IT Strategy Considerations

Hitachi Consulting Strategy Business Forum

September 20, 2006

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The Strategic Void

� Many companies do not have a vision with actionable strategies reinforced through metrics and rewards systems

� Most companies do not integrate IT into strategic thinking and processes

IT Projects are often driven by external requirements, ad hoc business unit demands and external sales pitches without making the proper strategic connections….

-- Y2K, SOX, ERM, CRM…….

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Strategy:

the art of devising or employing plans or stratagems toward a goal (Webster’s Dictionary)

� Successful strategy must fully incorporate

PEOPLE, PROCESSES, SYSTEMS

� Successful strategy must create focus – it should also clarify what you won’t do

� Many tools work to facilitate the process; for success, all require actionable, measurable targets for which individuals are held accountable

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Why IT Strategy Matters:

� IT is a key means to make business strategies actionable

� Translates data to management information (key metrics)

� Creates the critical transparency

� Complexity, cost and time horizons associated with IT projects require strategic focus and disciplined planning

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The Sad Truth:

Even when IT is incorporated and aligned with business strategy, IT projects typically are …

a) LATE

b) OVER BUDGET

c) MISSING PROMISED DELIVERABLES

d) TWO OR MORE OF THE ABOVE

… due to the collision of good intentions with bad execution.

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Why Bad Things Happen to Good IT Strategies:

� The Magic Button Dilemma

� The Lure of “Available” Resources

� The Fear Factor

� The Fallacy of Consensus

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The Magic Button Dilemma(or let’s throw in the kitchen sink)

The app vendors and IT guys said it could be done (and project has mgmt attention & budget $$) … but

� There are significant costs to accommodating all those “nice to haves”

� Immediate hard dollar costs

� Ongoing soft dollar costs associated with added complexity and obscured transparency

� There are performance and maintenance implications (more costs!)

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The Lure of “Available” Resources

No one is lining up to volunteer and all the best people are too busy. In the absence of your dream team you are tempted to:

� Accept nominated “available” resources

� Turn to corporate staff to design and implement on behalf of business units

� Rely too much on consultants

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The Fear Factor

Strategic initiatives involve change

People view change as a threat to the status quo (their “turf”) or a risk to their personal security, SO…

Faced with the choice between changing one’s mind and proving that there is no need to do so, almost

everybody gets busy on the proof.- John Kenneth Galbraith

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The Fallacy of Consensus

In the interest of obtaining “buy-in” or avoiding conflict,

� Sub-optimal solutions (e.g., automation of existing processes) are accepted at project team level

� The Steering Committee and/or executives agree to compromises (see also Magic Button Dilemma)

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So…. What’s a Project Sponsor to do?!

� Educate and get informed buy-in by executive management, including full commitment to required change management initiatives

� Maintain ownership at company (line executives!), with judicious use of consultants

� Apply an integrated project approach and robust project management techniques

� Ensure clear understanding of success factors

� Establish and obtain explicit agreement by executives, steering committee and teams to clear ground rules

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The Role of Consultants

� What they can do:

�Provide expert guidance and tools – they’ve done it many more times than your company

�Help facilitate group sessions

�Reinforce tough messages to executive management during the process

� What they can’t do (but may try to do):

�Substitute for a lack of leadership

�Drive a successful project without sufficient

company involvement

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Project Initiation

Business Direction

As-Is Process

Preliminary To-Be Design

Package Capabilities

Package Selection

Refined To-Be Design(Package-based)

Implementation Plan

System Projects

Process Changes

Org Changes

Implementation Phase

Key Business Requirements

New IT Architectures / Standards

• Application• Data• Technology

• Interoperability

Business

Process

Performance Metrics

Integrated Project Approach

As-Is ITIT

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Elements of Robust Project Mgmt.

� Project standards

� Structured work plan

� Scope control

� Issues management

� Successful knowledge transfer

� Clear ownership of defined deliverables

� Clear and detailed documentation

� Quality assurance and risk management

� Lessons learned process

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IT Project Success Factors

� Explicit deliverables connected to business strategy

� Strong executive leadership and on-going support (corporate and business unit)

� User driven

� A committed, knowledgeable team with broad representation (key personnel must be made available)

� Robust project management structure and process

� Early escalation and resolution of issues

� Active change management process, including strong communication and training components

� Clear ground rules

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Combat-Proven Project Ground Rules

� Continually manage project scope

� Openly disclose all ideas and agendas

� Escalate and resolve issues early

� Prohibit software customization

� Standardize where feasible

� Focus on major cost-benefit trade-offs (use an “80-20”approach and data-based decision-making)

� Either meet deadlines for providing input or accept the team’s recommendations

� Wear corporate hat first, local business unit hat second

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Tactical Elements to Success

� Don’t start a project until executives have explicitly agreed to key elements

� Always manage expectations

� Keep change management “front and center” in discussions and approach

� Communicate options and trade-offs when confronted with major issues

� End product implications of compromises related to success factors and ground rules

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Typical IT Traps to Resist

A compelling business case and demos geared to well defined deliverables

Falling in love with new technology/apps (i.e., drinking the “kool aid”)

Up-front education and buy-in of key stakeholders

Implementing new apps without modifying processes

Early alignment w/ mgmt. re roles and responsibilities

Taking the lead on apps design/implementation

Prior to project approval:external focus; after kickoff: defined deliverables and ground rules ( ROI)

Unquestioning client support (aka the YES BIAS)

THE TRAP: THE REMEDY:

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Benefits From Strategic Approach to IT

� IT becomes a business enabler

� Clarity around IT priorities based on defined business requirements

� once priorities are established, timing of projects can be tied to budget considerations and IT project returns

� Catalyst to streamline business processes, improving effectiveness, efficiency and internal controls

� Enhanced utilization of selected IT tools

� Improved ROI on IT spend

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Final Thought

Plans are only good intentions unless they immediately degenerate into hard work.

- Peter Drucker