Wednesday, 30 November 2011

IT Maturity: The law of accelerating returns

Last week I had my gall bladder removed, for which I must first say thanks to the surgeons and staff at Murrayfield Hospital.  Being away from the operational distractions of the office for a whole week I have been able to think more clearly about some strategic issues.  It’s a luxury that few people have time for, particularly right now.  The economic climate is constricting resources which means keeping the lights on takes precedence over improvement initiatives.  Consequently, organizations tend to shrink back into the comfort of a low cost, low risk operations-only mentality – sitting out the economic downturn safe in the knowledge that battening down the cost hatches will see them through the storm.  However, the fact is that companies that invest during lean times almost always emerge in a stronger position – by leapfrogging their shell-shocked competitors who are shying away from risk.

It is a commonly accepted 'fact' that an average of 70-80% of IT resources are used to provide support and therefore do not contribute anything new to the business.  With only 20-30% of IT budget going to new developments - some of which is fruitlessly wasted on projects that deliver no business value - it is no wonder that IT never reaches the ‘star player’ status.

Most IT organizations are stuck in the operations rut 
Many IT organizations are stuck in a rut - where the new development portion of their budget goes towards perennially catching up with business requirements.  In essence, there is no budget or resource dedicated to innovation that can close the gap and develop IT as a business leading organization. Few companies can afford to dedicate time to innovation, but organizations such as Google very cleverly built this into their company culture at a very early stage to guarantee long-term success in the market through ongoing commitment to innovation.  Organisation's need to shrug off their industrial-age thinking and start thinking in the context of a modern, fast moving global enterprise market where innovation gets you noticed.  The trick is to find the 'wormhole' to the next level - and often, it's a very small wormhole.

The IT Ops Managers Reunion 2012

Step on the gas
In essence, a nudge is required to release resources for innovation and push IT out of the operational rut.  A single, prioritised improvement project can start the ball rolling and create some forward acceleration.  However, the selection of the right project is critical.  A set of initiatives should be analysed and evaluated in terms of the capital expenditure, required resources and benefits that will be delivered.  If the selected project is predicted to release sufficient resources and deliver sufficient cost savings to meet the cost and resource requirements of the next project, inertia will be maintained and IT can continue to make progress with the roadmap.  Of course, no budget means instant failure, so it is vital that IT communicates the value of this ‘wormhole project’ in both standalone terms and as the critical first step in a holistic IT maturity roadmap.

"I'm an IT department and I have a problem"
Realising the problem is the first step towards a solution.  Admitting the problem is the next step (difficult as this might be) but it is also an opportunity to build credibility.  Politics enters the equation and to a certain extent the status quo can be considered a legacy situation that has built up over many IT ‘administrations’ allowing IT to pass the buck to the ghosts of IT past.  IT organizations should aim to gear up morale internally and create organizational enthusiasm by planning and communicating a way out of the rut that is crystal clear.

Who are you calling a 'legacy situation'?

Critical Success Factors
  • Risk assessment must be stringent to foresee and negate project pitfalls to minimise risk of failure.  It must be kept in mind at all times that failure in step one will destroy organizational confidence in the whole roadmap, making it very difficult to re-start.
  • The cost savings and resource benefits of one project should meet or exceed the input requirements of the subsequent project or a shortfall will be revealed and IT will have to go back to the CFO with cap in hand.
  • The CEO must recognise the strategic potential of IT and provide the resources (in other words the breathing space) they need to embark on an improvement roadmap.  Clamping budget helps nobody but your competitors  - who see the strategic potential and recognise that there is a price tag associated with achieving Innovation Technology maturity.

Monday, 14 November 2011

The Value of IT: A Real Life Example

How IT could have saved BAA £220 Million
I’ve been listening to The Bottom Line this week - one of BBC Radio 4’s flagship business programs presented by Evan Davis (better known for presenting The Dragon’s Den).  In the show, Alison Carnwath, Chairman of Land Securities, took the opportunity to pin down BAA Chief Executive Colin Matthews over how much time passengers spend circling London before landing at London Heathrow, one of 6 airports operated by BAA in the UK.

 "I think I'd like to get off the plane now"

The Business Challenge
Flights arriving in London Heathrow are circling the city waiting for a landing slot due to congestion at the airport.  The challenge is for Heathrow to land more planes more quickly and reduce time spent in the in the sky above London without cutting the number of flights using the airport.  The benefits of solving this problem are three-fold:
  • Improving the passenger experience by reducing delays in the air and queuing on the ground
  • Improving airline customer satisfaction by reducing fuel overheads incurred as a result of extra time spent circling the city.
  • Maintaining and indeed increasing the number of airlines and flights using Heathrow - a core source of BAA revenue.

