Class themes were Internal Capabilities - Financial Management, Human Resources in MGNPO and Aligning IT and Business Strategies, IT Enabled Business Transformation in IDSC

Table of contents

MGNPO

• Chapter 8, Managing Nonprofit Organizations, Tschirhart and Bielefeld (2012)
• Chapter 11, Managing Nonprofit Organizations, Tschirhart and Bielefeld (2012)
• Brown, Chapter 4

IDSC

• The CIO as Venture Capitalist, CISR Research Briefing Vol XVI, June 2016
• Ross, J and Beath C. “Beyond the Business Case: New Approaches to IT Investments”, Sloan Management Review, Winter 2002
• Nils Fonstad and David Robertson, “Transforming a Company Project by Project: the IT Engagement Model”, MISQ Executive, Vol 5(1), 2006
• Meridith Levinson. “Don’t Stop Thinking About Tomorrow.” CIO.com, 2000

MGNPO

Reviewing Chapter 7 of Managing Nonprofit Organizations was also assigned this week

Chapter 8, Managing Nonprofit Organizations, Tschirhart and Bielefeld (2012)

• Marketing starts with the nonprofit’s mission and strategies and relates the organization to customers, clients, and others that it seeks to provide benefits to or influence
• The notion of marketing as a distinct business process, however, was only developed in the twentieth century and the most recent ideas about the nature of marketing were developed in the 1950s
• formal expansion of marketing ideas to nonprofits began in the late 1960s
• Three orientations toward marketing can be identified:
  • product or service orientation - this orientation focused on the more efficient manufacture and distribution of the goods and services
  • sales orientation - focused on persuading customers to buy a particular organization’s products or services instead of those of its competitor
  • marketing orientation, or customer orientation - shifts to the needs of the customer (sometimes also called the target audience or market)
• The notion of joint value creation for both the consumer and the organization makes the marketing orientation quite compatible with the missions and activities of nonprofit organizations
• Nonprofit marketing, like marketing in for-profits, relies on the marketing mix to accomplish its goals. The marketing mix is composed of the four P’s: product, promotion, price, and place
• Most nonprofits serve multiple constituencies and therefore have multiple objectives, the most important of these objectives may be nonfinancial
• deciding on goals must often involve compromise and consensus building
• it may be difficult to measure for nonfinancial goals
• In many nonprofits there are two separate constituencies: those who subsidize the organization (such as donors) and those who will use or benefit from the nonprofit’s services
• effective result is that there are two target markets
• both markets must be taken into account in marketing plans and program
• may result in tensions between mission and customer satisfaction.
• Most nonprofits provide services as opposed to tangible products
• some nonprofits produce neither products nor services but seek instead to change some form of social behavior for the better
• In both the product and sales orientations described earlier, marketing begins with the organization and what it wants to offer the customer
• Although the discussion is often about these marketing functions, the larger, philosophical significance of marketing for keeping a focus on the nonprofit’s mission should not be overlooked.
• A nonprofit with a product or sales orientation will believe that its products or services are inherently desirable. Numerous consequences follow:
  • lack of success is attributed to target audience ignorance or lack of motivation
  • Marketing research is given a minor role
  • Marketing’s job is seen primarily as promotion
• A marketing orientation, in contrast, holds that the only way a nonprofit can achieve its own goals is by satisfying the needs of its target market.
  • To do this the nonprofit will need to completely understand that target market
  • necessitate planning the marketing program as a whole and coordinating all its elements
  • marketing must be closely integrated with the other activities of the nonprofit
  • Heavy reliance will be placed on marketing research
• The development and maintenance of a marketing orientation requires continuous attention to marketing
• Nonprofits need to continuously monitor, assess, and react
• a marketing cycle that embodies the customer orientation
  • Define or redefine the market
  • Answer the question, What does the market want?
  • Shape or reshape the products or services
  • Set prices for, promote, and distribute the offerings
  • Evaluate the results of the marketing program
  • Start over
• In order to be effective, the marketing cycle needs to be embedded in and supported by a planning framework
• strategic marketing plan will:
  • evaluate the nonprofit’s environment and current marketing program
  • set future marketing goals
  • develop strategies and tactics for reaching these goals
• marketing planning should be consistent with and build upon the nonprofit’s mission, vision, and overall strategic plan
• good place for marketing planning to start is with the findings and conclusions of the internal and external analyses prepared for the overall strategic plan
• Setting marketing goals, strategies, and tactics can be complex for nonprofits because their marketing may be aimed (sometimes simultaneously) at current or future customers or clients, donors or other funders, or volunteers
• Marketing planning, decision making, and control need to be based on accurate information
• The need for information may, in fact, be greater for nonprofits than for for-profits
• A nonprofit needs a system that routinely collects, analyzes, stores, and disseminates relevant marketing information
