rogow slides

Independent Executive Counsel for Information Technology Agendas

220 Ocean AvenueMarblehead, MA 01945

USA Office: 781-631-2783Mobile/GSM: [email protected]

ViValdi Odyssey and Advisory ServiceViValdi Odyssey and Advisory Service

from the ViValdi Odyssey IT Landscape

Concours IT Leadership Development Program Alumni Session

May, 2005

1. Summary Issues

2. ..and Now for Business Growth.. But a Different Game

3. Getting More Value From IT

A. IT Financials Direction Management

B. ViValdi Management & Building the Fit Bench

The Emerging IT Landscape….. A Brand New Set of Challenges

….Return

Four Terms Appear to Be Defining IT

• Context is Crucial as Seasons Change• Mainly Higher Hanging Fruit is

Next• Affordable IT is Essential• What Exactly Do We Want to Do

Next?

ViValdi Advisory Services Copyright 2005© Bruce J.Rogow

BusinessAsset

BusinessLiability

Source: Adapted from theFeldGroup by Bruce J. Rogow

Many Folks Appear to Want the Same Things & to Have the Same IT Issues ….. But….1. Few Large Enterprises Are in One Position2. Their Situations Are Different3. Their Ways Forward Are Different and Have Different Time Horizons or Deadlines4. Whether They Know the What, How, Who and When are Issues!

TimeDisadvantage

TimeAdvantage

Are There Any Common Odyssey Findings? ….. Context is Critical and

… as Several CIOs Have Said… The Firm Gets the IT They Deserve

Worst SituationLosing Ground

Currently Limited

Capability

The Long

Sustained March

FullComplex

Contribution

Difficult to SustainGetting Ahead

IT Led Campaign

Easy to Fall BackBarely Keeping Up

Positioned for Growth

ENTITY A

ENTITY C

ENTITY B

Individual Business Entities

Odyssey Distribution: ‘03-’04 ‘04-’05

Red to Green 30-35% 25%

Green to Blue 60%-65% 70%

Blue <5% <5%


These Business Driver & Environment Challenges Dominate the Discussions.… Sometimes Positively, Sometimes Negatively

I. Again, IT is Now Going After the High Hanging Fruit!

A. Most Hairballs are Being FixedB. Few Big Applications, Many Little PiecesC. Many Business Models are BrokenD. Shifting To Growth Is Proving To Be a Broad Set of

Challenges ..Especially Adding Service BusinessesE. Business Structure, Discipline, Short Term Focus and

Attention Are the Limiting Factors.. Not Technology The firm and IT may not be ready for growth

F. Has a Process Obsession Made IT Myopic to the Issues?

G. IT is Now Netwoven Into the Firm… the Next 20% Is Bespoken to Fill the Seams

H. Service Businesses Require Service Business and IT Architectures

• Parallel Activities Replace Serial Process• Publish & Subscribe Must Be Event Driven and State Aware• Business Rules Disciplines Must Become Fundamental… but are often beyond current behavior

I. Big Firms Are Having Trouble Introducing Big Growth Oriented Change

I. Again, IT is Now Going After the High Hanging Fruit!

A. Most Hairballs are Being FixedB. Few Big Applications, Many Little PiecesC. Many Business Models are BrokenD. Shifting To Growth Is Proving To Be a Broad Set of

Challenges ..Especially Adding Service BusinessesE. Business Structure, Discipline, Short Term Focus and

Attention Are the Limiting Factors.. Not Technology The firm and IT may not be ready for growth

F. Has a Process Obsession Made IT Myopic to the Issues?

G. IT is Now Netwoven Into the Firm… the Next 20% Is Bespoken to Fill the Seams

H. Service Businesses Require Service Business and IT Architectures

• Parallel Activities Replace Serial Process• Publish & Subscribe Must Be Event Driven and State Aware• Business Rules Disciplines Must Become Fundamental… but are often beyond current behavior

I. Big Firms Are Having Trouble Introducing Big Growth Oriented Change


For Many Firms, The Current Business Model is Broken…..The Current Trajectory Can Only Take Most Firms Down a Slippery Slope..Turning the Corner Demands Things They Haven’t Done Well Before

Efficiency Inefficiency

Revenue Loss

Revenue Growth

Current Trajectory

Pending Challenge

How Does a Business Grow?• Acquisition• New Businesses• New Markets• New Products• New Channels• Better Yield

How Does IT Assist, Enable?

