In the New Digital World, it’s Time to Write a New IT Charter

Finding the right balance between operational excellence and business innovation

The CiO.com 2017 State of the CIO survey found that 72% of respondents said they were struggling to strike the right balance between operational excellence and business innovation. 87% of respondents also said that “juggling transformational and functional responsibilities has become a permanent job requirement, not a short-term challenge.”

To effectively manage this multifaceted workload will require CIOs and their leadership teams to think very differently about how the IT function is organized; how their project prioritization process can accommodate ever-increasing demand; and how they can recruit, develop and retain the relevant skills and capabilities needed to carry out the new work of IT. As Phil Potloff said when Edmunds.com put him in the CIO role several years ago, “one of the reasons they asked me to be CIO was to bring new thinking, new processes and new ways to get work done.”

Rethinking the IT organization model

Traditional IT is organized around the functions it carries out and the services it provides instead of the constituencies it serves and the business capabilities it enables. What would your organization look like if you structured it around the 4 Zones Model to serve multiple constituents and enable a multitude of business capabilities that deliver a variety of desired outcomes, as shown on the slide below.

The 4 Zones Model is designed to provide and new organizational framework that helps CIOs and their leadership teams find the right balance between:

  • A need for innovative approaches to enable their organizations to deploy five disruptive technologies: Cloud, Mobile, Social, Data Science and Internet of Things.
  • A need to evolve from lengthy waterfall-based technology implementations to the more rapid agile development approach. The Plan, Build, Run model will be displaced by a Co-Develop, Assemble, Consume model.
  • A need to embed a trapped value assessment process to identify opportunities to shift resources and funds from maintaining legacy systems of record to developing new systems of engagement and systems of intelligence.
  • A need to utilize new methodologies and tools to recruit, develop and retain the relevant new skills and capabilities necessary to lead and manage a digital enterprise.

It is also designed to better enable IT to enhance the critical business capabilities needed to effectively operate in each zone. For example, in the performance zone, this outcome-based approach with internal business partners starts with the question: How can technology better enable the customer engagement or revenue-generating capabilities of your business? The answers to that question help to align future IT investment priorities with critical business outcomes.

Rethinking the IT project prioritization process

In most traditional IT organizations, the project prioritization process is tied to the annual planning and budgeting process. It is driven primarily by resource capacity and funding constraints that ultimately determine which projects make the cut and which don’t. This results in a high level of frustration for those internal customers who can’t get what they need and want for their businesses or support functions.

By contrast, early adopters of the 4 Zones framework and tools as shown in the chart below have started the prioritization process by segmenting potential new projects in the following way:

  • Are they sustaining innovations or disruptive innovations?
  • Are they enabling systems productivity and cost optimization?
  • Are they increasing business unit performance and revenue growth?
  • Are they enabling business model transformation?

Each project has its own time-to-value cadence and metrics but all of them require IT to be fast, adaptable and bring an enterprise-wide perspective to the priority-setting process.

In addition, rather than using resource capacity and budgeting constraints to make project prioritization decisions, IT Executives and their internal partners should start their prioritization discussions by asking three key questions:

  1. Should we do it? Does it align with and support critical business outcomes?
  2. Can we do it? Do we have the relevant skills, capabilities and tools to achieve the outcome?
  3. Did we do it? Do we have the right metrics to measure the achieved outcome vs. the desired outcome?

This new approach moves project prioritization from a budget exercise to a business value creation exercise.

A new charter for the new work of IT

IT’s current charter is primarily built around the old work of IT as shown in the left-hand column of the chart below. While much of this operational excellence work must continue to be done, it does not reflect the new technology-enabled innovation work shown in the right-hand column that companies increasingly expect IT to deliver.

The new work of IT also calls for a complete reassessment of the relevant skills and capabilities the IT team needs to manage this multifaceted workload. For example, the skills needed to deploy an inside-out user interface design approach are very different from the skills needed to deploy an outside-in user experience design approach. As the CIO.com survey validated, finding the right balance between operational excellence and business innovation is now a permanent job requirement for IT.

As such, I think it’s time to write a new charter for IT. A charter that properly reflects the new and expanded role that IT brings to any organization. A charter that:

  • At the strategic level, defines IT’s role in enabling the transformation of a company into a digital enterprise
  • At the operating level, defines IT’s role in co-developing the business and functional capabilities with its internal partners to enable a company to successfully compete as a digital enterprise
  • At the functional level, defines IT’s role in recruiting, developing and retaining the new skills and capabilities needed to support a digital enterprise

Unfortunately, left to my own devices a task of this magnitude is well beyond my reach. Therefore, I am looking for any brave souls who would like to embark on a collaborative venture to achieve this goal. If you are one of those people, please let me know.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

In The New Digital World, You Have to Win the “Technology-Enabled” Business Innovation Game

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The connected customer wants a different customer journey

Technology-enabled innovation is not only disrupting the competitive landscape, it is redefining the user experience value proposition across a multitude of industries. It is also putting companies on notice that if you can’t successfully engage your customers in this new digitally mediated world you are on your way to being Uberized.

