Chapter 2 Information Systems Management in Practice 8th Edition The Top IS Job Chapter 2 Information Systems Management in Practice 8th Edition

Today’s Lecture Introduction Where is the IS organization headed? The escalating benefits of information technology Traditional functions are being “nibbled away” New roles are emerging Toward “IS Lite”

Today’s Lecture cont’d The CIO’s responsibilities CIO’s roles in 3 eras Leading Creating a vision by understanding the business Governing Establishing an IS Governance Structure Investing Shaping the IT portfolio Managing Establishing credibility and fostering change

Today’s Lecture cont’d The Office of the CIO Whither CIOs Conclusion Questions and Exercises References

Introduction Growing demand for IT managers in the U.S. and worldwide. Management of IT in past 50 years has drastically changed. Basic functioning  cost reduction  decision support  inter-organizational supply-chain and “business eco-system” Onus on top executives to provide IT vision and leadership.

Where is the IS organization headed?

Escalating Benefits of IT Changing technology and evolving IS role since 1950s. (a parallel process) “Waves of Innovation”: Wave 1: Reducing costs Wave 2: Leveraging investments (continuous improvement) Wave 3: Enhancing products and services Wave 4: Enhancing executive decision-making Wave 5: Reaching the consumer Wave 6 (new): Leveraging partnerships through supply chain management or other forms of collaboration

Escalating Benefits of IT (cont’d)

The SABRE System (American Airlines) Case example of “Waves of Innovation” Evolution: Handwritten reservation system (1950s) to Web-based system (2000s). Waves 1 and 2 (1960s) SABRE (CRS) built to reduce costs of making airline seat reservations. ROI on staff expenditure. Wave 3 (1970s) System enhanced to span organizational boundary for travel agents (provide direct access to CRS)

The SABRE System (American Airlines) cont’d Wave 4 (late 1980s) Revenue Management System (provide decision support to managers) under SABRE Airline Solutions (new division). Wave 5 (1990s) System extended to provide direct Web access to customers (CRS, flight information, movie etc.) Wave 6 (2000s) Sabre (small letters) spun off from AMR in 2000, leveraged partnerships and technology.

The SABRE System (American Airlines) cont’d Throughout waves of innovation, strong IS involvement was crucial. Evolving with changes in technology From money-making to extending organizational boundaries to spinning off. So what is the function of the IS organization?

Traditional Functions are Being Nibbled Away Traditional set of responsibilities for IS Managing operations of data centers, local and remote systems and networks Managing corporate data and legacy systems Performing system analysis and design and constructing new systems Planning and integration of systems Identifying opportunities for new systems

Traditional Functions are Being Nibbled Away cont’d Trends that are moving traditional roles out of IS: Distributed Systems Migration of software applications to user areas Ever more knowledgable users Better application packages Systems development to integration Outsourcing Based on fiscal and managerial considerations

Traditional Functions are Being Nibbled Away cont’d

New Roles are Emerging IS involves a cluster of functions: Run operations Develop systems Develop architecture Identify business requirements Create IT-enabled innovations

New Roles are Emerging cont’d Different set of skills and management strategy needed for each function: Maximize efficiencies of IT operations Better allocation of IT personnel time Prioritize resources to demonstrate usefulness of new software projects IT-enabled business innovations

New Roles are Emerging cont’d

Toward IS Lite IS started “centralized” and then evolved into “federal” model. Some things (e.g standards, operations) centralized Others (e.g. applications development) dispersed to best meet local needs. Solution: shift attention from roles to processes IS Lite: managing three overall processes Driving innovation (dispersed) Managing change (dispersed) Supporting infrastructure (centralized)

Toward IS Lite

LifeScan Case example: The “Federal” Model Johnson and Johnson subsidiary New CIO with business-IS alignment agenda 3-stage framework that is focused on execution and performance measurement (value, on time, budget) Stage 1: backend (supporting infrastructure) Stage 2: start working with business units (change, innovation etc.); value measured by business units e.g. business score cards. Stage 3: melding of business units and IS; value measured by firm performance

LifeScan cont’d Strong project management, not allowing scope creep (business value, on time, within budget) Emphasis on staff with leadership and brokering skills Outsourcing (Tata, J&J outsourcing agreements) Adopt J&J quality-driven culture into IS processes and working closely with business units for alignment every step of the way. Centralization of policies, procedures etc. All IS projects business led and locally owned by business units.