Source: Bruce J. Rogow, ViValdi

Advisory Services

Dead Business is 25-35% of

Base


Cost or Catch Up Initiatives

Current Foot Print

New Definitions of Business & IT Excellence Should Change the IT Agenda

New & Innovative Initiatives

No Choice

Chose to Take the Risk

InnovateFix

Desired Foot Print

Business Productivity Definition

IT Excellence Definition

‘01 - ‘04

Decrease Cost & Headcount per $ of Revenue

Decrease IT Cost as % of Revenue

‘05 - ??

Increase Revenues Innovation

Enhance the Business

Support Business Opportunities

..as Described in: “Getting in Shape for Growth”Optimize Magazine May 2005

http://www.optimizemag.com/article/showArticle.jhtml?articleId=161501550


Transformation into Reality Has About a 20% Success Rate in the First Iteration… …More Front End Assessment and Subsequent Iterations Are Needed to Increase Yields …Especially as the Applications Are More Elective

StrategyFormulation

StrategyFormulation ImplementationImplementation

OperationalizationOperationalization

Define the Benefits

Preserve and enable the benefits

Preserve and realize the benefits

Source: Bruce J. Rogow and Differentis

The Focus Has Changed from Killer Apps,Major Re-Engineering & Technology to Readiness, Percolation, Assimilation, Adaptation, Realization, Rationalization, Simplification and Elimination

SupplyChainManagement

CustomerRelationshipManagement

More With Less

2000 - 2005

KnowledgeManagement?

CoreArchitectures,Infrastructuresand Systems

Leadership

Leadership

Leadership


D. Where are the Strengths and Issues?

Simply Viewing the Business As a Set of Processes Often Misses The Key Issues Involved In Creating Growth… The Business Must Look Beyond Functions….. …IT Must Consider the Entire Business Model…

Adjusting Processes or Outsourcing May Only Add Complexity

Market Platforms

Service Business Model

Business Strategy Customer Base ?

Market Platforms

Products

Product Business Model

Business Strategy

Business Entities and Organization

Business Policy

Business Practice

Skills Functions Procedure Process Behavior

ReadinessLeadership

Business Measurement

Accountability Discipline

ProductsServices

Finance, Costs, Productivity

Customer Base ?


A New Set of Technologies, Applications and Expectations Dramatically Change the “Joined-Up Business” Game!


qCoreFunctions

Customer

With TransactionsManaged Relationship

Experience

Employees and Process Outsourcers

Partner

Network

Performance

SupplyChainManagement

CustomerRelationshipManagement

More With Less

2004-2006

KnowledgeManagement?

Core Architec

tures, Infrastructures

and System

s

• The Consumer Driven IT Experience is Driving the Corporate IT Expectation… “iPodization”

• Applications are Shifting from Directive to Elective with Collaborative as a Deceiving Middle Ground

• An Almost Endless Set of Opportunities Exist • The Brand Implications Demand that the IT Perform

Seamlessly and Flawlessly• Architecture May Likely Shift From Inside-Out to

Outside-In• The SideShow Technologies Must Evolve in Their New

Roles To Become Inherent in the Mainstream of Systems, Behavior and Discipline

- Business Intelligence

- Wireless and the expanded Web- Web Services and SOA- RFID and Physical Sensing- Rules Based - Informatics


Nee

d &

Im

pac

t

Realistic Ability to Address in HorizonLow

Low

High

High

2. Can We Increase Ability?

3. Can We Increase Need & Impact?

1. Top Priority

Elements of Need & Impact?

• Show stopper• Essential • Simplifies• Capability Req’d• Expedites• Misery• Confusion• Wasted Effort• Efficiency• Credibility

Elements of Ability to Address?

• Common Understanding

• Clear Definitions

• Resources Available

• Resources Capable

• Behavior, Style• Discipline

• Management Bandwidth

• Funding

• Current Underlying Architecture Quality

• Quality, consistency of underlying data• Existing Mgt Process• Commitment Level

• Leader/Sponsor/ Happenator

• In-House Capability + Adaptability Culture = Percolation Rate• Absorption

• Focus and No Interfering Efforts• Vendor Capability• Information Management and Discipline

Private & Confidential Source: Bruce J. Rogow

Readiness Assessment and Management Is Becoming More Critical.. .. It’s More About What Is Practical Than Conceivably Possible


Part of Achieving Value From Most

Money Spent


Summary, A New IT Financial Expectation Is Dominating… ….. Affordable IT & Financial Management

II. Many Started IT Strategy with Affordable IT .. Now They Are Making Affordable IT a Base Condition1. The basic cost of IT must be driven down2. IT budgeting has been self leveling 3. Resulting in lower IT expense as % of Revenue4. While depreciation has been squeezing discretionary spend..