The five waves of digital disruption (social, mobile, cloud, data analytics and connected devices) are completely altering how people connect, communicate and discover information. What these individuals are looking for are “friction-free” user experiences that delight and inspire them. These new tools affect how customers make decisions which affect their entire customer journey which ultimately affects their customer lifetime value. Simply put, it defines the differences between the traditional customer and the new connected customer.

A Framework for Organizing and Implementing Technology-Enabled Business Innovations

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In his book Escape Velocity – Free Your Company’s Future From The Pull Of the Past, my brother, Geoffrey Moore, put forth a three-part innovation framework that is designed to significantly increase the ROI on innovation investments. At the core of this framework are three distinct innovation playbooks ( see chart above ) that clearly define the mandate and desired outcome for each one. Here are the key diagnostic questions that clarify those mandates and outcomes:

  • Have we differentiated our offer enough to gain real competitive separation?
    • Have we created a truly unmatchable offer?
  • Have we neutralized offers with enhanced features from our reference competitors in a timely manner?
    • Have we gotten to good enough fast enough?
  • Have we optimized our opportunities for gains in resource utilization and cost reduction?
    • Have we reclaimed unproductive resources and redeployed them against differentiation or neutralization opportunities?

Why do so many companies fail to get the ROI they want from their portfolio of technology investments?

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In a recent study on IT innovation, 90% of CIOs said that technology-driven innovation is crucial for achieving competitive advantage. Yet on average, just 14% of IT budgets are earmarked for innovation and only 23% of companies report very positive results from their IT innovation efforts.

The answer to the question above lies in the way companies approach innovation and why they struggle to turn good ideas into sustainable revenue producing products and services. First, they don’t distinguish between the different types of innovations and the outcomes they are designed to deliver. Second they manage all innovations with the same processes and tools which leads to multiple sources of waste and failed initiatives as the chart above highlights.

Two Rules of Thumb

There are two key rules of thumb that can keep you from making the mistakes many companies make and result in most innovation initiatives not achieving their desired goals and outcomes.

  1. Never tie differentiation and neutralization innovation programs to the same release schedule. Differentiation is all about how far while neutralization is all about how fast. Combining the two dumbs you down and slows you down.
  2. Best in class is appropriate for optimization innovations only. It is too low a mark for differentiation ( goal is beyond class ) and too high a mark for neutralization ( goal is good enough ).

A new approach to innovation calls for a new mindset and a new game plan

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Regardless if it’s the CEO, The Chief Information Officer or the Chief Innovation Officer who is driving the innovation process, companies must approach things with a very different mindset and a different plan of attack:

  • They need to be very good at neutralizing competitive disruptions quickly and effectively.
  • They need to be relentless in identifying and redeploying trapped value in legacy systems and operating processes that sap the organization’s resources and forward momentum.
  • They need to be Darwinian in their prioritization and allocation of resources against any major disruptive technology business innovation and make sure they only fund one at a time.
  • They need to commit to rapid iterations of minimum viable products and services and make changes based on actual customer adoption and utilization metrics.
  • They need to constantly experiment and be willing to fail fast and learn fast.
  • They need to leverage the new portfolio of digital tools to create compelling and enduring customer experiences. 
  • They need to harness the power of machine learning and A.I. to gain real-time insights into what’s working and what’s not working.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

In the new digital world, you have to change the narrative about IT

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In far too many companies, IT is still seen as a cost center/support function rather than as a direct contributor to revenue, margin and profit growth. Most of the CIOs I’ve talked with over the past several years admit that their budgets have been reduced or kept flat. This says that for whatever reason, the companies have not seen fit to invest in technology as a competitive differentiator, or if they have done so, they’ve by-passed IT. That legacy mindset and behavior is a death knell for any company which wants to transform itself into a digital enterprise. So how do you get out of that situation?

Start with a new vocabulary

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It turns out in the new world of digital disruption that vocabulary is just as important as performance. Simply put, if you can’t effectively communicate the role and business value of IT you are unlikely to get the recognition and credit for the contribution technology is making to the competitive performance of your organization. Some CIOs I’ve worked with have started by changing the name of their group from IT to:

  • Enterprise Technology Solutions
  • Global Technology Services
  • Technology Systems & Services

Here are some examples of how you can use a new vocabulary to communicate what one CIO I know calls the “new style of IT.”

  • Stop talking about the IT cost budget and start talking about the technology investment portfolio
  • Stop talking about uptime and start talking about time to value
  • Stop talking about user interface design and start talking about user experience design
  • Stop talking about technical debt and start talking about releasing and redeploying trapped value
  • Stop talking about systems infrastructure and start talking about how digital disruption will impact your company’s operating and business models

From fact telling to story telling

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Many CIOs go to great lengths to tell the IT story with a set of facts. Everything from IT spend as a percentage of revenue to the number of projects delivered in a given period of time. Facts are good at documenting what IT does but they aren’t effective in changing people’s attitudes and mindsets about the value technology brings to the enterprise.

