This article is the second in a series called The 12 Principles of Agile IT Governance. The series is designed to help board members and senior managers leverage technology excellence as a competitive advantage. Each article discusses a key principle of agile IT governance and presents tactical measures that allow for deployment of that principle.
The ability to change is fundamental to achieving and sustaining a competitive advantage. However, change can be expensive in more ways than one, especially for technologists and the business units that invest in change. Physicist J. Robert Oppenheimer articulated this sentiment when he said, “When you see something that is technically sweet, you go ahead and do it and you argue about what to do about it only after you have had your technical success. That is the way it was with the atomic bomb.”
While the first key to agile IT governance is a focus on stakeholder satisfaction, the second key is the ability to harness change for competitive advantage. This can be a complex challenge for CIOs who have their hands full keeping legacy environments operational and managing constant pressure on their budgets while facing expectations to deliver innovation.
However, harnessing change can be tactically achieved by taking three steps:.
- Make small investments in innovative skunkworks projects that target one tactical and one strategic business metric such as EBITDA.
- Change IT strategy to align with changes in business strategy.
- Build a culture that embraces change.
Step 1: Make Small Investments in Innovative Skunkworks Projects
With computing performance doubling every 18 to 24 months, CIOs have a lot of new technologies to choose from, and it can make agile IT governance difficult. Incumbent vendors are trying to sell them on new versions of existing products, while new vendors are trying to earn their spot on the procurement rung. Often, these new vendors are referred by powerful business unit leaders touting a powerfully perceived business benefit, so the CIO has little choice but to give them due consideration.
How-to: Dealing with Politics in IT: Separating Operators from Performers
Regardless of the predicament, politics should never be allowed to precede performance. And performance can only be tested one way—hands on, with specific business use cases that measure tangible, and preferably quantifiable, business benefits.
This is easier said than done. Tests require resources, and most CIOs don’t have excess resources to spare. However, there are always many people on any IT team who would love to contribute their spare time to projects that let them test cool new technologies. Alternatively, allowing the team to focus on innovative skunkworks projects one day per week can be a great reward and retention mechanism for top-performing engineers, who are infamous for leaving to join start-ups.
For example, a DBA in charge of a legacy database may find it refreshing to take MemSQL or MongoDB for a test drive to see if he can potentially offer greater benefits on an upcoming project. This may result in dramatically faster response times and may deliver greater user satisfaction at a lower cost for an upcoming business application project.
If the employee spends 40 hours on this test project, at an internal rate of $100 per hour, the project costs the company only $4,000—but, at scale, the benefits may be in the millions relative to the investment required to scale the technology. If hundreds of financial advisors can rapidly crunch real-time fund performance data concurrently by entering customized searches with dozens of scenarios for the hundreds of customers they are meeting with, then the quantifiable benefits of more advisors being able to select funds that beat the S&P 500s performance (a tactical metric) and the qualitative benefits of an improved client experience (a strategic metric) may significantly improve assets under management or even EBITDA for the company as a whole.
Case Study: How KKR Used Data Mining For Competitive Advantage
Even so, for every successful skunkworks project, 10 will fail. It can be all worth it if the one successful project delivered net benefits that exceed the cost of the 10 that fail. Therefore, the CIO should set aside a small portion of the budget to play the role of in-house venture capitalist—choosing small investments carefully and doubling down on bigger commitments only when preliminary tests conducted by passionate and talented employees prove successful. Enough successful skunkworks projects will inevitably yield a competitive advantage.
Step 2: Change IT Strategy to Align with Changes in Business Strategy
That said, innovation for the sake of technology advantage alone can be meaningless. Therefore, it is the CIO’s responsibility to understand how innovation impacts business strategy and communicate it to business stakeholders in a manner they understand.
An effective way to bridge the gap is to analyze the business plans that are published annually by business unit leaders for the C-suite and approved as business drivers for technology budgets. These plans, in aggregate, communicate the organization’s business strategy. One technology innovation may impact multiple business drivers on business plans for multiple business units. Therefore, defining a technology strategy that encourages the right tactical execution behavior within the teams that the CIOs deputies manage can prove critical in how a CIO’s performance is measured.
For example, a business unit that suffered brand damage from a major customer data breach in the prior year may have included a focused effort on information security as a centerpiece of its business strategy, even going so far as allocating a portion of is advertising budget to inform customers about data protection. A savvy CIO may jump at this opportunity to change the organization’s password policy to one that requires users of critical systems to use an entire sentence, preferably one that includes numbers or symbols, since a sentence is both long and complex and yet easy to remember.
At the same time, this initiative could make critical systems for multiple business units more secure, since the prevalence of GPU computing and the free availability of password-breaking programs on the Internet is increasingly making password shorter than 12 characters rather vulnerable. A skunkworks project for installing GPU-based workstations that assess the security strength of a password may also add significant strategic value.
How-to: Create Stronger Passwords
Taken together, these initiatives may cause cybercriminals to move on and target competitors known to have weaker password policies. This could cause a data breach—and brand damage—for those companies, thereby bringing you an unforeseen competitive advantage.
Step 3: Build a Culture That Embraces Change
Change can sometimes be difficult for technologists to embrace, since not all change is viewed as being positive. If key employees have built years of expertise in a set of technologies, and the technology strategy mandates migrating to a different stack, these employees may feel alienated and resist the change. In rare cases, they may even sabotage the effort in order to protect their knowledge base and jobs. This type of behavior can hurt an organization in many ways.
Games of change can be a fun but powerful way to get employees to think about and accept out-of-the-box solutions. Awarding wacky prizes to those who think of clever ways to (theoretically) solve nagging business problems keeps employees “familiar” with change while keeping them focused and engaged.
Technology jobs are frequently deadline-driven and stressful. Culture pundits preach the importance of building a workplace where employees love coming to work each the day. Balancing fun and accountability can be quite challenging for CIOs, especially when they are under constant pressure from business units to perform.
That’s why a conscious, concerted effort to build a culture that embraces change is so critical to agile IT governence. The cascading results will surface in the form of employees who carefully propose changes in technology solutions that have a meaningful, positive impact on the future of the company. Above all, a culture that embraces change can prove to be a powerful harbinger of competitive advantage.
Chiranjeev Bordoloi writes about Agile IT Governance for CIO.com and is currently writing a doctoral dissertation on the subject. He has served in senior executive roles at Fortune 500 companies and start-ups alike. Read Bordoloi’s blog on AgileITGovernance.com, follow him on Twitter @AgileITGov or email him.
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