Even though it is often non-IT User Cap-Ex (relents in ‘05-’08)

5. Then Force Economic Discipline

III. Getting More for IT Spent is the new norm IV. IT Is a Complex, Diverse Conglomerate of Operating

Assets1. ROI, TCO, Budgeting without multi-year financial

management can lead to disease 2. Over 70-95% of IT spend is on current asset base

Doesn’t a 2% increased yield on asset base trump an ROI of 20% on a new, unproven <1% new project?

3. Taxation is a mess: how do you pay for increasing IT infrastructure and system retirement in federated models

4. For some, the game is now platform economic strategy..Are you big enough to afford the required IT platforms?

5. For most, IT strategy, true asset portfolio management, multi-year IT financial management and sourcing must be brought together

II. Many Started IT Strategy with Affordable IT .. Now They Are Making Affordable IT a Base Condition1. The basic cost of IT must be driven down2. IT budgeting has been self leveling 3. Resulting in lower IT expense as % of Revenue4. While depreciation has been squeezing discretionary spend..

Even though it is often non-IT User Cap-Ex (relents in ‘05-’08)

5. Then Force Economic Discipline

III. Getting More for IT Spent is the new norm IV. IT Is a Complex, Diverse Conglomerate of Operating

Assets1. ROI, TCO, Budgeting without multi-year financial

management can lead to disease 2. Over 70-95% of IT spend is on current asset base

Doesn’t a 2% increased yield on asset base trump an ROI of 20% on a new, unproven <1% new project?

3. Taxation is a mess: how do you pay for increasing IT infrastructure and system retirement in federated models

4. For some, the game is now platform economic strategy..Are you big enough to afford the required IT platforms?

5. For most, IT strategy, true asset portfolio management, multi-year IT financial management and sourcing must be brought together

Part of Affordable and Financially Sustainable IT


Source: B. Joseph Pine II and James H. Gilmore, The Experience Economy: Work is Theatre & Every Business a Stage, (Boston: Harvard

Business School Press, 1999) p. 166

IT Will Be Challenged to Either Commoditize or Customize


Many Firms Are Coming From a Budget Leveling Period that Balanced Cost Reduction and New Initiative Programs

‘04 New & Enhanced Initiatives

Wireless Pilot

RFID Phase II

Supplier Management Rollout

Self Service

Sales Channel Program

‘03BudgetLevel

‘04 Cost Reduction & Efficiency Programs

Tighten Outsourcing

Renegotiate Telecomm

Asset Portfolio Management Phase II

Server Consolidation Phase III

Partial Offshore

Vendor Bending

‘04BudgetLevel

User Assimilation May Be Limited Regardless of What is Spent on New Initiatives

..as Described in: “IT’s Fiscal Squeeze”Optimize Magazine June 2004http://update.optimizemag.com/cgi-bin4/DM/y/ej4T0GL7y50G4a0CZvt0Au



‘02

Bu

dge

t

1 - 5 % Annual IT Expense Reduction Slope for ‘01-’04• Annual Base Productivity = -10% to -15%• New Initiative Cost = +8 to +12%

… But, the ‘05-’07 Trend May Be Different

‘03

Bu

dge

t

‘04

Bu

dge

t

‘05

Bu

dge

t ?

Many Firms Are Coming from a Budget Leveling Period that Balanced Cost Reduction and New Initiative Programs

Cost Reduction & Efficiency Programs

New & Enhanced Initiatives




5n

4n

2n

3n

1n

Number of

Firms

Typically:• “1 Firm” Top Down

Discipline• Common Business

Processes• Common IT

Architecture, Data, Applications, Process

Industry Average

X %

Folks Who Believe IT is The Most Important Also Believe IT Must Be Managed With the Financial Discipline to be an Affordable Resource!Commonality of Business Process & IT Appears to Be The Key Factor

1.15-1.2 X Industry

Average = 1.15-1.2 X %

.4-.6 X Industry Average =

.4-.6 X %

2 X Industry Average =

2X %

Typically:• Autonomous Business Units &

Functions• UnCommon Business Processes• Some Common IT Architecture,

Data, Applications, ProcessOften:• Desire to Be “1 Firm”