While it may seem crass to some, the CIO and their senior leadership team have to become aggressive marketers of the mission critical necessity for their organizations to embrace digital technology as a competitive weapon.

What does it take to tell a really compelling story? Here are some suggestions from John Bates who has trained hundreds of Tedx speakers:
“Every story needs the 5 C’s – Circumstance, Curiosity, Characters, Conversations and Conflict.”

  • To craft a compelling story, start by laying out the circumstances that will provide the context for the content you want to deliver
  • Use curiosity to keep the listener engaged and wanting to hear more about your story
  • Present real characters and real conversations to give your story reality and credibility
  • Utilize real examples of conflict as the motivation for the stories that resolved them

You can start this storytelling process by asking and answering some core questions:

  • How do you tell the technology business value story in your company today?
  • How well is that story being received?
  • What storytelling tools and processes could improve your ability to tell the business value story?
  • What do you ultimately want the technology brand to stand for in your company?

Some CIOs have already started to tell a new and different story about the role and value of technology within their companies. This story will take many shapes and come in many different story telling formats.

My current plan is to engage with those CIOs who have started down this storytelling path to see if we can assemble a set of practices and tools that have started to change the narrative about IT in their organizations. If you would like to participate in this process, please let me know.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

In the new digital world, time to value defines competitive advantage

A recent IBM study concluded that “no business can remain relevant by making tweaks. The only way to stay ahead of disruptive change is to embrace it, which means being able to develop and release new products and services within weeks or even days.”

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One of the major implications of the unprecedented level of digital disruption is that companies must find ways to get a 10x compression in their product/application development release cycles. Simply put, how can they go from 6 to 12 months to 6 to 12 weeks to 6 to 12 days. Granted, not all releases have to get churned out in days, but those products and applications that are essential to delivering compelling and enduring customer experiences must find a way to meet this new compressed time standard.

Many companies have begun using different development processes and tools including Agile, Lean or DevOps to increase their time to value. While there have certainly been some improvements, there has also been continued resistance from long term developers who still prefer the more methodical waterfall approach. One would be tempted to “vote them off the island” only to discover that they are the only folks on the IT team who actually know how the systems of record work.

Using frustration as a motivator to change

Many CIOs I’ve talked with have complained at how frequently project priorities are changed in mid-stream leaving their developers angry and frustrated. One CIO who I work with has met this challenge head-on by limiting product development timelines to 90 days or less. He readily acknowledges that he will soon need to reduce it to 60 days and then to 30 days.

A core element of this new approach was to get everyone on his team and their internal end users comfortable with developing a minimum viable product (MVP) in that time frame and then make upgrades and changes based on end user feedback. He also has his developers go out on the shop floor and perform the work of their customers to see firsthand if the product or service is doing what it was designed to do, and, if not, what changes need to be made.

While he initially got some push back from his developers, they soon came to appreciate the fact that by taking this time compressed approach and making a fundamental commitment to rapid iteration, they could actually complete something they started rather than engaging in a series of false starts.

A 10x change requires new ways of imagining what’s possible

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Most well-established companies have invested tens of millions of dollars in developing, installing and maintaining the systems of record necessary to operate their businesses. In many cases, these investments have served them well and enabled them to sail the competitive seas like the Queen Mary whose three to four-day trip from New York to Liverpool was the standard.

The new digital disruption from systems of engagement and systems of intelligence is not only turning the competitive landscape on its head but it is also forcing companies to reimagine how they engage with their customers, employees, supply chain partners, and other key constituents. Until the Hyperloop was recently conceived of, no one thought it would be possible to go from Los Angeles to San Francisco in 30 minutes.

The best 10x change example I’ve seen recently is the difference between NASA and SpaceX. When NASA launches a rocket into space, they have 450 people in their control room monitoring the flight. When SpaceX launches a rocket, they have 45 on their way to two – a pilot and co-pilot. NASA imagines itself as a space exploration company while SpaceX sees itself as a technology company in the space exploration business.

To compete in this new world of digital disruption, companies across all industries have to start to reimagine who they are, what they do and how they do it.

Organizing and prioritizing for maximum speed and throughput

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Early adopters of the 4 Zones framework and tools as shown in the chart above have found it helpful to segment their new product and application releases in the following way:

  • Are they sustaining innovations or disruptive innovations?
  • Are they enabling systems productivity and cost optimization?
  • Are they increasing business unit performance and revenue growth?
  • Are they enabling business model transformation?

Each zone has its own time to value cadence and metrics but all of them require IT to be fast, adaptable and bring an enterprise wide perspective to the priority-setting process.

One way to move toward a 10x improvement in time to value is to strip away the multiple levels of decision making governance that bog down most IT project approval processes.

