gap between the goals of enterprise strategy and the current information and technology structure of the organization.
Part 1 of Chapter 2 demonstrates how a strategically aligned enterprise architecture enables IT governance, portfolio management, and organizational development practices with a step-by-step discussion of CIO best practices for enterprise architecture development and maintenance. The second part of this chapter describes ways that the CIO can integrate strategic IT governance and portfolio management processes into the enterprise architecture. Part 3 addresses CIO best practices for IT organization development for individual staff members and ways to achieve balanced capabilities from the entire organization to address the enterprise'sstrategic IT requirements.
CHAPTER 3 EXECUTIVE SUMMARY
Chapters 1 and 2 establish the necessary foundations that the IT organization needs to accomplish enterprise strategy. Chapter 3 discusses the ways the IT organization works with its processes throughout the enterprise, characterizes IT agility as a process, and lists agility skills that the IT staff can practice to become more strategically focused. Tactical agility depends on skills and techniques, so this chapter discusses six core techniques that the CIO and IT staff can use to make the IT organization more agile.
Agile IT organizations work most efficiently and remain strategically focused when they have clear frameworks for dealing with the processes they manage. With a detailed focus on process management best practices, Chapter 3 provides a step-by-step system for process monitoring and decision making that allows the IT organization to appropriately discontinue, maintain, and improve existing processes. This chapter also provides a detailed, deliberate, disciplined system to define the need for new IT processes, design strategically aligned solutions, and build them according to budget and deadlines.
CHAPTER 4 EXECUTIVE SUMMARY
More than any other member of the senior executive team, the CIO runs a business within the enterprise and accordingly answers to two distinct sets of customers who require very different forms of financial information. Chapter 4 discusses strategic cost management in terms of the operational information that IT Finance needs to offer the IT organization's internal customers so that they can make more informed decisions about the IT services they request.
This chapter presents models developed by SAS that characterize the maturity of the IT organization and help the CIO and IT staff strategically map the costs and performance of IT's service-level agreements. Because the General Ledger, budget, and other traditional accounting tools lack the operational cost information that nonfinancial employees need to gauge the value of their IT services, this chapter describes the deployment of a more mature method, Activity-Based Costing and Management, and ways that IT Finance can use readily available data sources to illuminate enterprise costs so that people can make more informed IT resource and capacitydecisions.
CHAPTER 5 EXECUTIVE SUMMARY
Performance management is another highly effective way to align and communicate strategic intent throughout the organization. Rather than using an ad hoc set of performance measures borrowed from another enterprise, best practice CIOs use flexible performance management systems like the Balanced Scorecard and design a custom set of strategically aligned measures to gauge and communicate the performance of the IT organization.
After providing a complete description of Balanced Scorecard principles, measurement perspectives, and management processes, Chapter 5 gives a detailed account of how the CIO and IT staff can develop a customized Balanced Scorecard that reflects IT organization strategy for communicating IT performance within the IT organization and to its customers inside the enterprise. This chapter describes a step-by-step approach to the two phases of building a Balanced Scorecard for the IT organization.
CHAPTER 6 EXECUTIVE SUMMARY
Customer relationship management (CRM) is one of the newest management frontiers as enterprises seek to use information about customer behaviors to refine their competitive advantage. As stewards of the enterprise systems and applications that house and process customer information, the best practice CIO works to stay as informed as possible as customer relationship management practices evolve. Parts 1 and 2 of Chapter 6 give the CIO a comprehensive update on the most current CRM practices with discussions of shareholder wealth creation, measuring the ROI on Sales and Marketing, customer value and profitability drivers, targeted selling and retention programs, effective Marketing delivery systems, and preparing customer analytics integration.
Parts 3 and 4 of this comprehensive chapter explore ways that enterprise systems distinguish between high and low economic customer value and lifetime customer value by focusing on customer data management. Parts 5 and 6 discuss the decision-making processes that senior executives use to balance trade-offs between customer value and shareholder values with an analysis of how the best practice CIO works with other senior executives to get the most out of enterprise business intelligence and performance management tools to optimize the balance between customer and shareholder value.
CHAPTER 7 EXECUTIVE SUMMARY
Chapter 7 addresses the ways that the CIO enables enterprise strategic value through outsourcing by describing a comprehensive, systematic approach to ensure a strategically aligned relationship. This chapter begins with a discussion of strategically valid reasons for outsourcing relationships followed by an analysis of activities appropriately and inappropriately outsourced. Perhaps the chapter's most important contribution is a step-bystep system for first defining an enterprise outsourcing rationale consistent with its strategic goals and then selecting an outsourcing partner committed to working with the enterprise to meet those goals.
Chapter 7 gives practical, concrete solutions for establishing an outsourcing project timeline and detailed descriptions of outsourcing processes such as surveys, requests for information, requests for proposal, site visits, contract negotiation, and outsourcing relationship management with a set of communication templates that the CIO can use for each step in the selection process.
CHAPTER 8 EXECUTIVE SUMMARY
This book concludes with a discussion of resource decision making that ties together the ever-widening circles of IT influence from its strategic core. IT architecture, tactical agility, and strategic cost, performance, customer relationship, and outsourcing management each enable an organization to align, implement, and realize its strategic objectives. Chapter 8 demonstrates the ways that the CIO can use conventional ROI calculations to improve decision making for IT project proposals and explores new perspectives on IT investments with ways that the CIO can help other executives manage and maximize more broad-ranging, elusive organizational resources and achieve a return on intangibles.
Part 1 addresses the essential elements that the CIO uses to see a conventional ROI process through from start to finish, including the joint development process between IT and Finance, a cost/potential benefit analysis, an IT ROI benefit audit, ways to weight tangible benefits, and the reapplication of anticipated resources freed up by the proposal. Part 2 explores the rapidly emerging importance of intangible IT resources from the marketplace to the boardroom. Building on intangible management best practices from IT, Human Resources, and previous chapters, this discussion addresses practical ways that CIOs can help their executive teams define, identify, measure, valuate, and renew their intangible IT resources.
[1] This book uses the term "chief information officer" (CIO) to stand for any title the enterprise might use to designate the leader of its information technology organization, such as chief technology officer, and acknowledges that a person ay serve more than one executive role in some enterprises.