RR066_E(Collaborative IT Management)

7/31/2019 RR066_E(Collaborative IT Management)

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Collaborative IT Management

Driving IT Investment Performance

Scenarios for Successful IT Management Reforms


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CONTENTS

Introduction 1

1. Summary 2

2. The Need or Collaborative IT Management 4

2 - 1. Reasons or Possible Failures in IT Investment 4

2 - 2. About the Survey on Successul IT Investment 6

2 - 3. Involvement o Top Executives 8

2 - 4. Involvement o Business Units 11

2 - 5. Capabilities o IT Department 14

2 - 6. The PDCA Cycle or IT Investment:

Advance Assessment and Follow-up Assessment 17

2 - 7. Conclusion: The Need or Collaborative IT Management 19

3. Undertaking IT Management Reorm Initiative 24

3 - 1. Overview o CIO Interviews 24

3 - 2. Eorts Common to Companies Succeeding in IT Management Reorms 25

3 - 3. Reshaping Awareness in the Three Parties

through Investment Management Structure 26

3 - 4. Achieving Overall Optimization through Interaction at the Planning Stage 27

3 - 5. Establishing a Structure o Responsibilities

through System Ownership Scheme 28

3 - 6. Developing Business-savvy IT Sta through Job Rotation 29

4. Conclusion: Critical Factors o Success in IT Management Reorms 30

Appendix: Case Studies o Successul IT Management Reorms 32


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1. Summary

Factors impeding the success o IT investment include

limitations on local optimization, ambiguities in respon-

sibility structures, and an insuicient development o

business-savvy IT sta. Companies that aim to derive ull

value rom IT investments, they must address these three

issues through the establishment o a collaborative IT

management--in which top executives, business units,

and IT department each ulll their own responsibilities, as

well as work together to ensure that IT investments have

the greater impact..

But how do these three parties take part in IT invest-

ment in individual companies, and how do these ways o

involvement relate to the results o IT investment? The

results o our survey show that irms making successul

IT investments share certain characteristics, as described

below.

Top executivesat successul irms place importance

on IT investment and grasp the complete picture o the

investment. In addition to communicating to employees

throughout the organization both the importance o and

the companys policies or the use o IT, they also provide

specic instructions when making decisions on IT invest-

ment and ensure alignment o IT investment with man-

agement strategies. Furthermore, such companies have

appointed CIOs. Business unitsalso place importance on

making eective use o IT and proactively participate in

projects. The right personnel are appointed as project team

members and their eorts are evaluated accordingly. More-

over, the IT departmentin such irms can proactively

make proposals to business units or discuss IT-related

matters with business units as an equal partner. At least40 percent o the personnel in their IT departments have

experience working in business units, and at least one per-

cent o IT sta are transerred to business units each year.

Such companies also choose and manage vendors appro-

priately.

Companies achieving the mean score or higher or all three

categoriestop-executive involvement, business-units in-

volvement, and IT-department capabilitieshad the highest

rate o success in IT investment: 68 percent. Conversely, it

was ound that the success rate declined sharply even with

only one party scoring low. In act, although the success

rate was 43 percent in companies whose business units

and IT departments both scored highly, all others had suc-

cess rates o 20 percent or less. Furthermore, this survey

conrmed that companies with low scores in terms o IT-

department capabilities were unable to increase their suc-

cess rates no matter how high the other two parties scored.

The results o this survey show that in order to improve

perormance o IT investments it is vital to establish col-

laborative IT management, with high scores or all

three categories. But what kinds o changes are needed in

IT management in order to establish such collaborative

IT management? Our interviews with the CIOs o seven

rms that had made IT management reorms real showed

our types o eorts shared by successul rms.

(1) Reshaping awareness in the three parties throughinvestment management structures

Successul irms provided opportunities or top execu-

tives and business units to participate in discussions on IT

investment and had established structures or managing

IT investment that encouraged active involvement o top

executives and business units. By adopting such struc-

tures, these companies not only get their top executives

and business units more deeply engaged in IT initiatives,

but also make their IT departments more accountable or

IT investment and more closely in line with the rest o the

organization.


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(2) Achieving overall optimization through interac-tion at the planning stage

Successul companies emphasized the interaction at the

planning stage between top executives, business units, and

IT departments, thus leading to better IT alignment with

management and business strategies. This enabled them to

realize overall optimization o IT investment.

(3) Establishing a structure o responsibilitiesthrough system ownership scheme

Successul rms have adopted the scheme o system own-

ership, clariying the roles and responsibilities o system

owners, and standardizing IT-related procedures, stan-

dards, and rules across the lie cycle o IT investment.

Those deployments helped raise awareness o the system

owner to business units and helped business units ulill

their respective roles and responsibilities.

(4) Developing business-savvy IT sta through jobrotation

Successul rms encouraged IT sta to be rotated to busi-

ness units or a set o period. Job rotation between busi-

ness units and IT department enables IT department to

develop business-savvy IT sta who have not only IT

skills but also business knowledge and understand the

operations o business units. On the other hand, such rota-

tion enabled business units to develop IT-savvy business

sta who are capable o planning IT-enabled operational

reorms and are also capable o developing and evaluating

business and system requirements.

These interviews showed what companies need to do to

ormulate IT management reorms. The issue is how to put

such reorms into practice. With this in mind, the ollow-

ing three key points should be noted:

(1) Top-executive involvement in IT reorms

(2) Preparation o a road map or change

(3) Appointment o a CIO to take leadership in making

changes

Enorcement o a Japanese equivalent o the Sarbanes-

Oxley Act would urther increase the importance o overall

optimization in group management. In IT investments,

the enorcement would also lead to growing demand or

an overall, group-wide optimization. For this reason,

the initial ocus should be to establish collaborative IT

managementat the level o individual companies, and

then work toward development ocollaborative group

IT management by expanding these eorts to a group-

wide level.


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2. The Need or Collaborative IT Management

2 - 1. Reasons or Possible Failures in IT Investment

How can companies derive more value rom their invest-

ment in IT? A wide range o suggestions have been pro-

posed to this question, and companies have worked hard

to make smarter IT investments. Despite such eorts, the

hoped-or improvement ailed to occur: the proportion o

companies succeeding in IT investment remains unchanged

rom a survey conducted two years ago.* Why is this issue

o improving perormance o IT investments still unsolved?

* "Successul IT Investment: Best Practices or IT Investment Management"

(ABeam Consulting Ltd., March 2004)

The ailure to improve perormance o IT investments

stems rom overlooking three undamental actors at the

root o the problem, or rom an inability to address these

actors even once they are understood.

(1) Limitations on local optimization

Many IT investment projects begin with proposals rom

business units. Such bottom-up type system proposals can

easily lead to the adoption o IT without a sucient review

o operations. Furthermore, it can lead to problems such as

duplication o eorts in system development and a lack o

collaboration and integration between systems. An accu-

mulation o such bottom-up IT projects result only in local

optimization, not in overall optimization.

(2) Ambiguities in responsibility structures

To derive ull value rom IT investments, companies should

make business units more involved in IT projects and

more accountable or the return on IT investments, more

than just making IT requests. In many cases, however, the

separation o roles, authority, and responsibility between

business units and IT department is not clearly deined

in terms o IT planning and promotion. Such ambiguous

structures o responsibility hinder the companys ability to

get more benet rom IT investments.

(3) Insucient development o business-savvy IT sta

To ensure that IT investment has a strategic impact, com-

panies must ollow the three steps: they make business

concepts, create structures and processes to realize the

concepts, and nally develop IT necessary or these pur-

poses. This requires IT personnel who understand both

business operations and IT and who can bring ideas or IT-

enabled business innovation and implement them. Howev-

er, in most cases it cannot be said that such business-sav-vy IT sta have been suciently developed, as no progress

has been made in the exchange o personnel between IT

departments and business units.

On these points, here we would like to consider the case o

a hypothetical Company X.