By example, one company I’ve talked with has a three level governance model that includes:

  • IT Governance Board
  • IT Steering Committee
  • Six IT Operational Councils

Contrast that with another company I’m working with that has one Executive Product Prioritization Committee that meets once a quarter and agrees on:

  • What IT will deliver in the next 90 days
  • What are the 3 key strategic business priorities IT needs to support for the next 90 days

Moving at the speed of trust

Another way to get step change improvements in time to value is to breakdown hierarchical, silo-based decision-making processes and convert them into horizontal cross-enterprise decision-making processes. In order for CIOs to facilitate this shift, they need to establish or regain a high level of trust with their internal business partners that IT merits a seat at the business growth discussion table. Once this level of trust is in place, speed to market goes up and costs go down.

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What does it take to make this new trust based process work? Here are some criteria to consider:

  • An agreement that all the key stakeholders must participate from the beginning to the end of the development cycle
  • A mutual desire to get something done quickly
  • A willingness and desire to learn, grow and change while on the journey to the final outcome
    • Plan Long – Execute Short
  • A common understanding of what needs to be done to deliver the ultimate user experience to customers, employees, supply chain partners or other key constituents
    • Replace inside-out user interface thinking with outside-in user experience thinking
  • A mutually understood vocabulary and taxonomy to discuss and resolve, build, or buy trade-off decisions
  • A series of metrics that align future technology investment priorities with critical business outcomes

Early practitioners of this process have significantly increased their time to value and have greatly reduced the costs of do-overs or extended release schedules driven by unclear or changing requirements. These results suggest that moving at the speed of trust is one way to achieve sustainable competitive advantage in the new digital world.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.

Using the 4 Zone Model to Build an IT Investment Portfolio

“How much value is IT adding to the business?”  

Value

 

 

 

 

 

This is the one question that most CIOs I talk with struggle to answer. For many organizations, IT’s value is only measured by its ability to reduce costs and optimize the capital expense depreciation of large hardware and software licenses. For others, it’s based on their ability to provide applications and services that enable employees to be more productive. In some cases, IT is seen as valuable resource and contributor to enabling business units to meet or exceed their revenue and profit targets.

Regardless of where your IT group falls across this spectrum of business value there is one unifying theme – IT is not very good at telling its business value story. Part of the problem is that much of today’s story was built on the old Plan, Build, Run model complete with its time consuming requirements process and waterfall development cycles which are now completely out of cadence with the fast-cycle marketplace. This approach has resulted in a large percentage of the annual IT budget being allocated to run the business activities, with a much smaller percentage allocated to change the business activities. This imbalance is only exacerbated by the typical 2% annual budget increases.

 

How to change the narrative about IT business value

Change the narrative

CIOs and their senior leadership teams must make creating and communicating IT’s business value story a mission critical priority. It all starts with a solid framework that defines the multiple ways IT contributes value to any organization. The framework should be realistic, but also simple and capable of being expressed in language that business leaders will recognize and support. The new 4 Zone IT Investment Portfolio is one framework that meets these criteria.

Ent IT Org Mod

The 4 Zone model enables CIOs to construct an IT Investment Portfolio that apportions the business value of IT in four investment categories. It depicts IT’s spending allocations and provides a clear visual aid for discussing changes to those allocations. For example, based on your organization’s 2016 strategic and operating goals and deliverables, is the weighting of the IT investment allocation aligned with those goals? In this context, most if not all business executives will not only understand the type of value IT investments are targeting, but they will appreciate the challenge and imperative of making smart IT investment choices going forward.

 

A four zone business value story

Not unlike a personal investment portfolio where risk and return are spread across multiple investment options, the IT investment portfolio is designed to deliver value and returns in four different categories.

Productivity Zone value is created by providing secure and stable operations and maintenance of the company’s systems of record. While most of the ROI from investments in these SORs has been realized, they are still an important and necessary component to the successful operation of any organization. CIOs can deploy our trapped value audit tool to periodically review and identify opportunities to optimize the costs of maintaining and modernizing SORs while also reducing the amount of technical debt. These resources can then be redeployed against new value creation opportunities in the performance and transformation zones.

Performance Zone value is created by delivering a series of user-centric tools, services and solutions e.g. Social, Mobile, Cloud and Data Analytics that enable the company’s businesses to better engage with customers, supply chain partners and other key constituents. CIOs can use our Collaborative IT Governance model to better align future IT investment priorities with critical business outcomes. By contributing directly to creating valuable and enduring customer experiences, IT can demonstrate its ability to help accelerate customer adoption and utilization resulting in new revenues and profits.

Incubation Zone value is created by IT’s help in identifying, testing and validating next generation product, service and business ideas and leveraging technology enabled innovation to deploy them. This zone also acts as a staging area for all IT projects and provides a prioritization process to determine which of the other three zones would benefit the most from the ultimate value of the project. A rapid agile development approach will enable IT to significantly increase its speed to market and throughput for all IT investments.

