Five elements of IT strategic management

Today, most business and IT executives face a common challenge: how do you know if your business' IT solutions are effective and efficient? Most of them were at a loss. Some people worry that the IT budget is too large, or that the returns are not meeting the requirements. But how much budget is too big, and how much return is required for investment in IT? Merely referring to the standards of other companies is not enough to answer this question.

The problem is that today's executives don't understand much about the role and cost structure of IT than they did twenty years ago. Some companies have $20 billion in annual sales, but they don't know how much they spend on business applications each year. Do you know what the annual cost of each IT project in your company is? Do you know how much it costs each time a user makes a call to the service desk? Do you know how much manpower is spent maintaining the status quo -- making minor repairs to existing systems that contribute little or no profit to the business?

Understanding these issues is important because, if the value and usefulness of IT is to be enhanced, the "internal IT market" must be managed: the matching of supply and demand for IT products and services. Managing the internal IT market also requires a profound shift in corporate behavior -- one so significant that even the savviest CIO can't do it alone.

A company's use of IT cannot be made more effective simply by managing ambitious projects, hiring competent people, or even looking at other companies' IT spending and purchases. To make breakthroughs in this area, and to sustain the results, the entire management team must be committed to implementing five core elements of strategic IT management: top-down planning, integrated governance, standardized implementation methods, balanced Supply and demand and platform management.

Planning from the top down

When planning for IT, many companies spend most of their energy on projects that solve the tough problems that middle managers face on a day-to-day basis. Such projects are called "maintenance projects," and they can be useful in many ways, but they tend to have low or negative NPVs. Sustainability projects can easily cost 10 to 20 percent of a business' IT budget, but most of them don't improve business profitability.

In order for companies to achieve greater returns on their IT investments, they must improve their planning processes so that IT projects better reflect business objectives and business strategies and achieve real benefits. Traditionally, senior business executives spend most of their time determining the future direction of the business, and business executives with advanced ideas spend at least as much time, if not more time, researching how to get there and why. can succeed.

Let's look at the planning process for an insurance company. The company's senior executives spent three months formulating the company's strategy, selecting only financial metrics such as operating income and net profit. Then it takes another three months to develop the budget for the next fiscal year. When asked how much time they spent thinking about how the business could achieve the strategic goals they set, they answered that there was no dedicated planning in this area after the budget was completed, but business managers made their own plans. Since they didn't decide how to reach the goal in the first place, they had no way of knowing if the goal was feasible. Nor did they take steps to achieve the desired results and benefits.

As a comparison, let's take another look at how a successful company conducts first-class, top-down planning. The company's executive team starts with broad goals, which may be financial goals, or qualitatively demanding improvements in performance. It is up to managers to determine how these goals can be achieved and to propose a corresponding set of actions involving changes in people, processes and technology. It is up to the executive team to determine whether these initiatives and investments deliver the right return in cost savings or increased revenue, and whether the plan matches the company's financial capabilities, shareholder expectations, and other factors.

The executive team then approves the investment plan and revises the original goals based on the return on investment. Managers are empowered to implement investment plans and are responsible for the return on investment for each project. The final step is done by the executive team, who adjust the budgets and goals of each business manager based on aspects such as revenue, sales, and performance.

An effective top-down planning process breaks down the budgetary divisions of each function, forcing top management to carefully consider how IT investments are allocated among various internal departments market" share). This method is more efficient than "snowplow" budgeting (with only minor changes to last year's budget) or "zero-based" budgeting (zero-based budgeting does not take into account last year's budget, so business unit leaders cannot Not giving a reason to spend every penny). Starting from business strategy, the top-down planning process answers the following questions:

●In business transformation, what kind of personnel and how much money must we invest in order to obtain quantifiable benefits---increase the real value, improving its profitability?

● How expensive is it to run the existing system (maintaining the status quo in production support and operations)?

●What is the maximum amount of money we can invest to improve our existing business capabilities (the benefits of which cannot be quantified)?

Overall Governance

Once the investment proposal has been approved, the company should manage the transformation of people, processes and technology as an integral project to ensure results. Many companies try to loosely attach their enterprise resource planning (ERP) system or customer relationship management system (CRM) to small projects. This approach will not succeed because it fails to take into account that decisions about people, processes and technology are interdependent. For example, when it comes to implementing an ERP process centrally, you cannot make the right decisions without understanding how it will affect the performance of the process. As another example, you cannot make the right decisions about changing a process without understanding the cost of adapting an existing system to support a new process.

Managers who successfully execute transformation projects without careful planning often rely on personal connections and coercive power to achieve goals -- an approach that won't work for any project manager. Lack of overall planning often results in projects having to be reinvented or corrected. In addition, projects fall behind schedule, resources are wasted, and they sit in place waiting for decisions.

In the early days of a project, managers have many opportunities to make their own demands on the project, but this time does not last long. During the project gestation and planning stages, senior managers need to position the project to drive changes in processes, systems, and job responsibilities that have a material impact on the company's profitability. Once the project has been implemented, it is very expensive for managers to make changes to the project, because the cost of the project is mainly incurred at this stage. For managers, the challenges they face in IT projects include optimizing project scope and objectives, gaining buy-in from top management, and ensuring that the changes brought about by the project are maintained. Overall planning can improve the ROI of IT projects, reduce the risk of project failure, and make project budgeting and scheduling more precise.

When the project is in the final stages, top management should ensure that the system has been properly and thoroughly tested. They have to make sure that the entire organization has changed in every way (communication, training, standard operating procedures, policies, etc.) and that employees don't resist the change when the system transformation actually takes place. Without diligent organizational change management, employees risk reverting to old ways of working, change is not sustainable, and ROI suffers.