For a consumer goods manuacturer like Company X, IT awareness is generally low in the executive level, including

the top executives. There is neither an atmosphere or executive involvement in the discussion on IT strategies, nor is

there sucient interest in requesting a report on progress o IT investments. Furthermore, in recent years the number

o large-scale IT projects to be decided at the top-executive committee has declined, so it is rare that IT projects come

up to their agendas. As a result, there is a great degree o distance between top executives and the IT department. In

addition, business units take a passive approach to IT-enabled business innovation. Although they do make a request

to the IT department or systems development, they show a strong tendency to leave the rest to the IT department,

lacking a sense o ownership regarding costs and results. At Company X, when making a request or IT development,

business units are asked to speciy the purpose o the investment and its anticipated results. Although it is likely that

their sel-assessed results have some bias, the results o IT investments are not verifed. Furthermore, as a result o cost

reductions over the past several years, even the IT department has been subject to restrictions on investment and re-

ductions in numbers o personnel. Although the IT department has strived with limited budgets and stang to meet

the needs o business units, they are incapable o devoting energy to strategic planning and investment management

or IT.

consumer goods manuacturer Company XCase study


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Businessunits

ITdepart-ments

Topexecutives

Businessunits

ITdepart-ments

Approval

Businessstrategies

Managementstrategies

ApprovalApproval

Improvements

Reportingon results

Vendormanagement

Progress reports

P

D

C

A

Vendors

Formulating coherenetIT strategies

Development

Participation

IT strategies

Topexecutives

Businessunits

ITdepart-ments

Top

executives

Businessunits

ITdepart-ments

Topexecutives

Businessunits

ITdepart-ments

Projectrequests

Developmentrequests

Reporting onstatus ofIT operations

Cooperation

Confirmingstatus ofIT operations

Project assessment

ReportingReporting

Verifying results

Operation

The circumstances in which Company X inds itsel are

deinitely not desirable. However, the business units eel

no major dissatisaction with the IT department that lls

their requests. The top executives as well may see the IT

department as perorming well with limited resources. Only

the IT department eels unable to take on their assigned

missions and authorities, vexed by the inability to advance

IT-led business innovation.

You have probably heard the example o the "boiling

rog." A rog is in a pot o water. As the temperature o

the water rises slowly, the rog is not impelled to jump out,

as it is not suddenly alarmed by the heat. However, since

the temperature keeps rising, eventually the rog is boiled

to death. Under its current circumstances, Company X too

risks the ate o the rog i it ails to take steps to improve

the situation.

Breaking out o these circumstances requires that top ex-

ecutives, business units, and IT departments work together

to take on the three undamental causes reerred to above.

The three parties also need to work in tandem through the

IT investment management cycle to establish collabora-

tive IT management, with each party ullling its own

responsibilities. (See Figure 1.)

Figure 1: The IT investment management cycle, with top executives, business units, and IT departments working in tandem


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Topexecutives

Businessunits

ITdepart-ments

Top-executive involvement

Top-executive involvement

Degree of importance given to IT investment

Degree of understanding status of IT investment

In-house communication concerning use of IT

Way of involvement in key IT projects

Alignment of IT investment and management strategies

Appointment of CIO

Involvement of business units

Degree of importance given to use of ITin operations

Degree of involvement in IT projects

Degree of appropriateness of projectteam members

Personnel evaluations of project teammembers

Capabilities of IT departments

Adequacy of required resources

Degree of understanding business-units'operations

Exchange of personnel with businessunits

Vendor management

2 - 2. About the Survey on Successul IT Investment

Although the case o Company X may be an extreme ex-

ample, it is likely that many companies could not say their

top executives, business units, and IT departments each

participate suiciently in IT investment. How do these

three parties participate in IT investment in real-lie com-

panies? Is there a relationship between the way o their

involvement and the results o IT investment?

We conducted a survey to examine elements related to

top-executives involvement, business-unit involvement,

and IT-department capabilities, as shown in Figure 2.

Figure 2: Elements surveyed or each section


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No answer 1%

More than 500 billion18%Less than 50 billion yen

30%

300 billion ~ 500 billion yen

13%


28%


10%

Other4%

Finance 15%

Distribution 13%

Manufacturing 46%

Construction 10%

Electricity and gas 1%

Transportation,telecommunications,

and other services 11%

10,000 or more

12%

5,000 ~ 9,999

10%

3,000 ~ 4,999

12%

1,000 ~ 2,999

28%

Less than 1,000

38%

Exceeded expectationsMet expectations Somewhat inadequate

Clearly inadequate Don't know No applicable investment made

0% 20% 40% 60% 80% 100%

39% 45%

1% 47% 38% 9%2%4%

30% 56% 10% 4%

16% 48%

6%

18%

11%

7% 10%

3%1%

6%

Reducing operational costs andautomating and improving

operations

Increasing sales, improvingproducts and services, and

realizing new business models

Speeding up decision-makingand visualizing and sharing

information

Strengthening informationsecurity and ensuring

compliance

Overall assessment

2%

27%0%

0% 0%

42% 20%

1%

This survey was conducted in February through March

2006, with subjects primarily consisting o CIOs and IT de-

partment general managers in listed rms. Responses were

received rom 141 companies. To begin, we will provide an

overview o rms subjected to this survey.

How did these irms assess the results o IT investment?

Figure 6 shows the results o questioning concerning as-

sessment vs. initial expectations or IT investment over

the past three years, both overall and by purpose o use. A

number o respondents reported that the results met their

expectations or the purpose o "strengthening inorma-

tion security and ensuring compliance" and "reducing

operational costs and automating and improving opera-

tions". On the other hand, many respondents also indicated

that their expectations were not met or the purposes o

"speeding up decision-making and visualizing and sharing

inormation" and "increasing sales, improving products

and services, and realizing new business models." In terms

o overall assessments, 30 percent o respondents reported

that their expectations had been met, 56 percent reported

results that were somewhat inadequate, and 10 percent re-

ported results that were clearly inadequate.

Figure 3: Overview o rms subjected to the survey(by industry)

Figure 5: Overview o respondent rms(by annual sales)

Figure 4: Overview o respondents(by no. o employees)

Figure 6: Results o IT investment


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2 - 3. Involvement o Top Executives

(1) Degree o importance given to IT investment

O successul rms, 93 percent reported that top executives

placed clear importance or some importance on IT invest-

ment, while 83 percent o unsuccessul irms reported the

same. Only 28 percent o unsuccessul irms reported that

the top executives placed clear importance on IT investment,

versus 44 percent or successul rms. O unsuccessul rms,

14 percent reported placing little importance on IT invest-

ment.

Figure 7: Degree o importance given to IT investment

(2) Degree o understanding status o IT investment

O successul rms, 79 percent reported that top executives

had a strong understanding or some understanding o thestatus o IT investment, while 57 percent o unsuccessul

rms reported the same. A large percentage o unsuccessul

irms (43%) reported that top executives had little under-

standing o the status o IT investment.

Figure 8: Degree o understanding status o IT i nvestment

(3) In-house communication concerning use o IT

A look at whether top executives communicate the impor-tance o and the companys policies or the use o IT within

the organization showed that the most common response at

both successul and unsuccessul irms was top executives

communicate "rom time to time". While 77 percent o suc-

cessul rms reported that top executives communicate "re-

quently" or "rom time to time," 63 percent o unsuccessul

irms reported the same. A large percentage o unsuccess-

ul rms (37%) reported that top executives "almost never"

communicate such inormation.

Figure 9: In-house communication concerning use o IT

This section introduces survey results or each element shown above in regard to top-executive involvement, business-unit

involvement, and IT-department capabilities. It categorizes rms whose overall assessment o the results o IT investment

met expectations as successul and those reporting results that were somewhat inadequate or clearly inadequate as unsuc-

cessul and examines the dierences in responses between successul and unsuccessul rms.