The CIO’s Responsibilities Evolution of CIO’s job emphasis over last 20 years Almost like a “bell curve” 80s: Chief architect (strategic use of IT) 90s: addressing business issues (more than technology manager) Late 90s to early 2000s (forefront role) Mid 2000s onwards: slide back toward back seat--more responsibilities, lots of justification and less $

CIO Roles in Three Eras Jeanne Ross (MIT) and David Feeny (Oxford)

CIO Roles in Three Eras The Mainframe Era Distributed Era Predominated 1960s – early ’80s Role of DP / IS manager = operational manager of a specialist function Distributed Era In the ’80s as PCs become commonplace LANs and WANs linking computers Took on 4 more roles: Organizational designer Technology advisor Technology architect Informed buyer

CIO Roles in Three Eras The Web Era Started in the mid-1990s for some Arose from the emergence of the Internet (especially WWW) as a business tool Era is still in “infancy” but add to the CIOs job, the role of business visionary Relationship between CEO and CIO vary along a wide spectrum.

CIO Roles Today Leading Governing Investing Managing Creating vision by understanding the business Governing Establishing an IS governance structure Investing Shaping the IT portfolio Managing Establishing credibility, managing IT functions, and fostering change

Leading: Creating vision by understanding the business Encourage project teams to study the marketplace Concentrate on lines of business Sponsor weekly briefings Attend industry meetings with line executives Read industry publications Hold informal listening sessions Partner with a line executive

Leading: Creating vision by understanding the business

Leading: Creating vision by understanding the business Creating a vision of the future and selling it CIO must be proactive and not simply reactive A leader not a follower What is a vision? Statement of perceived future Why develop a vision? A vision of a desirable future can provide stability when it sets a direction for an organization Selling the vision

British Petroleum (BP) Case example of creating a vision of the future and selling it 150 business units in 100 countries Each with own balance sheet and performance criteria Need to reconcile business unit independence with overarching HQ strategy (“speed matters”) Strong core values and operational excellence How can IT be a value-add?

British Petroleum (BP) John Leggate’s “Digital Business” vision. Technology provider to strategy-creation role Strategy, architecture, differentiated services based on business streams (processes) Living on the Web Socializing technical directions (adoption) Going forward: Foster learning and focus on explanation (assimilation)

Leading: Creating vision by understanding the business Creating a vision of the future and selling it (cont’d) Encouraging champions of IT projects “Boundary-spanner-in-practice” Typically someone with authority Need information Need resources Need support Champion: someone (outside of department) with a vision who gets it implemented by obtaining the funding, pushing project over hurdles, putting his or her reputation on the line, and taking on the project risks. Boundary spanner: suitable for business processes and streams

Aetna Life and Casualty Case example of creating a vision of the future and selling it Vision: “breakthrough technologies” Sought out business champions Pilot studies Feedback for new technologies experimentation Steering Committees Challenges Adoption (attention and use) Value (beyond piecemeal payoffs)

Governing: Establishing an IS governance structure Definition: IS Governance “The assignment of decision rights and the accountability framework to encourage behavior in the use of IT.” (Weill & Woodham, 2002) Governance versus management Governance is about deciding who makes decisions. Management is about making decisions once decision rights have been assigned.

Governing: Establishing an IS governance structure Importance of corporate IT governance Large and diverse IT assets Striking a balance between global and local needs IT portfolio (in sync with business needs) Assigning decision rights Governance style Definition: who has a decision right and input right. Six governance styles

Governing: Establishing an IS governance structure

Duke Energy International Case example of IS governance Diverse portfolio of natural gas and electric supply, delivery and trading businesses. CIO: “When am I free to decide on my own versus when should I involve others?” I involve others if the consequences of my actions will come to bear on those others. I do not involve others if the consequences of my actions will come to bear just on me. I inform others when the consequences of my actions will be of benefit to others.