Transformation Zone value comes from ITs ability deploy new disruptive technologies to enable the company to launch and scale a material net new line of business. An organization’s ability to leverage technology enabled innovation is becoming a critical source of competitive advantage with the emergence of digital enterprises.

This 4 Zone investment portfolio approach provides a structure and common vocabulary to resolve risk reward discussions between IT and its internal business partners across multiple investment options. It also enables the CIO to characterize and justify IT’s investment recommendations, whether at the C-Suite or Board level, augmented by specific business cases that highlight the ROI from each one.

 

An investment approach that is aligned with the new consumption economy

Contributions

In today’s subscription-based consumption economy, the value of IT’s products and services are measured by customer/end-user adoption and utilization. To deliver the maximum business value of IT, CIOs need to effectively articulate how each investment will directly contribute to the successful deployment and utilization of each product or service its supports. As such, IT investments must be able to generate immediate returns which accelerate with increased usage. This means that IT has to significantly increase its speed to market and throughput.

The fast cycle cadence of the consumption economy will require IT to replace the old Plan, Build, Run development process with a new Co-Develop, Assemble and Consume process. This new process puts a premium on making a series of investments and getting market feedback on them quickly so leaders can make the needed changes that will drive further adoption and utilization.

 

Get started with a current state investment assessment

As a first step, CIOs can use the 4 Zone model to do an assessment of how their budget and resources are allocated across their current pipeline of projects and deliverables. This assessment would allocate each project into one of the four zones and create a baseline of where you are making your IT investments today. You can then ask questions like:

  • Is the current weighting of investments by zone aligned with our corporate strategy and goals?
  • Do we have the appropriate risk reward ratio across our investment portfolio?
  • Are we delivering the desired ROI from our portfolio of investments?
  • Are we making the right level of investment to accelerate customer adoption & utilization?
  • Does our portfolio of investments maximize the business value if IT across our company?

Creating and effectively communicating a compelling IT business value story is not an easy task. Overcoming legacy mindsets about the role and value of IT requires a strong framework; a well-balanced risk vs. reward investment strategy aligned with corporate goals and deliverables; a new development process that is in sync with the fast cycle market cadence of digital enterprises and a new set of consumption market metrics.

Armed with those tools and that approach, CIOs should be well prepared to make the business case for the value of IT.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

 

 

 

Implementing the 4 Zone Model Playbook

From Strategy to Implementation: Common Drivers & Expected Outcomes

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Like any new strategic framework and set of tools and processes, the 4 Zone Model’s value can only be realized through implementation and execution. I have outlined below how some early adopters of the model have deployed different elements of the playbook to address critical issues and opportunities.

The 4 Zone Model is built upon several drivers common to enterprise information technology functions:

  • A need for innovative approaches to enable organizations to address five disruptive technologies: Cloud, Mobile, Social, Data Science and Internet of Things.
  • A need to evolve from lengthy waterfall-based technology implementations to the more rapid agile development approach. The Plan, Build, Run model will be displaced by a Co-Develop, Assemble, Consume model.
  • A need to embed a trapped value assessment process to identify opportunities to shift resources and funds from maintaining legacy systems of record to developing new systems of engagement.
  • A need to utilize new methodologies and tools to identify, develop and reinforce the relevant new skills and capabilities necessary to lead and manage a digital enterprise.

The motivation to adopt the Four Zone Model playbook encompasses a number of expected outcomes:

  • Higher percentage of IT resources allocated to change-the-business outcomes.
  • Significant increase in speed to market and throughput of all development initiatives.
  • Strong alignment between future IT investment priorities and critical business outcomes.
  • Increased ROI from the portfolio of IT innovation investments.
  • More impactful IT presence at the business strategy table.

To respond to these drivers and expected outcomes, the Four Zone Model playbook affords technology teams’ processes and tools which enable them to maximize the business value of IT across all three levels of their organization.

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The Starting Point: Mission-Based Teams

In order to move expeditiously, the 4 Zone Playbook begins at the “starting point” with mission-based teams specifically assembled and empowered to attack prioritized desired outcomes. These mission- based initiatives all start from the “Incubation Zone” and seek an exit path to one of the three other Zones depending on the desired outcome.

3 exits

IT Executives leading mission-based initiatives begin the process by asking three key questions:

  1. Should we do it? Does it align with and support critical business outcomes?
  2. Can we do it? Do we have the relevant skills/capabilities, tools and capacity to achieve the outcome?
  3. Did we do it? Do we have the right metrics to measure the achieved outcome vs. the desired outcome?