0% 50% 100%

33% 54% 11% 2%

28%

44%

55%

49%

14% 3%

7% 0%

Overall

Successful

Unsuccessful

Top executives place clear importance on IT investment

Top executives place some importance on IT investment

Top executives place little importance on IT investment

Top executives place almost no importance on IT investment

0% 20% 40% 60% 80% 100%

9% 55% 36%

16%

53%

63%

43%

21%

4%

Top executives have a strong understanding ofthe status of IT investment

Top executives have some understanding ofthe status of IT investment

Top executives have little understanding of the status of IT investment

Overall

Successful

Unsuccessful

0% 20% 40% 60% 80% 100%

6% 60% 33% 1%

6%

7%

57%

70%

37% 0%

21% 2%

Top executives frequently communicate such information Top executives communicate such information from time to time

Top executives almost never communicate such information

No answer

Overall

Successful

Unsuccessful


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(4) Way o involvement in key IT projects

At both successul and unsuccessul rms, large percent-ages o respondents reported that top executives were

involved in key IT projects by "providing direction" and

"making comments." However, while 19 percent o suc-

cessul rms reported that top executives "provide specic

instructions," 12 percent o unsuccessul rms reported top

executives were "rarely" or "almost never involved." Sim-

ply put, it could be said that top executives at successul

rms are more deeply involved in key IT projects.

Figure 10: Top-executive involvement in decision-making on key IT

projects

(5) Alignment between IT investment decision-mak-ing and management strategies

This survey examined the degree to which top executives

consider alignment with management strategies when

making IT investment decisions. O successul irms, 91

percent reported their IT investment decision-making was

"ully aligned" or "somewhat aligned" with management

strategies, while 78 percent o unsuccessul rms reported

the same. While 44 percent o successul irms reported

"ull aligned," a large percentage o unsuccessul irms

(22%) reported "little aligned." These results imply that a

large number o successul rms have better aligned IT in-

vestment decision-making with management strategies.

Figure 11: Alignment between IT investment decision-making andmanagement strategies

(6) Appointment o CIO

Next, the survey examined whether a CIO was appointed.While 53 percent o successul irms reported a "CIO o

managing director rank or higher" or a "CIO o another

rank," 30 percent o unsuccessul rms reported the same.

These results show that the percentage o successul rms

that have appointed CIOs is nearly double that o unsuc-

cessul rms.

Figure 12: Appointment o CIO

0% 20% 40% 60% 80% 100%

31% 50% 18% 1%

25%

44%

53%

47%

22% 1%

9% 0%

Fully aligned

Somewhat aligned

Little aligned

Almost no aligned

Overall

Successful

Unsuccessful

0% 20% 40% 60% 80% 100%

24% 13% 63%

19%

35%

11%

19%

70%

47%

CIO of managing director rank or higher appointedCIO of other rank appointed

No CIO appointed

Overall

Successful

Unsuccessful

0% 20% 40% 60% 80% 100%

11% 40% 40%

6%

19%

42%

37%

39%

42%

9%

2%

7%

1%

0%

2%

1%

3%

Top executives provide specific instructions

Top executives provide direction

Top executives make comments

Top executives are rarely involved

Top executives are almost never involved

No answer

Overall

Successful

Unsuccessful


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Furthermore, a look at the percentages o the activities o

persons appointed as CIOs actually devoted to CIO duties

shows that while 22 percent o successul irms reported

that their CIOs spent 100 percent o their time on CIO du-

ties (i.e., were ull-time CIOs), only 7 percent o unsuc-

cessul rms had ull-time CIOs. The percentage o unsuc-

cessul irms reporting that their CIOs devoted less than

30 percent o their time to CIO duties was very high, at 71

percent. Simply put, more than hal o successul rms had

CIOs and these CIOs had spent more time on CIO duties,

while only 30 percent o unsuccessul rms had CIOs and

they spent less time on CIO duties.

Figure 13: Percentage o CIOs time spent on CIO duties

Requests rom CIOs and IT leaders to top executives

This survey asked respondent CIOs or IT leaders to indicate any requests they had or the top executives in order to improveperormance o IT investments.

Particularly notable in this survey were responses concerning requests or top executives to encourage active involvement by

business units in IT investment projects. This shows the importance o reshaping awareness in business units and the sense ocrisis resulting rom limitations on what IT departments can achieve in this area.

"Business units should be guided to be better owners o IT." (Manuacturing)

"The importance o business units involvement should be communicated to business-unit leaders." (Manuacturing)

"Communicating the use o IT to business units is inadequate." (Manuacturing)

"Proactive communication with business-unit should be encouraged." (Distribution)

"Business units should be instructed to get more involved in IT projects." (Manuacturing)

"Business units should be asked to monitor the expected benefts ater implementation." (Finance)

"Management direction to business units and IT department should be presented on the understanding that business units have re-sponsibility or generating value rom IT investment." (Manuacturing)

"Business units should be asked to make a frm commitment to target results and to take the lead in making improvements on thebasis o post-implementation evaluation." (Manuacturing)

"Participants should be motivated to get more involved in the development process and business units should be motivated to use

the newly developed systems in cutover." (Miscellaneous)We thus see the need to strengthen IT governance, or example by clearly defning the separation o responsibilities betweenbusiness units and IT department across the IT investment process.

"Decision-making process and decision-makers should be defned more clearly." (Manuacturing)

"It should be clarifed who take responsibility or generating value rom IT investments." (Manuacturing)

"A strong support rom the top executives is needed to strengthen IT governance." (Manuacturing)

"Generating greater value rom IT investments requires reviewing both operational processes and rules and procedures. Since the lat-ter depends heavily on management leadership, strong support is needed here." (Manuacturing)

0% 20% 40% 60% 80% 100%

60% 15% 6%

71%

48%

7%

22%

7%

6%

22% 0%

13% 0%

7%

4%4%

4%4%

Overall

Successful

Unsuccessful

Less than 30% 30% ~ 50%

50% ~ 80% 80% or higher100% (full-time) No answer


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2 - 4. Involvement o Business Units

With regard to the involvement o business units, this survey inquired about the degree given to the use o IT in operations,

the degree o involvement in IT projects, the degree o appropriateness o project team members, and personnel evaluations

o project team members.

(1) Degree given to the use o IT in operations

What do business units think about the use o IT in opera-

tions? O successul rms, 100 percent reported that busi-

ness units placed clear importance or some importance on

the use o IT in operations, while 87 percent o unsuccess-

ul rms reported the same. While 56 percent o successul

rms reported that business units placed clear importance

on the use o IT, only 33 percent o unsuccessul rms did.

O unsuccessul irms, 12 percent reported that business

units placed little importance on the use o IT. Thus, busi-

ness units in successul rms placed more importance on

the use o IT in operations.

Figure 14: Business-units awareness o the use o IT in operations

(2) Degree o involvement in IT projects

This survey asked about the degree to which business units

proactively participate in IT projects that they planned or

proposed. O successul rms, 86 percent reported getting

involved "proactively" or "somewhat proactively," while

only 62 percent o unsuccessul rms reported the same.

The percentage o unsuccessul irms that reported par-

ticipating "somewhat passively" stood out at 34 percent.

These results indicate that business units in successul

irms more proactively participate in IT projects than do

those o unsuccessul rms.

Figure 15: Degree o business-unit involvement in IT projects

0% 20% 40% 60% 80% 100%

40% 51% 8% 1%

33%

56%

54%

44%

12% 1%

0%

Overall

Successful

Unsuccessful

Business units place clear importance on the use of IT

Business units place some importance on the use of IT

Business units place little importance on the use of IT

Business units place almost no importance on the use of IT

0% 20% 40% 60% 80% 100%

19% 50% 28% 2%

15%

30%

47%

56% 14%

34% 3%

0%

Proactively

Somewhat proactively

Somewhat passively

Passively

Overall

Successful

Unsuccessful


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(3) Degree o appropriateness o project team members

This survey asked about the degree to which business

units assign appropriate personnel to IT projects that they

planned or proposed. O successul irms, 86 percent re-

ported assigning appropriate personnel "most or all o the

time" or "in the majority o cases," while only 57 percent

o unsuccessul rms reported the same. The percentage o

unsuccessul irms that reported not assigning appropri-

ate personnel "in the majority o cases" was markedly high

at 37 percent. These results indicate that business units in

successul rms assign appropriate project team members

to a higher degree than do those o unsuccessul rms.

Figure 16: Degree o appropriateness o project team members

(4) Personnel evaluations o project team members

Whether business units assign appropriate personnel to IT

projects is also related to the personnel evaluation system.

