When you turn down a request for funding an R&D project, you are right 90% of the time. Thatâ€™s a far higher rate of decision accuracy than you get anywhere else, so you do it.
And thatâ€™s fine. Except for the 10% of the time youâ€™re wrong. When youâ€™re wrong, you lose the company.
McCormack asserts that technology management is a board issue, and cites three reasons why IT management “fails to stem from the boardroom”:
- the “tech-free” careers of many of today’s business leaders
- the feeling, in many IT departments, that “users” should not interfere in IT decisions
- the power of the “vendor” in undermining the relationship between board and function
He then goes on to recommend five steps to “move technology management into the boardroom”:
- Investing in boardroom development to ensure that the board grasp the strategic importance of IT
- Ensuring that the “IT function” has strong management
- Demonstrating that top technologists are valued
- Insisting that best practice is normal
- Considering outsourcing, but giving the function first refusal
Sean, while endorsing what Ade has to say, goes further. He indicates that he only invests in companies where the board demonstrates its understanding of the strategic importance of IT.
There are some important points being made here, and I’d like to add my sideways-on view:
1. It’s about access. I am less concerned about whether the CIO is on the board or not, what matters is that the CIO has access to the boardroom. Easy access. And one way of measuring access is the number of times that IT topics make the board’s agenda. I regularly hear about companies with CIOs on the board which would not meet Sean’s criteria. Putting a CIO on the board is a bit like joining a gym. Value is only obtained when you exercise.
2. It’s not about measurement, it’s about outcomes. Boards need to know where the company is going, and the role that technology must play in getting the company there. Too often boards abdicate that responsibility and seek to govern via ratios. That’s a bit like managing a war by looking at the body counts on either side. If IT is a construction industry it should be run like one, with fixed prices and penalties for change or delay. If IT is an investment business it should be run like one, with clear expected returns and the willingness to divest when required. If IT is a sales and marketing business, then IT estimates and forecasts would be expected to have the same level of confidence as sales forecasts, tightening over time. The trouble is, the word “project” covers all these types: construction, investment, sales/marketing, with different behaviours and expectations. This issue is made worse by the current “battle of professions”, particularly between finance and IT.
3.Â This time it’s personal. Enterprise 1.0 was an easy ride for most boards in this respect: the understanding of the strategic value of IT was consistent across the boards of different companies: consistently low, that is. And as a result, the failure to derive value from IT was common and consistent. Now, with Enterprise 2.0, the rules have changed. As Andrew McAfee has noted a number of times, what Enterprise 2.0 does is to accelerate a company’s capacity to differentiate, so the gap between winners and losers has increased sharply more recently. IMO one of the reasons for this acceleration is the entry of Generation M into the workplace. Today is about acceleration, tomorrow, as more of that generation gains employment, we’re going to see ballistic growth in that difference.
Too often we argue about the strategic value of IT, and allow that argument to descend into measurement farce. As we continue to move into a digital age, understanding the strategic value of IT is now “table stakes”.
What matters is understanding what’s at stake. It’s called the company.