Mission-based teams are appointed for work which has been identified as a priority for movement from the Incubation quadrant to another Zone within the Model. Expectations for success can be high given the following critical elements:

  • Alignment at the leadership level that the work commands sufficient priority to be implemented. Alignment must occur not only within IT but also with all other key stakeholders including internal business partners and shared services partners.
  • Formation of the mission-based team includes careful appointment of team members to ensure they have the appropriate skills and competencies necessary to achieve the outcome.
  • The initiative must be carefully scoped to fit within the Model’s timeframe boundary conditions (namely pilot initiation to go live within 30-90 days especially for productivity and performance zone projects).
  • Active collaboration and critical thinking processes must drive the shared discovery, problem solving and solution adoption. The focus of the team and their work is deliberately narrow, user centric and intentionally innovative.
  • Measurement is expected to occur throughout the discovery and design process as well as at the conclusion of the team’s work.

The Outcome is Worth the Journey

What we have learned over the past 12 months is that to successfully introduce and deploy this playbook is a leadership challenge not a management challenge. This is not about just doing what IT has always done better, faster and cheaper. This is about transforming the role of IT from a cost center/support function to a business enabling strategic partner. This is about changing outcomes by changing legacy attitudes, behaviors and actions.

As always, I am interested in your comments, feedback and perspective on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.

The 4 Zones Model: A Playbook for the Incubation Zone

Companies have no choice but to up their technology enabled innovation game

According to a recent McKinsey study, more than 60% of CEOs expect up to 50% of their earnings growth in the next 5 years to come from “technology-enabled” business innovations. A recent study of CIOs by IDC found that 57% expect to be defined in terms of delivering business innovation to increase revenue, margins and new products.

In order for companies to be competitively viable in this new era of digital disruption, they have to dramatically increase their ROI on their portfolio of technology innovations. As I’ve stated in earlier blogs, these digital disruptions are fundamentally changing the way companies engage with their employees, customers, supply chain partners and other key stakeholders.

Disruption Chart

Companies have been spending money on research and development at the fastest pace in 50 years. From last November to the end of March, U.S. companies funded R&D at an annual rate of $316 billion or about 1.8% of GDP which is the largest share ever for the private sector.

As such, it is disturbing to read that, according to a recent Deloitte study, the return on R&D investments by the 12 biggest biopharmaceutical companies fell from 10.5% in 2010 to 4.8% in 2013.

The Incubation Zone: The Three Innovation Playbooks Model

The 4 Zone Model I’ve developed (link to earlier blog http://eepurl.com/blFb3T) is designed to enable CIOs and their senior leadership teams to maximize the business value of IT across their organizations. IT’s charter for the Incubation Zone in particular is to help the company identify, test and validate next generation product, service and business ideas and leverage technology-enabled innovation tools to develop them.

In our work with many companies across multiple industries, we have developed a set of three innovation playbooks to help them better organize and implement their portfolio of technology innovation investments as the chart below illustrates:
Three Innovation PlaybooksAt the core of this tool are three distinct innovation playbooks that clearly define the mandate and desired outcome for each one. Here are the key diagnostic questions that clarify those mandates and outcomes:

  • Have we differentiated our offer enough to gain real competitive separation?
    • Have we created a truly unmatchable offer?
  • Have we neutralized offers with enhanced features from our reference competitors in a timely manner?
    • Have we gotten to good enough fast enough?
  • Have we optimized our opportunities for gains in resource utilization and cost reduction?
    • Have we reclaimed unproductive resources and redeployed them against differentiation or neutralization opportunities?

Our work in this space has also shown us some of mistakes companies make with their approach to innovation which results in a very low ROI on their investments. Here are two rules of thumb to avoid:

  • Never tie differentiation and neutralization programs to the same release schedule
    • Differentiation has to go far
    • Neutralization has to go fast
    • Combining the two dumbs you down and slows you down
  • Best in class is appropriate for productivity innovations only
    • Too low a mark for differentiation (beyond class)
    • Too high a mark for neutralization (good enough)
    • Benchmarks are for productivity programs only

The Harsh Reality about the ROI on Technology Innovation Investments

As the chart below illustrates, the majority of innovation investments do not deliver the desired results or ROI. These less-than-optimal outcomes most often occur when differentiation projects are launched too soon or neutralization projects take too long.

Why many innovation efforts are wasted - graph
While there is no silver bullet that guarantees innovation success, when the three innovations playbook model and tools are successfully deployed ROIs have greatly increased in many technology investment portfolios.

In my next blog, I will take a deeper dive into the Transformation Zone and talk about how you can deploy our Three Horizons model to scale net new lines of business that produce material new revenues and profits.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.

The 4 Zones Model: A Playbook for the Performance Zone

The CIO is not a “Device Santa Claus”

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My good friend and technology futurist, Thornton May, clearly defined the CIO’s role when he said “…the role of the CIO is not to be a ‘Device Santa Claus’ but, rather, to craft an environment which empowers executives to create competitive advantage vis-à-vis the innovative and informed use of information technology.”

A recent McKinsey & Company survey of business and IT leaders validated that when CIOs play an active role in shaping their company’s business strategy both IT’s and the company’s overall performance greatly improve. However, when business executives were asked how well IT supported key business activities like entering new markets and driving new revenues, only 35% agreed IT played that role in their company down from 57% in the same survey two years ago.

