The new challenges facing the CIOs in large organizations

1. Alignment in the 21st Century:
Balancing Innovation and
Implementation
Professor N. Venkatraman
Boston University School of Management
SAP Users Group @ Maastricht
April 20, 2007

2. Imagine life without……
(c) Venkatraman, 2007 2

3. Yet.. there are conflicting views on the
role and value of IT…
 “expensive.. But necessary evil”
 “Am I getting value from IT investments?”
 “Are we investing in the right areas?”
 “Can IT become my core competence?”
 “Why not outsource and offshore?”
 “I see my competitors using IT strategically..”
 “I know that IT will become more central in the
future… but I do not know how to extract value”
(c) Venkatraman, 2007 3

4. My Agenda
Alignment in the 21st century:
Innovation and Implementation
IT Strategy 2.0
Reframing the Business--IT
Conversation
(c) Venkatraman, 2007 4

5. New Excitement.. circa 2007
 CIO as the Chief Innovation Officer!
 I.T contributing to Revenue and Growth
 From Business Process Reengineering to
Crafting Business Model Innovations
 Pervasiveness of I.T in products, processes
and services
(c) Venkatraman, 2007 5

6. 66
(c) Venkatraman, 2007
© N. Venkatraman, 2006

7. Source: Bill Gates

8. We see I.T everywhere now..
(c) Venkatraman, 2007 8

9. A Car is a computer on wheels connected
to the network
(c) Venkatraman, 2007 9

10. Software is shaping next generation
business processes..
(c) Venkatraman, 2007 10

11. with new web functionality…
(c) Venkatraman, 2007 11

12. We see convergence and overlap
across industries and markets
(c) Venkatraman, 2007 12

13. Four conversation questions
1.How different will your business landscape
be in the next 3-5 years?
2.What’s the role of Innovation.. especially
business model innovation for your future
success?
3.Is I.T central to business model
innovations?
4.How important is I.T to achieving your
current business profitability?
(c) Venkatraman, 2007 13

14. Alignment 1.0
IT
Business
Strategy
Strategy
(c) Venkatraman, 2007 14

15. We have captured value from IT
+ +
People Processes Technology
OO + IT = EOO
15
(c) Venkatraman, 2007 15

16. Alignment 1.0 Mechanisms
 Business process reengineering (massive scale)
 Decentralize and centralize (adapt over time)
 Standardize to reduce inefficiency
 Outsource and multi-source IT functionality
 Cross-functional global teams
 Service level agreements
 Business--IT partnerships
 Etc…
(c) Venkatraman, 2007 16

17. Alignment 1.0 Scorecard
B
If we are charitable..
(c) Venkatraman, 2007 17

18. Alignment 2.0: The Network Era
Network Era
Client/Server Era
Mainframe Era
(c) Venkatraman, 2007 18

19. We are in an era of global network
Live Connect
Work Create
Consume
Play
(c) Venkatraman, 2007 19

20. And globalization of work and business
processes
(c) Venkatraman, 2007 20

21. Innovation… The new focus?
(c) Venkatraman, 2007 21

22. My view on business model innovations
Moore’s
Law
Products
Processes
Services
People
Metcalf’s Bandwidth
Law Law
(c) Venkatraman, 2007 22

23. Alignment 2.0:
New Perspective, New Mandate
Drives
Business I.T.
Strategy Strategy
Shapes
(c) Venkatraman, 2007 23

24. Alignment Agenda 2.0
Innovation
Strategic
Focus
Implementation
Business IT/IS
Leadership Responsibility
(c) Venkatraman, 2007 24

25. Alignment Agenda 1.0 focused on
operational, execution issues
Innovation
Strategic
Focus
Implementation
Business IT/IS
Leadership Responsibility
(c) Venkatraman, 2007 25

26. Alignment Agenda 2.0: Building
Blocks (1)
Innovation
Strategic
Focus
Cost
Center
Implementation
Business IT/IS
Leadership Responsibility
(c) Venkatraman, 2007 26

27. Cost Center
Focus Best in class global IT
infrastructure
Business Case Lowest delivered cost
benchmarked against
external referent; not directly
connected to strategy
Organization Detached from business
operations
Sourcing Best-in-class global sourcing
partners and vendors
(c) Venkatraman, 2007 27