Typically:• In Transition From

Business & IT Hairballs• Losing GroundOften:• Efforts Stymied By

Blinky Behavior




100%

80%

40%

60%

20%

% Utilization of Intended Function

(after 6 months)

Utilization Mapping Is Just Beginning to Become Part of Application or Asset Management.. Firms Now Realize Use and Adoption Isn’t Automatic

100%80%40% 60%20%

% of Intended Users Using (after 6 months)

Very Poor Utilization• 60% Not Using of Function• 20% Using < 5% of Function• <7% Using >40% of Function

Moderate Utilization• 80% Using At Least 30% of Function• 20% Using < 5% of Function• 15% Using >40% of Function

Excellent Utilization• 85% Using At Least 55% of Function• 10% Using < 80% of Function• <5% Using <20% of Function

Is the Issue:• Over Design?• Mis-Design?• Management Discipline?• Training?


Managing IT Solely By ROI Process, TCO and Budgeting Can Lead to Serious Financial Problems

Underlying Assumptions:

• Reasonable Application Quality and Infrastructure Efficiency

• Application types create differences

• 2/3 New & 1/3 replacement development

• Drop downs include refurbishment of infrastructure

Maintenance&

Enhancement

Replacement Development

Year 1 Year 2

Grow/shrinks(?) with the business

Incremental Production

28-35%

Discretionary

NonDiscretionary

Maintenance &Enhancement

Rollout & Deployment

New Development

15-22%

Incremental M + E

& SupportProduction Production

& Support

Source: Bruce J. Rogow, Leverage Partners, ViValdi Advisory Services


LevelI

LevelII

LevelIII

LevelIV

Industry Changing

<1% 2-3%

Business Changing

<1% 3-6%

Mgt Action

1% 4-10%

Mgt Visibility

1% 2-5%

Self- Service

2% 20-40%

Business Systems

10% 15-20%

Core Admin

25% 20-30%

Infra- Structure

60% 25-35%

Mix of Portfolio

Differentiating the Types of Capabilities in the Portfolio Is Increasingly Crucial

Largest Relative IT Investment

Highest Relative Business Contribution

Infrastructure

Core Administration Systems

Business Systems

Management Visibility Systems

Self Service Capabilities

Business Changing Systems

Industry Changing SystemsGrowth

Cost

Management Action Systems

Many Years

Transaction Enabled

Information Enabled

Transformational

For the Most Part, Carr’s HBR Article Was Correct….. but Knowing, Managing the 80/20% Split Is More Crucial

.. And Strong Foundation and Blended Asset Portfolio Is Essential


Advisory Services


Recession Focus…Cost, Yield

Joined Up Business

Innovation

Leverage & Connection• EAI• Quick and Eventually Dirty

Consolidation• Eliminate• More with Less

Re-Platform• ERP

A Rational Blend Is Best.. But, • Diabolic Opposites• Dramatic Shifts Cause Issues• Shift Outruns Capability• Long Term Waste or Over Missed Opportunity Thrives


The ViValdi Model Suggests CIOs Can Lead All Positions in All Four IT Seasons…

..as Described in: “Anatomy of Power”Optimize Magazine October 2004http://update.optimizemag.com/cgi-bin4/DM/y/ej4T0GL7y50G4a0CqHr0AV


1. Direction Bottom-Up Top-Down Across T-D;B-U;Across

2. Key Horizon Discontinuity Action/Task Project Endeavor

3. Other Horizon Milestone Budget ROI Program/Project

4. Funding Source Bus. Unit (OPM) IT Budget Savings Bus. Unit (OPM) CEO

5. Funding Amount Initially Small Medium Small-Medium Massive

6. Starting Point New POV* Existing Assets Existing Systems Platform Kit

7. Benefit To… Innovator IT Business Unit Enterprise

8. Role of Standards Little Decree Practical Platform Defined

9. Architecture Separate Critical Loose Inherent

10. Technology Maturity Weak? Industrial Pragmatic Match Risk Profile

11. Key Skill Innovative Folks Tech& Fin Anal Bus. Decomp. Process AnalysisMulti-Discipline Disciplined Problem Solve Endeavor Mgt

12. Key Challenge Momentum,Value Resistance Identification Scope,Change

13. Style Loose,Creative Near Fascist Detailed Impresario

The 4 IT Seasons Demand Separate Leadership Strategies….