A look at the results o the survey on this point shows

that while 86 percent o successul rms reported person-

nel evaluations o "appropriate" or "appropriate to some

degree," a somewhat smaller percentage (70 percent) o

unsuccessul irms reported the same. While 30 percent

o successul rms reported personnel evaluations o "ap-

propriate", a markedly smaller percentage (8 percent) o

unsuccessul rms did. In addition, the percentage o un-

successul rms that reported personnel evaluations "un-

avorable to some degree" was high, at 25 percent. These

results indicate that successul rms made more appropri-

ate personnel evaluations on project members than did

unsuccessul rms.

Figure 17: Personnel evaluations o business-unit personnel involved in projects

0% 20% 40% 60% 80% 100%

6% 61% 26%

14%

54%

72%

37%

7%

6%

5%

5%

1%

0%

2%

3%

Overall

Successful

Unsuccessful

Appropriate personnel assigned most or all of the time

Appropriate personnel assigned in the majority of cases

Appropriate personnel not assigned in the majority of cases

Personnel assigned could not be considered appropriate

No answer

0% 20% 40% 60% 80% 100%

15% 60% 18%

30%

62%

56%

25%

5%

3%

2%

9%

4%

2%

0%

8%

Appropriate

Appropriate to some degree

Unfavorable to some degree

Unfavorable

No answer

Overall

Successful

Unsuccessful


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Requests rom CIOs and IT leaders to business units

CIOs and IT leaders have a wide range o requests to business units to get greater beneft rom IT investments.Most notable among requests or business units were those seeking more business-unit involvement in IT investments.

"Business units should take more responsibility or generating value rom IT investments, instead o relying on the IT department or ev-erything." (Manuacturing)

"Business units should emphasize using IT to innovate their operations and bring new ideas IT-enabled business innovation, instead orelying excessively on the IT department or everything." (Manuacturing)

"Business units should get more involved in IT projects with sense o ownership, instead o having IT department take care o everything."(Manuacturing)

"Business units should have more sense o ownership and take more responsibility." (Finance)

"Business units should take responsibility or the return on IT investment." (Manuacturing)

"Business units should be more accountable or the outcome o IT investments." (Distribution)

"Business units should have a strong will to realize the benefts o IT investments." (Manuacturing)

"Business units should view IT as a means to an end and thoroughly ascertain the purpose o IT investment and how such investmentleads to benefts." (Manuacturing)

"Business units should frmly deploy measures to make the most o IT investments." (Manuacturing)

In addition, many CIOs and IT leaders mentioned that project requests submitted by business units should promote IT-enabledbusiness innovation, instead o being oriented only toward running the current operations more eciently.

"Business units should stop submitting project requests intended to achieve short-sighted results centered on matters o convenience."(Manuacturing)

"Business units should minimize project requests aimed at improving convenience." (Finance)

"Business units should request development projects to realize IT-enabled business innovation, instead o requesting projects based onexisting operations." (Manuacturing)

"Business units should promote IT investments coupled with business innovation and business process engineering (BPR), rather thansubmit requests based on simply continuing or improving eciency under the status quo." (Manuacturing)

"Business units should start with through BPR in advance o IT initiatives." (Manuacturing)

"Business units should make proposals based on projects impact on business, rather than simply improving day-to-day operations."(Manuacturing)

"Business units should realize IT-enabled new businesses through partnering with organizations both inside and outside the company,instead o ocusing solely on operational eciency inside the company." (Distribution)

"Business units should propose projects that are aligned with strategic goals and directions o the organization." (Manuacturing, Finance)

Moreover, a number o respondents admit the insucient involvement o their business units in project implementations includingrequirements analysis, review, and testing. Thus, they need more business-unit involvement in the system development phase.

"Business units should be more deeply engaged in IT projects." (Manuacturing, other)

"Business units should be more strongly involved rom the planning and design stages." (Manuacturing)

"Business units should share the tasks o systems development." (Manuacturing)

"Business units should proactively participate in the requirement analysis and testing phases." (Manuacturing)

"Business units should get more involved in project implementation, including requirements analysis and testing." (Finance)

With regard to the personnel rom business units involved in projects, there are strong demands or assigning key personnel andhighly skilled personnel who can take leadership in planning and promoting IT initiatives.

"Business units should assign key personnel who are capable o planning and requirement analysis in the planning phase." (Manuacturing)"Highly capable personnel should be involved in IT projects." (Manuacturing)

"Competent team members should be chosen and assigned or IT project." (Distribution)

"Personnel who can discuss projects in detail should be assigned to participate in meetings." (Finance)

"Personnel capable o implementing operational reorms and who do not consider their involvement to be a temporary assignmentshould be chosen as project team members." (Manuacturing)

In addition, capability to conduct a thorough post-investment verifcation was deemed desirable.

"Results should be measured thoroughly, with a heightened awareness o responsibility." (Distribution)

"Eorts to veriy investment perormance should be strengthened." (Finance)

"A thorough ollow-up assessment is desirable." (Distribution)

"The perormance o IT projects should be verifed thoroughly ater the projects are implemented." (Finance)

Furthermore, there were also requests rom the business units or greater executive involvement and leadership in IT matters andor guidance in reshaping the awareness o the entire business unit.

"Executives in business units should participate more proactively." (Manuacturing)

"General managers o business units should take active part in realizing IT investment perormance, rather than leaving things to theirsubordinates or the IT departments." (Manuacturing)


16/40

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0% 20% 40% 60% 80% 100%

26% 20% 34%

31%

16%

20%

21%

31%

37%

5%

9%

7%

6% 3%1%

5%5% 5%0%

2%6%4%1%

1%

Less than 0.5% 0.5% ~ 1.0% 1.0% ~ 2.0%

2.0% ~ 3.0% 3.0% ~ 4.0% 4.0% ~ 5.0%

5.0% or higher No answer

Overall

Successful

Unsuccessful

0% 20% 40% 60% 80% 100%

6% 45% 45% 4%

5%

9%

42%

44%

46% 6%

47% 0%

Clearly adequate

Somewhat inadequate

Clearly inadequate

Excessively inadequate to a degree that hinders operations

Overall

Successful

Unsuccessful

0% 20% 40% 60% 80% 100%

5%

9% 60%

54% 41%

30%

72%19% 9%

Can proactively make proposals

Can discuss relevant matters as equals

Little understanding

Overall

Successful

Unsuccessful

(1) Adequacy o required resources

A look at the percentage share o IT department personnel

in the entire workorce shows that the most common re-

sponse among successul rms was "1.0% or more but less

than 2.0%," given by 37 percent o respondents. O unsuc-

cessul rms, the response "less than 0.5%" and "1.0% or

more but less than 2.0%" were each given by 31 percent o

respondents. In general, it can be said that the percentageshare o IT department personnel in the entire workorce is

lower at unsuccessul rms.

Figure 18: Percentage share o IT department personnel in the entireworkorce

Next, the survey asked about the degree o adequacy o

the numbers o IT department personnel. For both suc-

cessul and unsuccessul irms, approximately 90 percent

o respondents reported that numbers were "somewhat

inadequate" or "clearly inadequate." However, a somewhat

larger percentage o successul rms (9 percent) than un-successul irms (5 percent) reported that numbers were

"inadequate." While no successul rms reported that the

numbers were "excessively inadequate to a degree that hin-

ders operations," 6 percent o unsuccessul rms reported

such. It can be derived rom this observation that while

numbers o IT department personnel are inadequate over-

all, such inadequacy appears to be somewhat more marked

among unsuccessul rms.

Figure 19: Adequacy o required resources

(2) Degree o understanding o business units operations

To what degree do IT departments understand business

units operations? O successul rms, 19 percent reported

having the ability to "proactively make proposals," while 5

percent o unsuccessul rms reported the same. Also, 72

percent o successul irms reported having the ability to

"discuss relevant matters as equals," while 54 percent o

unsuccessul irms reported the same. While 9 percent o

successul rms reported having "little understanding" o

business units operations, 41 percent o unsuccessul rms

reported the same, indicating that unsuccessul rms had

relatively lower degrees o understanding o business unitsoperations.

Figure 20: Degree o understanding o business units operations

2 - 5. Capabilities o IT Department

With regard to IT departments capabilities, this survey inquired about the adequacy o required resources, the degree o un-

derstanding o their operations, exchange o personnel, and management o outside resources.