If actively engaging the CIO in helping to shape a company’s business strategy works so well, then why are so many companies not doing it? My answer is that they don’t have a “good decision-making governance process” that aligns future IT investment priorities with critical business outcomes.

The Performance Zone: Demonstrating the Business Value of IT

The 4 Zone Model I’ve developed ( link to earlier blog http://eepurl.com/blFb3T ) is designed to enable CIOs and their senior leadership teams to maximize the business value of IT across their organizations. IT’s charter for the Performance Zone in particular is to provide new user-centric tools, services and solutions e.g., social, mobile, cloud and data analytics that improve the competitive performance of each of the company’s lines of business.

To effectively demonstrate IT’s ability to directly contribute to generating new revenues and profits, CIOs and their leadership teams must actively engage their internal business partners and users. To activate this new process, I propose that they utilize the Collaborative IT Governance Model below.

The Collaborative IT Governance Model

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From my early work in this area, I have seen first-hand how effective this model is in breaking down hierarchical, silo-based decision-making processes and converting them into horizontal cross-enterprise decision-making processes. It enables all the key stakeholders to be aligned with and committed to a common course of action to deliver the desired business outcomes. It has also dramatically increased the speed to market and throughput of major IT developmental projects.

It’s An Outside-in Approach Not An Inside-out Approach

To effectively deploy the collaborative IT model, you need to start with a common understanding of what you want the ultimate user experience to deliver to customers, employees, supply chain partners and other key constituents.

Historically IT has started with the technology it has and added to it. This inside-out approach is fine if your goal is to modernize your Systems of Record and optimize the cost of maintaining them. However, if your goal is to provide “friction-free” customer engagements then you must take a very different approach.

This outside-in approach begins by getting all the key stakeholders to address three fundamental questions:

  1. What are the key moments of customer engagement that define the success of our business or company?
  2. Who or what system represents our company at this moment of engagement?
  3. How could we strategically intervene with a new system of engagement in order to make that moment of engagement more compelling and enduring?

Some companies I’ve worked with have used a “customer touch point” mapping exercise to identify all the different touch points and eliminated those that they felt added no value to the customer. They then looked for opportunities to enhance the value of critical touch points and finally they identified gaps where they could add new touch points.

In all cases, it has been gratifying to see that when these models and tools have been utilized they have successfully demonstrated the business value of IT in multiple business growth venues.

In my next blog, I will take a deeper dive into the Incubation Zone and talk about how you can deploy our Three Innovation Playbooks model to significantly increase the ROI on your portfolio of IT investments.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.

The 4 Zones Model: A Playbook for the Productivity Zone

Reversing the IT Resource Allocation Imbalance Equation

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For decades, senior IT leaders have confronted the financial reality that every year 80% of their IT budgets are allocated to “running the business” while 20% are allocated to “changing the business.”

No one can argue how important it is for IT to make sure each company’s systems infrastructure and data is stable, secure and in compliance with industry standards and regulations. Unfortunately, just doing that job well severely limits the ability of CIOs and their senior leadership teams to maximize the business value of IT across their organizations.

The Trapped Value Audit

The new 4 Zones Model is designed to reverse that equation by creating individual playbooks for each zone and, in doing so, enable IT to exponentially increase its business value. The Productivity Zone Playbook is designed to optimize the costs of maintaining a company’s systems of record thereby freeing up resources to be redeployed against developing new systems of engagement.

A key tool to achieve this outcome is the Trapped Value Audit which enables cross-functional teams to systematically review all their systems of record and determine if they should be modernized, out-sourced or, if possible, eliminated. This audit is also designed the identify opportunities to significantly reduce or eliminate a company’s “technical debt.”

You can get started by asking some core questions:

  • Where is the trapped value in our company? E.g., maintaining systems of record
  • How can we identify and unlock that trapped value?
  • How can we redeploy that trapped value against critical new IT investment priorities? E.g., the development of new systems of engagement
  • Where is the new business value of IT going to come from?

The results of these efforts will enable senior IT leaders to redirect resources away from lower busine47ss value activities in the left hand column to higher value activities in the right hand column in the chart below.

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Extending IT’s Business Value Beyond A Company’s Infrastructure Model

Unlike previous evolutions of enterprise IT, which were mainly focused on the need for a company to adjust its infrastructure model, the disruptive impact of social, mobile, analytics and the cloud extend to its operating and business models. As such, it is imperative for IT to realign its skills, capabilities and resources to better enable the performance of the company’s operating model and if necessary help shift its business model.

From my early discussions with CIOs, this process entails earning the trust and confidence of their internal business users and partners as well as creating cross-functional teams to align future IT investment priorities with critical business growth goals and deliverables.