Issue Innovation Consolidation Leverage Re-Platform


… a fundamental decision.. does the firm want seasonal or longer term leadership?



What are Criteria for Evaluating a CIO?

IT Management:

• Builds and utilizes an IT management process

• Understands roles and responsibilities

• Assesses and abates IT Risk

• Experienced with IT development, test and deployment process

• Experienced with IT architecture, infrastructure and operations

• Experienced at managing the on-going maintenance, enhancement and support

• Experienced with the multi-source environment

• Utilizes appropriate practices vs. best practices

Leadership:

• Understands Business

• Instills confidence

• Communicates clearly – has executive presence

• Can sell the critical ideas and programs

• Rolls with the punches

• Obtains buy-in

• Understands how to manage the organization

• Fits culture and style

• Has charisma or aura

• Has Drive.. Can Do … Proactive

• Demonstrates Backbone

• Operates with Integrity

• Develops People

• Recruits high quality staff

• Motivates people

Context:

• Has broad Business Perspective

• Has an internal gyroscope

• Draws on deep Experience

• Knows what has to be done

• Knows the order of getting things done

• Understands risk

• Understands the financial implications

• Understands and appreciates the technology

• Works Diligently

• Operates in a Disciplined fashion

• Judges people well

Source: Bruce J. Rogow ,ViValdi Advisory Services and Leverage Partners, Inc.



Does the IT Leadership Have the Right Folks on the Bus for Shifting Seasons?

Consolidation

Connection

Innovation

Re-Platforming

IT Executive Current Increasing Future No Apparent Need

IT General Management Minor Minor Future No Apparent

Need

IT Section or Functional Management

Current Increasing Future No Apparent Need

Endeavor Management Minor Increasing Future No Apparent

Need

Program Management

Minor Increasing Future No Apparent Need

Project ManagementCurrent Increasing Future No Apparent

Need

IT Process Management Current Increasing Future No Apparent

Need

Subject Matter Expertise Current Increasing Future No Apparent

Need

Required Capability in Place

Required Capability Needs Improvement

Required Capability Lacking


ManagerRole Focus Objective Style

Endeavor Visionary The What Business Cases ImpresarioMomentum The Story PassionOverall Funding Scenarios

Program Happenator What to How Freeze Specification PragmaticDoability Freeze Priorities FlexibleScale, Scope Get ResourcesBudget Get Commitment

Force Return

Project Delivery How to When,Where Project Plan Heads DownProject Steps Time, Budget DisciplinedDetail, Assignment Specification Inflexible

Quality

Expect and Demand Conflict Between the Levels

Private and Confidential


Advisory Services

Endeavours Demand a Three Tiered Management Process…..


Each Horizon Episode Has Vastly Different Focus and Process..

Time

Thinking (Endeavor) Horizon (5-10 Yrs)

Scale, Scope, Cost, Return, Risk

2nd Episode Horizon

Base Camp

• Broaden BeachHeads

• Further Original BeachHeads

• Governance Established

• Architecture Templates

• Scaling Considered

3rd-xth Episode Horizon

• Broad Coordinated Execution, Enablement

• Management of Program Management

• Broad Governance

• Broad Architectural Discipline

Yth Episode Horizon

• Fill In Sustaining Portfolio

• Reach Further Out

• Transparent Execution

• Governance and Branding Fully Functional

• Multi-Tiered Architectures on Release Schedule

1st Episode Horizon Beach Head• Establish the

BeachHead

Initiation

Momentum

Exploitation

??????


Four Levels of e-Leadership

1. Each Initiative

2. Initiative Momentum

3. Joining Up Initiatives

4. Whole Portfolio

Concept

RequirementsDelivery

Realization


1. Re-Casting the Role of IT as the Seasons and Expectations for IT Change

2. Sorting Out IT “Fit for Purpose”

3. Remembering that Alignment Is Not About Just Front End Direction or Priority

4. For the Next Wave of IT, Adjusting Management Approach and Pace Is Essential If You Are to Succeed with High Hanging Fruit

5. ViValdi Style and Behavior Must Return to be Successful

6. IT Must Dramatically Adjust Its Agenda, Focus, Approaches, Skills and Models of How IT Does Business

In Summary, the Emerging Role of the CIO Will Revolve Around….

rogow slides

Business

vivaldi odyssey

different game

summary issues

odyssey distribution

whoandwhenare issues

different time horizons

theirways forwardare

common odyssey findings