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15.571 Generating Business Value from Information Technology
Spring 2009
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15.571
Generating Business Value
From Information Technology
Jeanne W. Ross
Director & Principal Research Scientist
Center for Information Systems Research (CISR)
MIT Sloan School of Management
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
Today's agenda
ƒ Introduction to MIT Sloan's Center for Information Systems
Research (CISR)
ƒ Overview of research on IT and business value
– Problem/opportunity we're addressing
– Three keys to business value
ƒ Course expectations
ƒ Getting settled in and looking ahead
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
1
MIT CISR gratefully acknowledges the support
& contributions of its Research Patrons and
Sponsors.
Research Patrons
– Boston Consulting Group
– BT Group
– Diamond Management &
Technology Consultants
– Gartner
– IBM Corporation
– Microsoft Corporation
– Tata Consultancy Services
Research Sponsors
CISR
’s Mission
CISR’s
••
••
Founded
Founded in
in 1974;
1974; CISR
CISR has
has a
a strong
strong track
track
record
record
of
-- based
of practice
practice
based research
research on
on how
how firms
firms
manage
manage
&
& generate
generate business
business value
value from
from IT
IT
Research
is
disseminated
via
electronic
Research is disseminated via electronic
research
research briefings,
briefings, working
working papers,
papers, research
research
workshops
workshops
&
& exec.
exec. ed.
ed. programs
programs including
including
http://mitsloan.mit.edu/cisr/education.php
http://mitsloan.mit.edu/cisr/education.php
2008 CISR Research Projects
IT
IT and
and Business
Business Strategy:
Strategy:
•
Achieving
• Achieving Superior
Superior Business
Business Value
Value from
from IT
IT
—A
Single
Framework
of
What
Matters
—A Single Framework of What Matters
•
• Managing
Managing IT
IT for
for Efficiency
Efficiency and
and Growth
Growth
•
Benchmarking
and
Building
Risk
• Benchmarking and Building Risk Management
Management
Capabilities*
Capabilities*
•
• Business
Business Models*
Models*
The
The Digitized
Digitized Business:
Business:
•
• Distributed
Distributed Collaboration
Collaboration
•
• Building
Building Innovative
Innovative Capabilities
Capabilities through
through IT
IT
•
Building
a
Platform
for
Agility
• Building a Platform for Agility
•
• Enterprise
Enterprise Architecture
Architecture as
as Strategy*
Strategy*
•
IT-Enabled
Business
Change*
• IT-Enabled Business Change*
IT
IT Governance
Governance and
and Leadership
Leadership
•
• Maturing
Maturing and
and Globalizing
Globalizing IT
IT Governance
Governance
•
Redefining
the
CIO;
Introducing
• Redefining the CIO; Introducing the
the SEO
SEO
•
Enhancing
Engagement
• Enhancing Engagement
•
• IT
IT Portfolio
Portfolio Investment
Investment Benchmarks,
Benchmarks, IT
IT Savvy
Savvy &
&
Links
Links to
to Firm
Firm Performance*
Performance*
•
• Strategic
Strategic Outsourcing*
Outsourcing*
*
*
Projects
Projects previously
previously conducted
conducted by
by MIT
MIT CISR
CISR that
that are
are regularly
regularly
updated
to
include
new
data
and
publications.
updated to include new data and publications.
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
2009
2009
MIT
MIT
Sloan
Sloan
CISR
CISR
,, 6-Jan-09
-- Ross
©©
©
2009
2009
MIT
MIT
Sloan
Sloan
CISR
CISR
6-Jan-09
Ross
2
The problem with IT
Data
Strategic
Initiative
Lag
Solution
Design
Lag
Applications
Infrastructure
New Idea
Source: Enterprise Architecture as Strategy: Creating a Foundation for Business
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR) Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
3
The IT landscape at most firms
Corporate Data
Data
Applications
Technology
Platforms
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
4
The nature of the problem
ƒ IT invariably provides a long-lived solution to an immediate
business problem or opportunity and thus becomes an inhibitor
rather than enabler of change.
Embedded Technology
Embedded
Processes
Embedded
People
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
5
How do we make IT a strategic asset instead
of a liability?
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
6
Three things to get right
1. Operating model
2. IT governance and decision making processes
3. Development and management of a digitized platform
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
7
The operating model…
ƒ the desired level of business process integration and business
process standardization for delivering goods and services to
customers.
ƒ The operating model describes how a firm will profit and grow.
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
8
There are four operating models
Source: Enterprise Architecture as Strategy: Creating a Foundation for Business
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR) Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
9
IT governance...
ƒ Framework for decision rights and accountability to
encourage desirable behavior in the use of IT.
ƒ Governance complements organizational structure to
enable a firm to meet conflicting objectives.