The chart below highlights these three levels of disruption and identifies specific sources of trapped value that these cross-functional teams can pursue together.

infograph2 By optimizing the costs of maintaining the infrastructure value delivery system, IT is then well positioned to deliver net new value creation for the company and thereby extend its business value across all three areas of potential disruption.

End Of Life Programs – It Takes A Village To Make Them Work

To be perfectly clear, companies cannot operate without stable, secure and well-maintained systems of record. These SORs run core functions from CRM to ERP to Finance. They also must be able to quickly and seamlessly connect with systems of engagement in order to deliver a friction-free user experience. That said, the fact remains that there is a significant amount of trapped value in how most companies deploy resources to maintain them.

In taking on the challenge of reducing or eliminating that trapped value, CIOs must establish a set of protocols and repeatable processes to monitor and evaluate the business value each SOR delivers. I have drawn upon some ideas and perspectives from my brother, Geoffrey, to give you some suggested ways to increase your odds of success:

  • Establish a stand-alone end of life (EOL) shared service function whose sole purpose is to manage this process from start to finish. Note: this is not just IT but all effected stakeholders.
  • Transfer all the SOR’s costs/expenses to the EOL shared services function.
  • Develop an EOL roadmap and timetable for each SOR.
  • Don’t allow non-EOL priorities/deliverables to compete for the shared services time and resources.
  • Accrue any trapped value savings to be redirected to new IT investment priorities.

A First Step

The Productivity Zone playbook is the first step in helping CIOs maximize the business value of IT across their organizations. It incorporates a set of tools to help senior IT leadership teams find the right balance between protecting the value they’ve created with stable, secure, compliant systems of record and creating new business value with easily accessible, friction-free systems of engagement that deliver compelling and enduring user experiences.

In my next blog, I will take a deeper dive into the Performance Zone and talk about the importance of IT building strong collaborative relationships with their internal business partners and other key stakeholders.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.

THE 4 ZONES MODEL: A Playbook to Maximize the Business Value of IT


Defining the Company’s Future Enterprise IT Agenda

The disruptive impact of social, mobile, analytics and the cloud is fundamentally changing the ways companies engage with their employees, customers, supply chain partners and other key stakeholders. In order for companies to remain competitively viable in the new world of digitally mediated interactions, they will need to overcome their legacy mindset about IT as primarily a cost center support function. CIOs must facilitate IT’s evolution to a full strategic partner role that directly contributes to delivering new revenues and profits. Simply put, a company will have to use technology as a source of competitive advantage in order to transform itself into a digital enterprise.

What’s ultimately at stake for CIOs is who will take the lead in defining and implementing the future enterprise IT agenda for their company. To regain their rightful leadership position requires both a new organizational and operating playbook for IT. We call this the Four Zones Playbook and it is designed to ensure that the organizational structure, operating cadence, resource allocation process and success metrics including ROI are properly adjusted to and aligned with the priorities and deliverables for each zone. In doing so, it will maximize the business value of IT across the enterprise.

The Four Zones: Maximizing the Business Value of IT


The 4 Zones

The Productivity Zone: Here the focus is to optimize the costs of maintaining the company’s legacy systems of record while making sure that all systems and platforms are stable, secure and in compliance with industry standards and regulations. There will be an ongoing effort to identify and unlock trapped value in maintaining legacy systems of record to be invested in new systems of engagement. There will be a goal of “no technical debt.”

The Performance Zone: Here the focus is to demonstrate the business value of IT as a source of competitive differentiation for all of the enterprise’s established lines of business. IT’s charter for this zone is to provide new user-centric tools, services and solutions eg: social, mobile, cloud and data analytics that improve the competitive performance of each of the company’s lines of business. The implementation of a Collaborative IT Governance Model will align future IT investment priorities with critical business outcomes.

The Incubation Zone: Here the focus is to help the company identify, test and validate next generation product, service and business ideas and leverage technology enabled innovation to develop them. An Agile development model will replace the traditional waterfall development model.

The Transformation Zone: Here the focus is to help the company scale net new lines of business that produce material (10% or more of current revenues) new revenues and profits. There can only be one transformational new business initiative in play at any one time.


The Key Principle for Success

Overall, the key principle behind the Four Zones model is that, because the goals and objectives of these quadrants are so diverse, any set of management methods that creates success in one zone is likely to cause failure in each of the other three. Therefore, it is critical to:

  • Install a governance model that separates these four zones from one another
  • Establish IT business value deliverables for each zone
  • Overlay a light-weight corporate system to oversee all four zones in parallel

In upcoming blogs, I will take a deeper dive into each zone and further examine the specific functions and deliverables from each one. I will also highlight specific implementation tools for each zone such as the Trapped Value Audit and the Collaborative IT Governance Model.

Based on some early engagements with CIOs and their senior leadership teams, I have seen first-hand the value and benefit this 4 Zone Model brings to maximizing the business value of IT within an organization and with its key external partners and stakeholders.

As always, I am interested in your comments, feedback and perspective on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.