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15

0% 20% 40% 60% 80% 100%

69%

64% 13%

16%

11% 5%

9%

5%

7%

7%51%

8%

21% 12%

2%

Overall

Successful

Unsuccessful

Less than 20%

20% ~ 40%40% ~ 60% 60% ~ 80%

80% or higher

0% 20% 40% 60% 80% 100%

70%

61% 7%

5%

13% 9%

9%

6%

7%

2%

2%

12%42% 2%

8%

26% 9%

9%

Overall

Successful

Unsuccessful

Less than 0.5% 0.5% ~ 1.0%

1.0% ~ 3.0% 3.0% ~ 5.0%

5.0% or higher No answer

0% 20% 40% 60% 80% 100%

11%9%12%

43%44%

42%

84%74%

89%

59%70%

53%

70%67%

70%

4%7%

2%

Overall Successful Unsuccessful

Planning

Design

Development

Operation

Maintenance

Not used

(3) Exchange o personnel with business units

Since IT department personnel need specialized techni-cal abilities, it is said to be diicult or IT departments

to exchange personnel with business units. A look at the

percentage o IT department personnel with experience

working in business units shows that the most common

response among both successul and unsuccessul irms

was "less than 20%." However, while the response "40%

or more" was given by 42 percent o successul irms, it

was given by only 15 percent o unsuccessul rms. These

results show that the percentage o IT department person-

nel with experience working in business units is relatively

higher at successul rms.

Figure 21: Percentage o IT department personnel with experienceworking in business units

Next, the survey asked about percentages o personnel

transerred rom IT departments to business units. The re-

sponse "less than 0.5%" was given by an overwhelmingly

high percentage o unsuccessul rms (70 percent), while

only 23 percent o such rms gave the response "1.0% or

higher." From these results, it can be seen that exchange

o personnel between IT departments and business units

is virtually nonexistent at unsuccessul rms. At the same

time, the response "less than 0.5%" was given by only 42percent o successul rms, while 44 percent o such rms

gave the response "1.0% or higher." Although exchange

o personnel between IT departments and business units is

dicult, more successul than unsuccessul rms are mak-

ing such eorts.

Figure 22: Percentages o personnel transerred rom IT departmentsto business units

(4) Management o outside resources

Use o outside resources such as IT vendors has become

commonplace. In this survey as well, the number o com-

panies using no outside resources was extremely small. A

look at the tasks in which such resources are used shows

no major dierences between successul and unsuccessul

rms, with such resources used in the areas o develop-

ment, operation, and maintenance.

Figure 23: Use o outside resources by task


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0% 20% 40% 60% 80% 100%

1%

35%

9% 30%

30%

10%

12% 57%

5%

49%

0%

1%

33%26% 2%

Always enforced Enforced more often than not

Not enforced very often

No standardized vendor-selection criteria

No answer

Overall

Successful

Unsuccessful

0% 20% 40% 60% 80% 100%

38%

43% 43%

47%

13%

15% 0%

1%

35%56% 5%5%

Prepared in-house

Summaries of RFPs are prepared in-house and details prepared by vendors

Prepared by vendors No answer

Overall

Successful

Unsuccessful

0% 20% 40% 60% 80% 100%

16%

23%

18% 33%

33%

20%

22% 29%

16%

28%

0%

1%

35%23% 2%

Always enforced Enforced more often than not

Not enforced more often than enforced

No company development rules or documentation standards

No answer

Overall

Successful

Unsuccessful

Although both successul and unsuccessul rms use outside resources such as IT vendors widely, whether such use is suc-

cessul depends on whether the outside resources are managed appropriately. On this point, this survey asked about the level

o respondents enorcement o vendor-selection criteria, those who prepare requests or proposals (RFPs), enorcement o

development rules and documentation standards, and conclusion o service-level agreements (SLAs).

(4) - 1. Enorcement o vendor-selection criteria

When asked about the degree to which standardized selec-

tion criteria are enorced when choosing vendors, 26 per-

cent o successul rms reported "always" enorcing such

criteria, while 33 percent reported enorcing such criteria

"more oten than not." In contrast, the most common re-

sponse among unsuccessul irms was "no standardized

vendor-selection criteria," given by 57 percent o such

rms.

Figure 24: Enorcement o standardized vendor-selection criteria

(4) - 2. Preparation o requests or proposals (RFPs)

When asked about those who prepare RFPs, 56 percent

o successul irms reported that RFPs are "prepared in-

house," while 35 percent reported that "summaries o RFPs

are prepared in-house and details prepared by vendors." Incontrast, the most common response among unsuccessul

rms was "summaries o RFPs are prepared in-house and

details prepared by vendors," given by 47 percent o such

irms, while 15 percent o such irms reported that RFPs

are "prepared by vendors."

Figure 25: Preparation o RFPs

(4) - 3. Enorcement o development rules and documentation standards

With regard to enorcement o the companys develop-

ment rules and documentation standards to vendors, there

were no major dierences between responses rom suc-

cessul rms and those rom unsuccessul rms. However,

percentages o successul rms reporting that such devel-

opment rules and documentation standards are enorced

"always" or "more oten than not" were somewhat higher

than those o unsuccessul rms.

Figure 26: Enorcement o development rules and documentation

standards


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17

(4) - 4. Conclusion o service-level agreements (SLAs)

With regard to conclusion o SLAs on projects related tooperations, 26 percent o successul irms reported "al-

ways" concluding such agreements. In comparison, only 8

percent o unsuccessul rms reported "always" concluding

SLAs, and 68 percent reported that SLAs were not conclud-

ed "more oten than concluded."

Figure 27: Conclusion o SLAs on projects related to operations

2 - 6. The PDCA Cycle or IT Investment:Advance Assessment and Follow-up Assessment

0% 20% 40% 60% 80% 100%

8%

9%

14% 23%

25%

59%

68% 0%

44%

4%

21%26%

Always concluded Concluded more often than not

SLAs not concluded more often than concluded

No answer

Overall

Successful

Unsuccessful

0% 20% 40% 60% 80% 100%

34%

56%

40%

35%

49%

54% 12%

9%

11%

Both implemented

Only advance assessment implemented

Neither implemented

Overall

Successful

Unsuccessful

We mentioned earlier that running through the PDCA cycle

or IT investment is required to improve returns on such

investment. In running through the PDCA cycle or IT in-vestment, advance assessment and ollow-up assessment

are both vital. Figure 28 shows the state o implementa-

tion o advance assessment and ollow-up assessment at

respondent irms. O successul irms, 56 percent imple-

mented both advance assessment and ollow-up assess-

ment, and 35 percent implemented only advance assess-

ment. At the same time, only 34 percent o unsuccessul

rms implemented both advance assessment and ollow-up

assessment, while 54 percent implemented only advance

assessment. These results show that while most successul

rms implemented both advance assessment and ollow-up

assessment, most unsuccessul rms implemented only ad-

vance assessment with no ollow-up assessment, showing

that such rms do not run through the PDCA cycle.

Figure 28: State o implementation o advance assessment and ollow-upassessment


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18

Overall Successful Unsuccessfu

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

72%77%

71%

30%32%

29%

17%9%

20%

20%5%

25%15%

5%18%

2%0%

3%

16%14%17%

5%9%

3%

No clear standards

Inadequate materialsfor making judgments

No personnel capableof making related

decisions

Depends on capabilities

of business unitsIT department has

weak influence

CIO has weakauthority

Decided on the quickthought of top executives

Other

0% 20% 40% 60% 80% 100%

17%

0%8%

27% 50%

51%

20%

27% 5%

8%

3%

Functional Somewhat functional

Somewhat dysfunctional Mostly dysfunctional

49%44%

Overall

Successful

Unsuccessful

In addition, at unsuccessul rms the process o assigningpriorities based on advance assessment does not unction

adequately (see Figure 29). When asked why, although the

number o such rms citing "no clear standards" was over-

whelmingly high, among unsuccessul rms the responses

"business units have strong infuence," "no personnel ca-

pable o making related decisions," and "IT department has

weak infuence" stood out. The numbers o successul rms

giving such responses were extremely small.