The Business Problem
The problem is one of capacity.  They need to be able to land more planes more quickly.  Initially, the most obvious solution was to build additional runways and more terminal stances to meet rising demand.  However, on top of the huge cost of building and maintaining this infrastructure there are other factors, including huge public resistance, which made this a contentious solution. The plan for a third runway was subsequently scrapped by the UK Government in 2010.  However, there’s more than one way to skin a cat.  If extending infrastructure is not an option, then an organisation must improve the way demand is managed to fit around the existing infrastructure.

The Solution
Matthew’s suggested solution was to manage demand more effectively by better integration of what Air Traffic Control with the allocation of runway slots and terminal parking stances on the ground.  This might relieve congestion in a limited way but it only addresses half the problem.  The cause of congestion lies both downstream and upstream of air traffic control.  Poor management of the runways and terminal stances creates a bottleneck downstream.  Upstream variation in flying times means arrivals deviate from the schedule and flights miss their allocated landing slots – so they are left circling in the stack until a new slot is found.

 "Hi, is that the tower?  I hate to rush you but..."

The weak point is NATS lack of visibility outside of their own airspace monitoring systems.  Mark Elborne, CEO of GE (UK & Ireland) was quick to plug GE Aviation’s Performance Based Navigation (PBN) system which allows air traffic control to track incoming aircraft from takeoff at the departing airport to landing, giving better visibility of delays before they enter NATS airspace.  This allows them to plan further ahead, reorganise landing sequences in advance and work with the airport to manage landing slots, terminals and parking stances to fit changing demand.  According to Elborne, this is already happening in China, Brazil, Australia and Sweden - meaning this is becoming an emerging best practice for aligning air traffic and airport operations.

I have no idea whether BAA will end up implementing such a system.  The point I want to make is that this is a prime example of an opportunity for IT to solve a business problem more cheaply and effectively than the alternative.  As such, CEOs need to integrate CIOs and IT executives into the decision-making process to explore all of the possibilities before making a decision.  BAA spent £220m buying property in the village of Sipson – the site of the proposed third runway.  This money could have been saved and a lot of bad press avoided if IT had been involved at an earlier stage.

Monday, 7 November 2011

Has IT really moved on?

This week I have been reading an interesting yet somewhat antiquated book first published in 1993 by Harvard Business Revenue called "The Business Value of IT".  Comprising a set of detailed, real-life case studies written by a number of CIOs and IT managers in high profile global companies, the book covers the challenges that they faced and the IT strategies they used to achieve success.

Given the age of the book in relative terms, you would expect this to be a quaint snapshot of a bygone era, but the really interesting thing is that the problems these guys faced in the early 90s would be easily recognisable by the CIOs of today.  This raises a somewhat embarrassing question - have things moved on in IT, or are we actually just going round in circles?

The iPad 3 will incorporate a new, intuitive user interface.

These guys, speaking from within very notable companies such as British Petroleum and Andersen Consulting (now Accenture) faced the big strategic decisions that are still current today:

  • How to respond to rapidly changing customer needs
  • How to make IT more 'human-centric' - what we would now call Business-IT Alignment
  • Whether to insource or outsource IT
  • How involved should CEOs be in IT decision-making?

So why haven't things moved on?  Almost 20 years later, shouldn't we be living halcyon days of a mature IT organization playing the shining star in the business? - driving the business forward with fast-paced innovation.  The truth is that we're not quite there yet, but we're getting there.  As the old device-oriented perspective is pushed aside to make room for more service, business and human-centric paradigms, the IT body of knowledge is finally growing out of adolescence into maturity.

We don't know what it is, but they said it's going to solve all our problems

It has become obvious that those IT organizations that have achieved notable success in supporting business with a competitive edge have been driven by people making the right problem-solving decisions, not the implementation of raw technology as a silver bullet.  To twist the words of Ronald Reagan in his inaugural speech - technology is not the solution to the problem, technology is the problem.  Technology is a means to an end, and will only ever deliver true value when deployed in the context of good strategy, good processes, good people, and good business decisions.  If any one element is missing, or one link in the chain is weak, there is a higher risk of project failure and IT will continue to tread water.  Much time is wasted on continually changing one enterprise technology toolset for another - and every time the promise is that 'this one is the one that will solve our problems'.

For those that are interested, "The Business Value of IT" is available from Amazon. A brilliant, readable book for anyone involved in IT.

So has IT moved on?  Has IT delivered what we were promised?  Answers on a punched card.