Source: IT Governance: How Top Performers Manage IT Decision Rights for
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR) Superior Results, P. Weill & J. Ross, Harvard Business School Press, 2004.
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
10
Five key IT decisions need to be governed
Principles for IT
High level statements about how IT is to be used. Driven
by business principles (e.g., operating model)
Enterprise
Architecture
Organizing logic for data, applications, and infrastructure
captured in a set of policies, relationships, and technical
choices to achieve desired business and technical
standardization and integration
IT Infrastructure
Strategies
Strategies for shared IT capability (both technical and
human) delivered as reliable services (e.g., network,
help desk, shared data)
Business
Application Needs
Specifying the business need for purchased or internally
developed IT applications
IT Investment
and Prioritization
Decisions about how much and where to invest in IT
including project approvals and justification techniques
Source: IT Governance: How Top Performers Manage IT Decision Rights for
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR) Superior Results, P. Weill & J. Ross, Harvard Business School Press, 2004. For
©
© 2008
2008 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
key issues in each decision area, see Figure 2-6, pp. 54–55.
11
clip
State Street’s IT Governance on One Page
Principles for
Digitization
Input
Rights
Decision
Rights
Enterprise
Architecture
Input
Rights
Decision
Rights
Infrastructure
Strategies
Input
Rights
Decision
Rights
Input
Rights
Decision
Rights
Investment &
Prioritization
Input
Rights
•Info
Technology
Executive
Committee
•CIO Staff
•CIO Staff
•Office of
Architecture
•CIO Staff
•Info
Technology
Executive
Committee
•Enterprisewide IT
Budget
Mgmt
•Enterprisewide IT
Budget
Mgmt
•Office of
Architecture
•CIO Staff
•Service
Delivery
Agreements
&
Chargeback
•Activity
Tracking
System
•IT
Leadership
Group
•IT
Leadership
Group
•Federated
IT
Organization
(Vertical &
Horizontal
Units)
•Federated
IT
Organization
(Vertical &
Horizontal
Units)
•Business
Leaders
•Business
Leaders
•Business
Leaders
•IT
Leadership
Group
Less
•Federated IT
Organization
(Vertical &
Horizontal
Units)
Centralized
•IT
Leadership
Group
Decision
Rights
More
•Info
Technology
Executive
Committee
Business
Application Needs
Source: Adapted from IT Governance: How Top Performers Manage IT Decision
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR) Rights for Superior Results, P. Weill & J. Ross, Harvard Business School Press,
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
2004.
12
The digitized platform…
ƒ The set of standardized technologies, systems, processes
and data that "wire in" a firm's essential transactions.
ƒ The digitized platform provides predictability, high quality, and
low cost for repetitive and basic activities.
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
13
Companies gradually build out digitized platforms.
Business
Silos
Standardized
Technology
Optimized
Core
Business
Modularity
Business
Agility
Standard
Interfaces
and Business
Componentization
Enterprise-Wide
Technology
Standards
Standardized
Enterprise
Processes/Data
Locally Optimal
Business Solutions
25%
46%
27%
2%
% of Firms
Source: Enterprise Architecture as Strategy: Creating a Foundation for Business
Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR) Percentage of firms in each stage is updated based on a 2007 survey of 1508 IT
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
executives.
14
Companies make critical design and sourcing decisions
Form
RELOCATION
on
nd
o
L
w
Ne
rk
Yo
ey
dn
y
S
CONSOLIDATION
e
or
p
a
ng
Si
n
do
n
Lo
w
Ne
rk
Yo
ey
dn
y
S
re
po
a
ng
Si
PLATFORM
INTEGRATION
n
do
n
Lo
w
Ne
rk
Yo
ey
dn
y
S
re
po
a
ng
Si
CLIENT
Process(es) locally
implemented
PROVIDER
Shared Service/
Joint Venture/ Business
Process Service Provider
process in each client
Distinguishing ƒ Same
location are different
Characteristics ƒ Provider runs processes as-is
ƒ Relocating work to lower
cost location
Efficiencies from ƒ Streamlining and digitizing
process
Who Specifies Process?
(bold circles)
Who Operates Process?
ƒ Like processes standardized
ƒ Compare metrics across processes
ƒ Platform provide unified customer
experience
ƒ Platform components shared across
multiple clients with different SLAs
ƒ Shared optimized process
ƒ Comparing processes across
locations
ƒ Platform capabilities
ƒ Sharing data and business agility
Client
Jointly
Provider
Provider
Provider
Provider
Client
Client
WhoCenter
Uses Process?
Client
for
Research
Center
for Information
Information Systems
Systems
Research (CISR)
(CISR)
©
© 2008
2008 MIT
MIT Sloan
Sloan CISR
CISR -- Weill
Weill
15