Figure 29: Internal assessment o efectiveness o priority-assigna-tion processes

Figure 30: Reasons why priority-assignation processes do not unc-tion adequately


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19

2 - 7. Conclusion: The Need or Collaborative IT Management

Fiteen characteristics o successul frms

With regard to involvement o top-executives, involve-

ment o business units, and capabilities o IT departments,

a comparison o successul and unsuccessul rms shows

marked dierences between these two categories on the 15

items shown in Figure 31. These 15 points can be reerred

to as characteristics o successul rms.

Categorization o these points shows that successul rms

in terms o IT investment t the ollowing description.

Top executives at successul irms place impor-

tance on IT investment and grasp the complete picture

o the investment. In addition, they communicate to

employees throughout the organization both the im-

portance o and the companys policies or the use o

IT. In making decisions on IT investment, they provide

speciic instructions and ensure alignment o IT in-

vestment with management strategies. Furthermore,

such companies have appointed Chie Inormation O-

cers (CIOs).

Figure 31: Prole o successul rms (summary)

Successulfrms

Unsuccessulfrms

Involvement otop executives

Importance attached to IT investment 93% 83%

The complete picture o IT investment grasped 79% 57%

Matters concerning use o IT communicated requently or rom time to time 77% 63%

Specifc instructions provided in decision-making on IT investment 19% 6%

Alignment o IT investment with management strategies ensured 91% 78%

A CIO has been appointed 53% 30%

Involvement obusiness units

Importance attached to use o IT in operations 100% 87%

Proactive participation in projects 86% 62%

Personnel rom business units involved in projects are mostly appropriate 86% 57%

Personnel evaluations o project team members are appropriate 30% 8%

Capabilities o IT

departments

Can make proposals to business units or discuss IT-related matters as equals 91% 59%

At least 40% o IT department personnel have experience working in business units 42% 15%

At least 1% o IT department personnel are transerred to business units each year 44% 23%

Vendor-selection criteria are enorced more oten than not 59% 31%

RFPs prepared in-house 56% 38%

Notes: Scores for item and item represent ratios of companies that reported placing much weight or some weight on the relevant matter. Scoresfor item represent ratios of companies that reported strong understanding or some understanding of the realities of IT investment. Scores foritem represent ratios of companies that reportedfully alignedorsomewhat alignedwith management strategies. Scores for item representratios of companies that reported participatingproactivelyorsomewhat proactivelyin proposed projects. Scores for item represent ratios ofcompanies that reported assigning appropriate personnelmost or all of the timeorin the majority of cases.


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20

0%

20%

40%

60%

80%

100%

1

2

3

4

5

6

7

89

10

11

12

13

14

15

Involvement ofbusiness units

Involvement oftop executives

Capabilities ofIT departments Specific instructions provided

in IT investment decision-making

Alignment of IT investmentwith management strategies

ensured

A CIO has been appointed

Importance attached to use ofIT in operations

Matters concerning use of ITcommunicated frequently orfrom time to time

The complete pictures ofIT investment grasped

Successful firms

Unsuccessful firms

Importance attached toIT investment

Proactive participation inprojects

Personnel from businessunits involved in projectsare mostly appropriate

Personnel evaluations ofproject team members areappropriate

Can make proposals tobusiness units or discussIT-related matters as equals

At least 40% of IT departmentpersonnel have experienceworking in business units

At least 1% of IT departmentpersonnel are transferred tobusiness units each year

Vendor-selection criteria areenforced more often than not

RFPs prepared in-house

Figure 32: Prole o successul rms (radar chart)

Business units at successul rms also place im-

portance on making eective use o IT in operations

and proactively participate in projects they have

planned or drated. Furthermore, right personnel rom

business units are appointed as project team members

and their eorts are evaluated appropriately.

IT departments in successul irms can proac-

tively make proposals to business units and can dis-

cuss IT-related matters with them as an equal partner.

At least 40 percent o IT department personnel have

experience working in business units, and at least one

percent o IT sta are transerred to business units

each year. In addition, many such irms apply stan-

dardized vender-selection criteria when choosing ven-

dors and prepare RFPs in-house.

The ollowing radar chart (Figure 32) summarizes the pro-

le o successul rms.


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21

Collaborative IT management and success rates

These iteen characteristics o successul irms comprisesix characteristics related to involvement o top executives,

our related to involvement o business units, and ve re-

lated to the capabilities o IT departments. Grading each

o these makes it possible to calculate scores on degree o

involvement by top executives, degree o involvement by

business units and capabilities o IT departments. (See Fig-

ure 33.)

A comparison o section scores and average scores or de-

gree o involvement by top executives, degree o involve-

ment by business units, and capabilities o IT departments

makes it possible to separate companies into two groups:

those with scores equal to or above the average and those

with scores lower than the average. Figure 34 shows the

percentages o successul rms (success rates) among rms

whose sections are in the high-scoring group and those

whose sections are in the low-scoring group. A look at this

table shows that the success rate or rms whose IT depart-

ment capabilities scored high was highest at 53 percent. On

the other hand, the success rate at rms with high scores

on degree o involvement by top executives was only

38 percent. These results show that even rms with high

scores on degree o involvement by top executives were

unable to increase their success rates i their scores on de-

gree o involvement by business units and capabilities o

IT departments were low.

Figure 33: Scores by section or measuring degree o collaborative IT management

Degree o involvement

by top executives

Degree o importance attached to IT investment 4

Degree o understanding o the complete picture o IT investment 4

Degree o communication on importance o and policies or use o IT 3

Degree o involvement in key IT-investment projects 5

Degree o alignment o IT investment with management strategies 4

Whether a CIO has been appointed 3

Degree o involvement

by business units

Degree o importance attached to use o IT in operations 4

Degree o involvement in projects 4

Degree o appropriateness o project team members assigned rom businessunits 4

Degree o appropriateness o personnel evaluations o project team membersassigned rom business units 4

Capabilities o IT

departments

Degree o understanding o business unitsoperations 4

Percentage o IT department personnel with experience working in businessunits 3

Percentage o IT department personnel transerred to business units 3

Degree o enorcement o vendor-selection criteria4

Main entity in charge o preparing RFPs 3

Note: Figures at right indicate the highest scores for each item.

Figure 34: Section scores and success rates

ScoreSuccessul

frmsUnsuccessul

frmsSubtotal Success rate

Degree o involvement by

top executives

High 33 54 87 38%

Low 5 36 41 12%

Degree o involvement by

business units

High 35 45 80 44%

Low 3 45 48 6%

Capabilities o IT

departments

High 33 29 62 53%

Low 5 61 66 8%


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22

Although the success rate or rms whose IT department

capabilities scored high was 53 percent, success rates vary

by degree o involvement by business units and by capa-

bilities o IT departments. For this reason, success rates

need to be analyzed by combining the scores or degree o

involvement by top executives, degree o involvement by

business units, and capabilities o IT departments.

When categorizing rms into our groups (those in which

all three sections have high scores, those in which only

two sections have high scores, those in which only one

section has a high score, and those in which no sections

have high scores), the breakdown o respondent rms is as

shown in Figure 35. Firms in which all three sections have

Topexecutives

Businessunits

ITdepartments

PatternSuccessul

frmsUnsuccessul

frmsSubtotal Success rate

All three sections have

high scores High High High HHH 28 13 41 68%

Only two sections havehigh scores

Low High High LHH 3 4 7 43%

High Low High HLH 1 5 6 17%

High High Low HHL 4 16 20 20%

Only one section has ahigh score

Low Low High LLH 1 7 8 13%

Low High Low LHL 0 12 12 0%

High Low Low HLL 0 20 20 0%

All three sections have

low scores Low Low Low LLL 1 13 14 7%

Total 38 90 128 30%

Successulfrms

Unsuccessulfrms

Subtotal Success rate

All three sectionshave high scores 28 13 41 68%

Only two sectionshave high scores 8 25 33 24%

Only one or nosection has a highscore

2 52 54 4%

Total 38 90 128 30%

high scores accounted or 32 percent o the total, those in

which only two sections have high scores or 26 percent,

those in which only one section has a high score or 31

percent, and those in which no sections have high scores

or 11 percent o the total.

A look at the success rate or each group shows that rms

in which all three sections have high scores had the high-

est success rate, at 68 percent. The success rate or rms

in which only two sections have high scores ell all the

way to 24 percent. Furthermore, the success rates at rms

in which only one or no section has a high score were ex-

tremely low at 4 percent.