Investing: Shaping the IT Portfolio Diminishing marginal increase today but still preposterous amount of IT investments. Two perspectives in IT investment: Strategic view What to invest in? Tactical view How to make investment decisions?

Investing: Shaping the IT Portfolio A Strategic view of making IT investments McKinsey Global Institute study of “new economy” IT, competition, innovation and productivity in virtuous circle Targeting IT investments Prioritizing on “levers that matter” = greatest productivity Timing of IT investments Based on company needs and goals

Investing: Shaping the IT Portfolio cont’d

Investing: Shaping the IT Portfolio Sequencing of IT investments Wal-mart versus Kmart case example Complementing IT investments “The whole is not the sum of its parts” (synergy) Complementarities between management practices, business processes and technology

Wal-mart versus Kmart Case example: Sequencing and timing IT investments Wal-mart Step 1: installed systems to automate the flow of products in its internal supply chain Step 2: turned outward to suppliers, coordinating its own operations with theirs Step 3: turned to customers to better plan its merchandising mix and replenishment Step 4: data warehouse

Wal-mart versus Kmart Kmart Mistake: used IT to target its marketing promotions versus investing in supply chain Result: increase in demand from successful promotions could not be met due to problems getting the products into stores in a timely fashion. Result: lost sales and revenues

Investing: Shaping the IT Porfolio cont’d A tactical view of making IT investments Portfolio (holistic) approach to deciding on how to make IT investment decisions. Numerous approaches to prioritizing Business Scorecards 80-20 Principle Cost-Benefit analysis (CBA) Net Present Value (NPV)

AXA Financial Case example of tactical view of making IT investments French global financial services organization with 140,000 employees and managing $795 billion in assets. New governance methodology (beyond IT) Economics-informed investments (precludes emotional attachment or other non-financial factors) Modeled after fund management Governance committee involve all C-level executives

Investing: Shaping the IT Portfolio cont’d Benefits from Discussions Categorizing projects for comparisons Address project risks Prioritize quarterly and apportion your budget accordingly Consistency (team decision-making)

Managing: Establishing Credibility and Fostering Change CIOs must first establish credibility in IS before change can come about. Establishing Credibility Focus first and foremost on the “today” even before talking about the “tomorrow” Deliver value-added, quality services First impression matters

Managing: Establishing Credibility and Fostering Change Technical aspects only half the battle Emphasis on change management Changing the way people work, bringing it to the next level Disruptive to current work practices Leads to resistance Methodologies to implement IT-enabled change

Managing: Establishing Credibility and Fostering Change Working across organizational lines CIOs now find that systems they implement affect people outside their firm boundaries Arms-length to more cordial relationship with partners (suppliers and customers) Change need buy-in from these external stakeholders

REXAM Case example of working across organizational lines One of the world’s top 5 consumer packaging companies and the world’s top drink can maker Rethinking interactions with customers (B2B) Leverage Internet to deliver “exceptional service” “Knock their socks off” Result: cash flow improvements, barriers to switching, profit increase

REXAM cont’d CIO’s role Steering Committee’s role Online catalogue External and business-oriented Convincing existing customers and business development Steering Committee’s role Firm-wide commitment from C-level executives for expanded e-business initiatives envisioned by CIO. Online catalogue

The Office of the CIO Chief Information Officer (CIO) Top management, customers, suppliers Chief Technology Officer (CTO) IT planning, architecture, new technologies Chief Operations Officer (COO) Daily IS operations Chief Project Officer (CPO) Projects management

Conclusion: Recap Why does the IS organization exist? Constant factor in parallel process of technological changes and IS evolution What is the role of the IS organization? Changing across the timeline toward IS Lite CIO’s job How does the IS organization perform its job Strategies

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