by Peter B. Nichol

How analytics help justify the role of the CIO

Nov 18, 2019
AnalyticsCIOIT Leadership

CIOs require unified intelligence for data-driven insights leading to actionable organizational decision making.

Executive attitudes, application portfolios, and suppliers each affect the perception of the value that the CIO brings to the table.

Initially, the CIO was a functional unit head, making promises of rapid delivery. Next, the role progressed to the CIO as a strategic partner that enabled business partner convergence. Subsequently, it advanced into a business visionary role that drove strategy. Today, the role of the CIO is centered around business transformation and building a data-driven culture.

The CIO is a change agent. All the IT functions that support business operations must work smoothly, or not much transformational change can be realized.

To change much, you need information and intelligence. Here’s how we CIOs get that intel.

A long way from there

Our role as the VP of IT in the mid-1980s has come a long way. The role was focused on IT infrastructure and getting technology deployed into the business. Then we had the international push in the late 1990s, where our global business knowledge regarding expansion strategies was tested. We started decentralizing and introducing business-process standardization. The technology was aligned with business models.

By the 2000s, CIOs were technology integrators. We had global system integrations, and it was vital that technology integrated with business solutions horizontally across our organizations. As we moved into the 2010s, we shifted to designing the architecture of business. Relationship orchestration and solution integration dominated most meeting discussions. Our focus was getting technology to provide on-demand business services. As we open the door to the 2020s, the role of the CIO is all of those responsibilities and more. Today, we’re conductors of value and leaders of transformational change.

Before you, as a CIO, can change much, you need intel—insights, analytics, and predictions of what will be and a reminder of what was. How do we obtain those insights to change the course of organizational analytics?

A simple and powerful method to gain actionable intel is an organizational analytics dashboard. Why? It provides self-service access to real-time information on the health and well-being of your organization.

Separate the data from the visualization of that data. This could be presented from the same system or not. It’s less important that they’re the same and more important that data presented as information is clean and actionable. From my experience, often the entry of data and the visualization of data require different systems.

Here are the six essential components of an actionable CIO dashboard:

1. Business capabilities

Business capabilities articulate how an organization plans to integrate and standardize to enable the organizational business model.

By aligning all projects, initiatives, and work to a business capability, it becomes clear how that element further enables the organizational goals and, more specifically, the business strategy.

There are three general views that help illustrate business capabilities:

First, Gartner’s Run, Grow, and Transform model quickly helps to identify if you’re maintaining core systems; e.g., just keeping the lights on or truly transforming the business model of your organization. This model can be useful to build the classic images of technical debt increasing over time and spend on innovation decreasing. This is visualized with the typical chevrons left to right with dollars of spend listed annually by category.

Second, the Center for Information Systems Research (CISR) out of MIT looks at four different investment classes: strategic, informational, transactional, and infrastructure. This is portrayed in the visual form of a triangle. Strategic focuses on innovation, major change, facilitation, high-value adds, and deep customer interaction. Informational concentrates on increased control, better information, better integration, improved quality, and overall faster cycle times. Transactional is simply cost out and increased throughput. Infrastructure is foundational and covers business integration, business flexibility, reduced marginal cost of IT business units, reduced business cost and IT standardization.

Third, we have the classes of business capabilities and enabling technical capabilities. Business capabilities highlight major functions that enable the organizational mission and advance initiatives e.g., in healthcare, this could be claims processing or revenue cycle. Technical capabilities enable those business capabilities, i.e., analytics or cloud computing.

These three views provide CIOs actionable intel on organizational initiatives and their linkage to the business strategy.

Questions this component of the dashboard can answer:

  1. Is the technical debt impacting our ability to innovate?
  2. Do we have the right balance between foundational and transformational initiatives?
  3. Which are the top business capabilities we’re accelerating this year?

2. Balanced scorecard

This is a concept we’ve all heard about, but no one has seen. Well, maybe we’ve seen it, but it’s more like a sighting of a Dodo bird—more myth than reality.

Regardless, the balanced scorecard concept is sound. The idea is that a balanced scorecard connects the business strategy to key elements such as mission (our purpose), vision (our aspirations), core values (our beliefs), strategic focus (our goals), objectives (our activities), measures (our KPIs or strategic performance), targets (our desired performance), and initiatives (our projects).

This connection between strategic objectives, high-level strategy, measures, and strategic initiatives provides insights into how effectively we’re executing on the organizational mission.

Key areas to cover in a scorecard that focuses on portfolio delivery might include the following:

  • Forecast vs. budget variance
  • Schedule confidence for active vs. committed projects
  • Data validation issues per active project
  • Statements of work in progress for active projects
  • Average project size per project manager or business relationship manager (BRM)
  • Average spend per project (for the current year)

Together, these elements provide you, as CIO, with information to better guide the organization.

Questions this view can answer:

  1. How accurate is our ability to forecast spend?
  2. Are projects rolled up into programs for maximum cost and management efficiency?
  3. How confident are we that we’ll meet our business commitments (risk in delivery)?

3. Executive portfolio summary

The executive portfolio summary is the heart of portfolio management—how we manage strategic organizational investments.

Generally, there are three components to portfolio management: application portfolio, infrastructure portfolio, and project portfolio. For simplicity, we’ll wrap these into a single and unified view in our dashboard.

There’s an endless amount of information that can be included in this view. However, these are some of the most important elements:

  • Projects – active workstreams
  • Project managers – who’re leading what?
  • Project health – cost, schedule, scope, benefits, and quality
  • Value – are we improving outcomes quantifiably?