26%

31%

11%

32%

All three sectionshave high scores

Only two sectionshave high scores

Only one sectionhas a high score

All three sectionshave low scores

Figure 35: Section score combinations and success rates

Figure 36: Success rates or each o the eight groups


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23

Figure 36 represents combinations o scores o the three

types o sections and success rates in more detail. This

table shows that success rates among rms in which two

sections have high scores varied according to which sec-

tions these were. The success rate or rms in which both

user and IT departments had high scores was 43 percent

second only to the rate or rms in which all three sections

have high scores. At rms in which only one section has a

high score, i that section was the IT department the suc-

cess rate was 13 percent, while it was zero when that sec-

tion was top executives or business units. When all three

sections had low scores, the success rate was 7 percent.

Although success rates or groups with small sample sizes

should be used only or reerence purposes, these results

can be said to be very interesting.

Low

HighHLH HHH

LLH LHH

68%17%

43%13%

IT departmentcapabilities

high

Success rate

53%

Degree of involvement by business units

Degreeofinvolvementbytop

executives

Low High

Figure 37: Success rates and combinations o IT department scores and other sections scores

As we have already seen, the success rate when the IT de-

partment had a high score was 53 percent. I the other two

sections also had high scores the success rate increased to

68 percent, while i the other two sections had low scores

the rate decreased all the way to 13 percent. (See Figure

37.)

The results o the above analysis imply that in order to im-

prove results o IT investment it is vital to establish collab-

orative IT management, by achieving high scores in terms

o all three o the ollowing: degree o involvement by top

executives, degree o involvement by business units, and

capabilities o IT departments.


26/40


27/40

25

3 - 2. Eorts Common to Companies Succeeding in IT Management Reorms

The results o our interviews with CIOs make it clear that

the ollowing our eorts are common to companies that

have implemented IT management reorms working toward

achieving collaborative IT management. (See Figure 39.)

(1) Reshaping awareness of the three parties through in-vestment management structures

(2) Achieving overall optimization through interaction at

the planning stage

(3) Establishing a structure of responsibilities through

system-ownership scheme

(4) Developing business-savvy IT staff through job rota-

tion

Managementstrategies

Four effortsrequired for ITmanagement

reforms

C

PA D

Businessstrategies

IT strategies

1Reshaping awareness of the three partiesthrough investment management structures

3Establishing a structure of responsibilitiesthrough system-ownership scheme 4

Developing business-savvy IT staff throughjob rotation

2Achieving overall optimization throughinteraction at the planning stage

Topexecutives

Topexecutives

Businessunits

Businessunits

Businessunits

IT depart-ments

IT depart-ments

IT depart-ments

Businessunits IT depart-mentsIT humanresources

Overalloptimization

Roles

Topexecutives

Topexecutives

Figure 39: Eforts required or IT management reorms


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B

A

C

E

F26

3 - 3. Reshaping Awareness in the Three Parties through Investment Management Structures

In order to improve perormance o IT investments, it is

important to run through the PDCA cycle or IT manage-

ment, with top executives, business units, and IT depart-

ments working in tandem. For this reason, it is desirable

to provide opportunities (meetings) or top executives and

business units to participate in discussions on IT invest-

ment. In act, successul rms have created structures or

managing IT investment that encourage active participa-

tion o top executives and business units. Adopting such

structures makes it possible not only to get top executives

and business units more deeply engaged in IT investment

but also make IT departments more accountable or IT in-

vestment and more closely in line with business units.

To ensure the success o such meetings, it is vital that

communication tools be prepared and that the oice in

charge make meticulous preparations in advance. In par-

ticular, in meetings with top executives present, pertinent

inormation must be communicated in a shared language

understandable to them. Successul rms use tools such as

IT strategy maps and IT-investment perormance metrics to

eectively communicate with top executives.

However, at many companies IT departments are so busy

with their day-to-day operations that they are unable also

to serve as the operational oice or these meetings. In

such a case, it would seem necessary to prepare an orga-

nizational structure in addition to securing the personnel

needed to run through the PDCA cycle in IT investment

management.

At Company A, in order to increase business units

awareness o IT investment, management adopted an ap-

proach three years ago that allows IT investments to be

managed systematically rather than leaving all IT-related

matters up to the IT department. In addition, three com-

mittees were established simultaneously, as ollows: IT

strategy committee, IT investment assessment committee,

and IT asset assessment committee. Over the past three

years, both top executives and business units have gradu-

ally reshaped their IT awareness and have developed an

interest in use o IT and return on IT investment.

At Company B, in order to educate top executives on ITs

strategic impact, an IT strategic plan was ormulated to

meet their midterm management goals and presented to

the board together with the companys IT vision, invest-

ment amounts and other matters. Furthermore, in order to

develop a sense o ownership among business units, an IT

committee was established in which business-unit leaders

participate. This committee meets quarterly to discuss key

projects.

At Company C, an IT planning section was established

separately rom its existing IT department. This newly cre-

ated IT planning section was led by the general manager

o the corporate strategies division who also served as the

CIO. The company also proceeded with preparations or

implementing the PDCA cycle or IT investment, with such

eorts centered on the IT planning section. Speciically,

business units were asked to submit an application or IT

project, which specied inormation such as the need or

new systems and anticipated results. Furthermore, a com-mittee made up o the IT planning section, business units,

and IT departments was established. In this committee, the

purposes and eects o proposed systems are discussed

thoroughly, based on the content o the applications.

At Company E, IT investment projects other than inra-

structure projects are submitted by business units. Invest-

ment projects are deliberated by the IT leadership commit-

tee, where project candidates are evaluated and prioritized

in light o benets o the investment, including quantita-

tive results.

At Company F, an operational eiciency promotion

committee was established ve years ago. This committee

gathers business-unit executives and discusses all IT in-

vestment projects monthly. The results o its deliberations

are reported to the board meeting. The operational e-

iciency committee prioritizes projects and approves or

unding, based on the IT plans prepared by business units,

and it veriies the results o projects ater six months o

cutover.


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27

3 - 4. Achieving Overall Optimization through Interaction at the Planning Stage

When IT projects are approved on the basis o bottom-up

system proposals, overall optimization cannot be realized

even when running through the PDCA cycle. Successul

irms embrace the approach o thorough interaction be-

tween top executives, business units, and IT departments

at the planning stage, thus leading to better alignment be-

tween corporate, business, and IT strategies. In addition, all

three parties ormulate a common understanding on busi-

ness concepts, structures and processes to realize the con-

cepts (i.e., operational reorms), and IT necessary or these

purposes. The investment management cycle is repeated

or individual investment projects within this ramework.

At Company B, the companys IT plan is broken down

by business unit and both corporate and business-unit IT

plans are explained at the rst meeting o the IT commit-

tee every scal year. Eorts are also made to ensure closer

alignment between midterm corporate plans, IT plans, an-

nual plans, and individual projects.

At Company C, instead o bottom-up system proposals

by business units, the system plans are designed to meet

the midterm management objectives and they are compiledinto an IT strategy map to oster communications with

business-unit executives and leaders. This is intended to

achieve better IT alignment with management strategies as

well as overall optimization.

Company E develops IT plans in addition to midterm

management plans. In ormulating IT plans, each business

unit and the IT department work together to identiy IT

needs and initiatives or the next ve years. Once IT plans

have been approved by the executive committee, they are

broken down into business-unit IT plans. In this way, the

company is able to ormulate IT plans that are properly

aligned with its management plans.


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In order to derive ull value rom IT investments, business

units should proactively participate in projects as system

owners and take responsibility or realizing the beneits

o the investments. However, business units oten lack the

sense o ownership and do not ulll their expected roles

and responsibilities.

For this reason, in such a case management structures

must be changed to ones in which business units perceive

themselves as system owners and can ulll their expected

roles and responsibilities. Many successul rms have im-

proved results by adopting the scheme o system owner-

ship and clariying the roles and responsibilities o system

owners as shown in Figure 40, as well as standardizing

IT-related procedures, standards, and rules. Furthermore,

successul rms are also characterized by appointing busi-

ness-unit executives as system owners and having them

take responsibility or the whole cycle o IT investment

rom proposing IT investment through realizing the ben-

ets o such investment.