28. Alignment Agenda 2.0: Building
Blocks (2)
Innovation
Strategic
Focus
Profit Cost
Center Center
Implementation
Business IT/IS
Leadership Responsibility
(c) Venkatraman, 2007 28

29. Profit Center
Focus Support current business
operations
Business Case Contributions to customer value
and current profitability levels
Organization Embedded (and partnering) with
business operations
Sourcing Selective use of best-in-class
global sourcing partners and
vendors
(c) Venkatraman, 2007 29

30. IT and Implementation Benefits
Data Results
Information Knowledge Action
}
}
}
}
Design Expertise Process Execution
Gap Gap Gap Gap
(c) Venkatraman, 2007 30

31. Alignment Agenda 2.0: Building
Blocks (3)
Innovation Growth
Center
Strategic
Focus
Profit Cost
Center Center
Implementation
Business IT/IS
Leadership Responsibility
(c) Venkatraman, 2007 31

32. How to think about innovation?
Moore’s
Law
Business
Metcalf’s Model
Law
Innovation
Bandwidth
Law Supporting the growth agenda
(c) Venkatraman, 2007 32

33. Growth Center
Focus Support future growth trajectories
through new business model
innovations
Business Case Contributions of IT to business
model innovations
Organization Embedded within business
operations—shared responsibility
Sourcing Selective use of innovation network
partners and vendors
(c) Venkatraman, 2007 33

34. Alignment Agenda 2.0: Building
Blocks (4)
Innovation Growth Investment
Center Center
Strategic
Focus
Profit Cost
Center Center
Implementation
Business IT/IS
Leadership Responsibility
(c) Venkatraman, 2007 34

35. What’s your experimentation
equation?
Google’s equation is 70-20-10.
What’s your equation?
(c) Venkatraman, 2007 35

36. Investment Center
Focus Influence future growth trajectories
through selective experimentation
Business Case Allowing for experimentation of
plausible business models
Organization Decoupled from current operations
Sourcing Selective use of innovation network
partners and vendors
(c) Venkatraman, 2007 36

37. The building blocks have different
personalities…
Innovation Growth Investment
Center Center
Strategic
Focus
Profit Cost
Center Center
Implementation
Business IT/IS
Leadership Responsibility
(c) Venkatraman, 2007 37

38. These building blocks are also dynamic
Innovation
Strategic
Focus
Implementation
Business IT/IS
Leadership Responsibility
(c) Venkatraman, 2007 38

39. Where’s Your IT Capital Allocated?
What % for Innovation?
What % for Implementation?
(c) Venkatraman, 2007 39

40. Where’s Your IT Core Competence?
IT Competence for Innovation?
IT Competence for Implementation?
(c) Venkatraman, 2007 40

41. Where’s Your IT Sourcing focused?
IT Sourcing for Innovation?
IT Sourcing for Implementation?
(c) Venkatraman, 2007 41

42. Where’s Your IT Mandate?
IT Mandate for Innovation?
IT Mandate for Implementation?
(c) Venkatraman, 2007 42

43. What about IT Performance Metrics?
IT Performance Metrics for Innovation?
IT Performance Metrics for Implementation?
(c) Venkatraman, 2007 43

44. There’s legacy ‘management’ problem
We say innovation.. But we manage IT
for implementation
We say future.. But we manage IT for
today
We say shared business-IT responsibility
but we blame IT for the problems
(c) Venkatraman, 2007 44

45. Managing for the future with I.T.
Value creation for
today and
No Business
tomorrow
innovation
without IT
Inf chn
Te
y
or ol
teg
ma og
ra
tio y
St
n
Leadership
(c) Venkatraman, 2007 45

46. Your Challenges
 The impact of I.T will be more than ever
before
 Pervasive
 Fast changing
 Value potential
 Management of IT is equally important
 Multiple roles within enterprises
 Leadership and strategy linkages
(c) Venkatraman, 2007 46

47. Putting these ideas into action
Clarity of Mandate for IT through
management workshops
Recognition of the four building blocks
for business innovation and
implementation
Reinforce joint business-IT responsibility
Develop an IT Strategy 2.0 scorecard
(c) Venkatraman, 2007 47

48. Are you ready to take on the
expanded IT mandate to win??
Thank You Very Much