Enterprises use integrated governance methods to develop comprehensive plans for the implementation of transformation projects (IT management is the operation of a company's information and information systems, the identification of IT goals and the actions taken to achieve those goals; and IT Governance is the use of top management (the board of directors) to oversee management's processes, structures and linkages in IT strategy to ensure that such operations are on the right track -- editor's note). The various business units and supporting departments (IT, HR, Finance, etc.) work closely together as a whole and share responsibility for the success of the project. Managers must avoid unclear strategic orientation, incomplete requirements description, poor management of people and process tasks, and poor system testing.

It's not enough to just hire the right people to work on the project, you need to govern the project. Some managers think that employees will automatically get things done. Most employees have good intentions and will try to do what they think is right. But every employee in the company judges what is right and what is wrong from their own standpoint. Decisions made by people who lack the big picture may not be optimal for the organization as a whole. Effective project governance can overcome this dilemma by ensuring that you see a broader perspective and involve key stakeholders and decision makers in the project.

Effective project governance has a two-tiered structure: the project team is responsible for planning, advising, and executing the project, and the team must report to a project approval committee or steering committee composed of senior management. The Project Approval Committee (PAC) is responsible for the success of the entire project. It can be seen that, for a project to be successful, the project approval committee must be able to view the problem from the right perspective and give the project team the right authority.

Standardized implementation methods

Top-down planning and overall governance can only ensure that the company "does the right thing", and in order for the project to achieve final success, the company must also learn to "correctly do the right thing" work".

Staff assigned to project teams often lack the necessary experience. In today's fast-paced, streamlined work environment, senior managers often overestimate the capabilities of their employees. As a result, they arbitrarily let employees take on new responsibilities, regardless of their competence. In addition, few companies can ensure that all project members perform their job responsibilities at every stage of project implementation. Another key reason for project failure is that the company failed to clearly define the specific roles and responsibilities of project members, and members did not agree on this.

The cause of project failure often occurs at the beginning and end of a project. In the initial stages of the project cycle, inaccurate definitions of business goals and requirements can delay project progress. The most common shortcoming is the inability of the project sponsor to clearly describe the business requirements. As a result, there are many back-and-forths regarding the choice of project direction; in some companies, this back-and-forth occurs until the end of the project. Such mistakes are costly: they can double the cost of a project over budget. This is the case with a large cash-to-cash management system project. Although the project budget was only $10 million, the company ultimately invested more than $20 million in the project.

In the closing stages of a project cycle, the inability to get employees to change behavior patterns in their day-to-day work is one of the common causes of project failure. This situation occurs in many sales automation projects. Salespeople are reluctant to use technology imposed on them by company leaders. Senior executives may fully support the project, but mid-level managers and various related business personnel do not. Project goals cannot be achieved without the full commitment of executives at all levels and the support of the necessary people and process shifts.

This kind of project failure can be completely avoided. There are several specific principles that enable managers to reduce the probability of making mistakes. The approach of "organizational readiness" (the degree to which an organization is ready for change) has proven to be effective, encompassing all the key steps required for project success. For example, "Listening to the Voice of the Customer (VOC)" ensures that the business has thoroughly assessed the project's business needs in terms of people, processes, and systems, and it engages all parties on the question of "what the project can and cannot bring to the business." form a consensus.

Other methods to reduce the probability of project failure include: conducting pilots to test new processes, using analytical methods to ensure that relevant personnel have a clear understanding of roles and responsibilities, and implementing rehearsal methods to ensure that the specific needs of each department are in the project cycle. was considered early on. Applying these reusable, standardized methods greatly increases the probability of a project's success.

Balancing Supply and Demand

Many companies say their projects are prioritized, but few actually put their priorities into practice. As the name suggests, higher-priority projects can "borrow" resources from lower-priority projects. But actually doing this means losing the interests of some people in the business, so many managers are often too careful to avoid conflicts of interest and fail to make the right trade-offs between priorities and interests.

When an enterprise is carrying out multiple projects at the same time, bottlenecks will occur, each project cannot get enough resources, and people are rushing between projects, wasting time. Unfortunately, managers are rarely aware of the seriousness of resource thinning. If existing projects require more resources than the business can handle, if employees cannot afford time off or training, if a department finds it lacks the flexibility to deal with unexpected events, managers should conclude that the company has too many simultaneous projects .

To truly balance the supply and demand of IT projects and services, companies need to be more transparent about what people are doing (checking the time and skills needed to do it), how much it costs (projects and costing), what is needed the same level of service (performance appraisal). Failure to collect, organize, and make decisions based on this information may be the biggest mistake many IT departments make. The information they hold is often incomplete and accurate, and is scattered across different databases. But if handled properly, this problem plaguing IT departments can be overcome.

Let's consider the data problem. Currently, the data needed to effectively manage IT projects and services is spread across different databases. For example, the financial information of the project is in the financial system, the resource information is in the human resources system, and the progress of the project needs to be found in the stage evaluation report and project plan. Project costing information is usually not available.

Typically, only IT managers have regular access to this data, so the burden of project decision-making falls on them. But in many companies, business unit managers and IT managers fail to work together across functions to balance supply and demand. If the IT department provides solutions that are too advanced for the business to adopt, there is no benefit to the business at all. The resource model for each project should take into account not only IT resources, but also the business resources needed to complete the project. Project accounting should take into account the cost and profit of the project.