Usually, this component of the dashboard includes a lower, more detailed view with specific project information including business case, sponsor, status, budget, weekly status comments, etc.

Questions this view can answer:

  1. Are we spending wisely?
  2. Are projects moving through the pipeline smoothly, or do we have bottlenecks?
  3. Are we on target to deliver initiatives for the current year?

This dashboard component is often the most referenced view by leaders and team members alike.

4. Resource management and capability planning

The objective of resource management is to improve the on-time execution of initiatives, view resource availability, and analyze utilization.

The capability planning of resources isn’t only about accurately forecasting true resource demand and accounting for future resource needs. Oh sure, that’s part of it, but we’re talking about building the credibility of IT: Say what you’ll do, and do what you say. It’s expectation management. Taking the time to develop a resource-management and capability program that can be visualized as a dashboard for insights and action is one of the more significant business transformations a CIO can make.

There’s a lot to present, but let’s highlight the most useful areas:

  • Allocations and stage
  • Allocations and status
  • Named resource utilization
  • Allocations by project
  • Allocations by resource role
  • Allocations by resource team
  • View by business relationship manager (BRM)
  • View by functional manager
  • View by project manager
  • Dimensional pivots by committed work, year, project name, resource, cost, or utilization percentage.

This information empowers your organizational leaders and enables intelligence decisions. It also helps to shift into a data-driven mindset and ensure information floating up is accurate and grounded by hard data.

Questions this view can answer:

  1. Do we have a justification for headcount increases?
  2. Are organizational roles continually overallocated?
  3. Which functional managers require assistance in managing their business demands?

As a CIO, I find the resource view one of the most powerful. We know we’re only as good as our worst organizational link. This view helps us identify where we have weak links in the chain.

5. Financials

Financial management is integral to responsibly managing portfolio investments. Financial planning is often a quarterly cycle that’s all-consuming for an organization. Project managers are scrambling to true-up project forecasts. Functional managers are balancing demand with capacity. Leadership is anticipating delivery roadblocks.

Financials are a lagging indicator, but they still offer huge insights for a CIO. If financial spend is trailing forecast, it’s a good indicator that we have influences pushing against our ability to deliver organizationally. These influences could be political, environmental, social, technological, economic or legal.

When presenting financials, less is more. However, we do need the ability to drill down deep. The Six Sigma 5-Whys come to mind here. Why is the variance off? Why is that project the major contributor to our variance? Why is that vendor not responsive? Why are we paying when we’re not receiving delivery? Why do we have a contract that doesn’t tie deliverables to payments?

Here are key areas of concern for visualizations:

  • Budget
  • Forecast
  • Actuals and Accruals
  • Variance and absolute variance
  • Variance by project
  • Variance by project manager
  • Variance by functional manager
  • Spend by vendor
  • Projects by vendors impacted
  • Vendors with projects impacted
  • Contracts by status
  • Contracts by vendor
  • Contracts by functional manager
  • Contracts by business unit by vendor

Accurate financials can be a game-changer when it comes to managing business expectations. Financial accuracy is a discipline and a mindset that needs to be cultivated and rewarded internally.

Questions this view can answer:

  1. Which projects have a greater financial risk?
  2. Do we have contracts about to expire?
  3. Has our CapEx-to-OpEx ratio changed from our initial estimates?

Solid financial management is required to scale or grow any business. A variance of 5% on $50 million is $2.5 million. However, a variance of 5% on $5 billion is $250 million. The cost of lost opportunity could be the innovation game-changer your business partners are looking for. Take the time to put the people in place, establish the processes, and invest in technology to improve financial accuracy.

6. Investments by area (total cost of ownership)

“What have you done for me lately?” Investments by area help to immediately quiet those business partners that feel they never get a fair shake when it comes to funding. Who was actually allocated what dollars has no relevance in their reality. These difficult business partners find a way to consume time that would be better spent on other areas. In their defense, they’re often the most steadfast defenders of value for their business. We, as CIOs, need to meet them halfway.

The investment-by-area view tracks financial performance for their business unit. Project-cost accounting tracks financial performance of resources (employees, non-staff augmented resources and vendors), software, hardware, projects, licensing, infrastructure, vendors, run (keeping the lights on), product development (small enhancements), equipment, professional services, and more. Everything the business consumes financially is tracked in investments by area view.

Ideally, this is project-cost accounting for each business unit rolled up to its functional head or executive leader. Not all organizations are ready for project-cost accounting. In that case, a “show back” approach is useful and serves as a step in the direction of adopting project-cost accounting. This approach shows business partners their investments by area. Investments by area sound more strategic—like we’re investing in innovation—whereas total cost of ownership sounds like we’re paying off debt.

Questions this view can answer:

  1. How much value is IT providing to the business?
  2. What’s the financial commitment from IT to our business partners?
  3. Is spending on each category reasonable based on our strategy?

This approach should illustrate the end-to-end cost. This includes the cost from inception (plan, build, run) to destruction (sunsetting the technology). This complete, multiple-year view helps business partners to understand how their decisions have a direct impact on committed spend in future years.

Is your role secure? Do you feel you have organizational and business-partner support to drive your agenda and enable the strategic mission? You might. You might not. Establishing a CIO dashboard can provide hyper transparency in your IT’s ability to meet expectations. A CIO dashboard offers insightful and actionable intelligence that’s vital to justify the role of the CIO. Are you justifying your role?