• a marketing information, or knowledge, system will provide information to key decision makers and, ideally, will have several subsystems.
  • An internal reports subsystem collects information from data sources within the nonprofit
  • A marketing intelligence subsystem collects information from routinely available public source
  • analytical marketing subsystem organizes general data, performs needed analysis, and provides reports
• Marketing research is problem oriented and can be defined as the design, collection, analysis, and reporting of reliable marketing information that is relevant to a particular problem
• To accomplish this, the marketing research process goes through a series of steps:
  • Problem Identification and Research Objectives
    • it is critical that the right question be asked. This may seem simple, but it might turn out to be quite complex
    • matter of identifying the most important factors in a marketing situation and the related questions that must be answered.
    • some preliminary information or exploratory research may be useful or necessary
  • Research Plan Formulation
    • When research objectives have been set, a research plan can be established
    • The plan will establish the type of information needed to address the research, where those data can be obtained, and the most appropriate data acquisition and analysis strategies
    • It will lay out the steps to be taken
  • Data Collection and Analysis
    • Once the research plan has been specified, standard social science data acquisition and analysis techniques can be used
    • Data can be composed of numbers (quantitative data) or words and descriptions (qualitative data)
    • Analysis can range from simple displays and summaries of the data to complex statistically based findings that predict future behavior
    • nonprofits that lack qualified staff may employ technically trained consultants
  • Interpretation and Reporting of Finding
    • interpretations of the findings are compiled and reported so that they can be the basis of strategies to successfully address the marketing problem
    • marketing research can be an extensive, time-consuming, and (by implication) possibly expensive process
    • Research is at the heart of the marketing orientation that nonprofits need to adopt. A marketing plan is only as good as the research and data it is based on
• A marketing audit will answer the question, Where are we now?
• consist of detailed reviews of internal and external factors
• Consideration should be given not only to the current state of these factors but also to their future change and development
• External analysis can be used to gather information on the general environment, including important political, economic, environmental, sociocultural, and technological factors (PEST analysis)
• A nonprofit may have gathered this type of information as part of its strategic planning
• should however now be examined for its particular relevance for marketing
• an analysis of competitors, collaborators, and stakeholders should be carried out
• The competitive environment will include other organizations providing similar or substitute products or services.
• An internal analysis will assess the nonprofit’s own marketing activity and its marketing strengths and weaknesses.
• Five areas should be assessed:
  • Trends
  • Share of market
  • Stability
  • Efficiency
  • Flexibility
• In addition, the nonprofit should examine its current marketing activities and the resources it has to carry out these and future marketing efforts
• assess the degree to which marketing contributes to the nonprofit’s mission and to its competitive advantage or disadvantage
• The marketing audit will generate a large amount of information
• A number of analytical tools are available to compile this information
• two techniques—the product life cycle and portfolio analysis.
  • Product life cycle
    • The product life cycle is based on the idea that products and services pass through predictable usage stages
      • Marketing research is used at the development stage
      • Introduction stage, raising awareness is of key importance
      • During the latter stages of growth and during maturity, competitors are starting to emerge and marketing is oriented toward differentiating the offering
      • During the decline stage, there may be a more limited role for marketing
    • Portfolio analysis
      • A portfolio analysis considers the main products, services, or programs of a nonprofit
      • MacMillan framework considers three dimensions: program attractiveness, competitive position, and alternative coverage
• Once a nonprofit has analyzed its current situation, It is in a position to set marketing objectives and goals and then strategies and tactics to achieve them.
• marketing objectives should be aligned with the organization’s overall strategic objectives
• should also be consistent with the objectives of key units of the organization
• Once objectives have been established, marketing strategies will express, in general terms, what the nonprofit’s broad approach to meeting its marketing objectives will be
• important to analyze the competitive environment
• three strategic options for competition:
  • differentiation strategy entails offering something that few or no others offer
  • cost strategy entails seeking to be the lowest-cost provider in the market
  • focus strategy leads the nonprofit to select a limited market segment and provide a unique offering
• market segmentation involves identifying groups of potential consumers based on some meaningful criteria
• criteria that may be used for segmentation:
  • Demographic criteria
  • Geographical criteria