Figure 40:Roles o system owners (business units) and IT departments

System owners(business units)

IT departments

Projects requests

Clariying anticipated results

Proposing system projects

Requesting development

Appointing project team members, etc.

Estimating approximate costs

Studying development structure, etc.

Systemdevelopment

Finalizing operational requirements

Confrming external requirements

Implementing test and verifcation

Conducting user training, etc.

Finalizing system requirements

Finalizing schedule, budget, and structure

Preparing o external requirements

Providing test environment, etc.

Cutover/operation

Utilizing the system

Comfeming the stratus o utilization

Veriying and reporting on the results o in-vestment, etc.

Assessing and reporting on developmentquality, cost, and delivery (QCD)

Providing operation services

Managing operational service levels

Veriying and reporting on operationdeliverables

Improvements

Identiying and examining issues

Proposing and implementing improve-ments

Measuring and reporting on results o im-provements, etc.

Identiying and examining issues

Proposing and implementing improve-ments

Measuring and reporting on results o im-provements, etc.

3 - 5. Establishing a Structure o Responsibilities through System Ownership Scheme

Company C has adopted a system ownership structure

and a business-unit executive was asked to take on the re-

sponsibility o the system owner. In this way, the company

attempted to make business units more accountable or the

return on IT investments and to enhance their commitment

to improving the perormance.

Company D has changed the structure and process o IT

project implementation. Under the new structure, business

units were asked to take the project leadership. This was

intended to ensure that the business units were responsible

not only or making project requests but also or devel-

oping and overseeing their systems, and or deriving ull

value rom their investments. At the same time, corporate

policy and guideline or IT use was developed to better

align IT with management plans and was communicated

to business units. This helped achieve overall optimization.

Furthermore, project leaders were appointed rom business

units and the IT department provided support on techni-

cal aspects o the project. Responsibilities are made clear

by appointing leaders on a ull-time basis, and in principle

results must be achieved within two years.


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G

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3 - 6. Developing Business-savvy IT Sta through Job Rotation

Despite the need or IT personnel who can understand both

operations and IT and can plan and promote IT-enabled

operational reorms, ew irms make deliberate eorts to

develop such business-savvy IT personnel. One method

o developing business-savvy IT personnel is to rotate the

sta between IT department and business units. However,

as our survey showed, such job rotation between IT depart-

ment and business units happens rarely.

Successul rms encourage IT sta to be rotated to busi-

ness units or a set o period. Job rotation between IT

department and business units enables IT department to

develop business-savvy IT sta who not only have solid

IT skills but also understand the operations o business

units. On the other hand, such rotation also enables busi-

ness units to develop IT-savvy business sta who can plan

IT-enabled operational reorms and also can develop and

evaluate business and system requirements.

Company D proactively promotes the exchange o IT per-

sonnel with business units in order to help IT sta develop

a deeper understanding o business-unit operations. How-

ever, i personnel transerred rom IT department to busi-

ness units do not return to the IT department, the benetso this exchange o personnel cannot be expected to take

eect. For this reason, sta members transerred to business

units always return to the IT department three years later.

Company F reports that insucient communication be-

tween business units and IT department are caused partly

by IT department sta: the IT department lacks personnel

with an acute sense o business. Furthermore, sta mem-

bers also need to develop the ability to recognize issues,

the ability to propose solutions, and the skills to manage

projects. The company has implemented job rotation and

other sta development methods to develop personnel with

experience both in system development and in business

operations.

Company Gs IT department (an IT subsidiary) had been

virtually in the position o an IT vendor. This position was

changed to one in which the subsidiary would support and

promote the parent companys IT strategies. A member

o Company Gs IT strategy committee was appointed IT

subsidiarys executive, and the operational oce o the IT

strategy committee was let to the IT subsidiary. In addi-

tion, the company plans to exchange personnel between

its business units and the IT subsidiary more proactively inthe uture.

At Company F, business units were requested to share

the responsibility and ownership o projects with the IT

department. In this way, the company adopted a system

ownership structure and specied the roles and responsi-

bilities o the system owners (business units) and those o

the IT department across the IT investment liecycle--rom

proposing IT projects through their development, opera-

tion, verication, and improvement. As the system owner,

the business-unit executive should be accountable or the

results o IT investment. The system owner was asked to

veriy the results ater cutover and to implement measures

to improve the perormance when the results all short o

expectation.

At company G, a system-ownership scheme was adopted

and an IT strategy committee was established to reshape

the awareness o business units. The system owner takes

responsibility or all aspects o the project--rom concept

development through project deinition, development,

and utilization. For projects involving costs o a certain

amount or more, a member o the executive team is ap-

pointed system owner. The IT strategy committee not only

examines IT investment projects and submits them to the

executive committee but also supports the system owners

eorts.


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30

In conclusion, we will discuss three critical actors needed to ensure the success o IT management reorms.

articulate IT visions, and leading IT investments toward

overall optimization. Leadership is vital to making these

changes real. Even i IT-department general managers are

able to strengthen the capabilities o their sections, it will

be dicult or them to persuade top executives and busi-

ness units to become deeply engaged in IT investments. An

eective means o addressing this challenge is by appoint-

ing a CIO to take leadership in making changes.

A CIO that can take leadership in making changes does

not need to be well-versed in IT, and in act need not even

have any experience in the IT eld. The key ingredients are

a trusted relationship with top executives, strong infuence

on business units, and a wealth o managerial experience.

In act, many CIOs at rms that have succeeded in IT man-

agement reorms have experience as company presidents

at subsidiaries or have backgrounds as general managers

in charge o management planning or operational reorms.

It must not be orgotten that close behind this pressing

need or establishing collaborative IT management is

the enorcement o a Japanese equivalent to the Sarbanes-Oxley Act. Such a law would require companies to improve

their internal controls, with the goal o ensuring the reli-

ability o inancial reports. The proposed law explicitly

mentions IT as one o the undamental elements o internal

controls. The Japanese equivalent to the Sarbanes-Oxley

Act would assume reporting on a consolidated basis, with

all consolidated subsidiaries subject to internal controls.

Implementation o this Japanese equivalent to the Sar-

banes-Oxley Act would lead to urther increases in the im-

portance o overall optimization in group management and

the same holds true or IT investment. For this reason, it is

necessary rst o all to establish an IT investment manage-

ment cycle at the level o individual companies, through

coordination between top executives, business units, and

IT department, and then to work toward development o

collaborative group IT management by expanding

these eorts to the groupwide level. Responding to a Japa-

nese equivalent to the Sarbanes-Oxley Act will provide an

excellent opportunity or companies to proceed with IT

management reorms.

4. Conclusion: Critical Factors of Success in IT Management Reforms

(1) Top-executive involvement in IT reorms

At the beginning o this report, we pointed out the ollow-

ing three undamental actors impeding the success o IT

investment: limitations on local optimization, ambiguities

in responsibility structures, and insuicient development

o business-savvy IT sta. Progress stalls in addressing

these actors when only ew members o top executives

view IT investment as a management issue and take IT re-

orms seriously. No IT management reorm will succeed i

the companys top executives are unaware o the demand

or reorms and i they do not express their commitment to

actively enact such reorms. The rst step toward a compa-

nys success in this area is to examine the present situation

o its IT investments and to make top executives deeply

involved in IT management reorms.

(2) Preparing a road map or change

The road to the goal ocollaborative IT management

diers depending on a companys situation regarding IT

management. For this reason, the company needs to devel-

op a correct understanding o the present situation and to

prepare a reorm road map, one that will take the company

rom its current starting point to the goal o collaborative

IT management.

As discussed in this report, an eective means o examin-

ing the present situation o a companys IT management

begins by breaking down and assessing it in terms o three

parties: top-executive involvement, business-unit involve-

ment, and IT department capabilities. Next, the company

must decide with which party to begin reorms. For ex-

ample, i a companys IT department capabilities are low, it

should initiate the IT department reorms. (See Figure 41.)

However, we must bear in mind that IT department reorms

a

Documents

RR066_E(Collaborative IT Management)