  • Product or service criteria
  • Psychographic criteria
• Targeting uses a variety of basic criteria to evaluate segments
• Most important, the segment should fit with the mission of the nonprofit and, given its present and future capabilities, the nonprofit should then be able to develop a marketing mix that will appeal to the segment
• characteristics of the segment should be measurable and distinct enough to differentiate it
  • its members should be accessible
  • segment should be large enough to justify a marketing effort
  • behavior of people in the segment stable enough for planning purposes
• broad strategic targeting choices:
  • Undifferentiated (mass) marketing
  • Differentiated marketing
  • Concentrated marketing
  • Mass customization
• Positioning involves creating and maintaining an image of an organization’s offering,
• Nonprofit marketers need to understand which dimensions their target audiences use to evaluate the nonprofit’s offering and to compare it to others
• Positioning can be used strategically to help a nonprofit build on its present strengths, search for a market niche, or reposition the competition
• The following process can be used to develop and choose among positional alternatives:
  • Determine the factors that are important to each market segment
  • Survey the market to uncover the current positions of each competitive offering
  • Create a perceptual map for each segment of interest
  • Analyze the alternative attractive positions
  • Decide what position is most strategically beneficial
  • Create an integrated marketing program
• It is necessary to determine which factors are important in order to design marketing programs appropriately
• nonprofits often deal with multiple constituencies
• likely that different constituencies will use different dimensions
• When different constituencies are important, positioning must be considered for each
• unlikely that a nonprofit can excel on every dimension
• the position that a nonprofit decides to strive for will, most likely, involve trade-off
• branding is defined as “a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct”
• A nonprofit’s brand is a way for the public to identify and recognize the nonprofit
• Ideally brands will be memorable, meaningful, likable, transferable, adaptable (meaning that their use can be extended and customized), and legally protectable
• designed to influence perceptions and convey complex psychological and emotional messages about the nonprofit
• A nonprofit’s brand, therefore, both reflects the nonprofit’s mission and unique social contribution
• Developing a brand involves defining what is distinctive about the nonprofit and what it does and why the nonprofit deserves consideration
• Successful branding can lead to these benefits:
  • Differentiation
  • Enhanced performance
  • Reputation insurance
  • Enhanced loyalty
  • Partnerships
• Branding may require complex planning and implementation
• depends on the consistency of all other communication the nonprofit has
• behavior in all elements and at all levels of the nonprofit must reinforce the brand
• may be difficult in large or geographically dispersed nonprofit
• formulating tactics, which uses the four elements of the marketing mix—the four P’s
  • Product
    • product is usually the first consideration, parameters will shape or determine the other elements
    • The use of the term product in the marketing mix comes from for-profit marketing
    • For nonprofits, the meaning of the product category in the marketing mix must be expanded to include services and program
    • Some nonprofits carry out marketing programs aimed at changing behaviors, termed social marketing
    • Products
      • Products are tangible items delivered to recipients in target markets
      • nonprofit’s mix of products can be described and strategically manipulated in terms of:
        • length, width, and depth (number of product lines, number of basic offerings, variety of offerings)
        • mission relevance
        • ability to attract customers, or patrons
      • Products designed to play a major role in attracting patrons are called product leaders or flagship products
    • Services
      • Services have a number of distinguishing features:
        • Intangibility - do not exist until they are consumed
        • Perishability - cannot be produced in advance
        • Simultaneity - produced and consumed at the same time
        • Heterogeneity - quality will vary
      • marketing services requires different approaches than marketing products does
      • key issue is the assurance of quality
      • critically important to understand what a target market’s perceptions of service quality and what they are based on
      • may require obtaining information from target audience members
      • Once such information is obtained, however, a nonprofit can then develop objective measures of service quality and monitor its performance
    • Social Marketing
      • Social marketing refers to an attempt to change some form of social behavior
      • Social marketing emerged as a distinct concept in the early 1970s
      • Social marketing seeks to have target markets do one of four things
        • accept a new beneficial behavior
        • reject a potentially undesirable behavior
        • modify a current behavior
        • abandon an old undesirable behavior
        • Social marketing has a number of unique features and challenges
          • audiences may be indifferent to the issues
          • may not see any direct personal benefits
          • behavior may involve controversial topics
          • may actually be opposed to the behavioral change
        • Change will be more difficult when people are highly involved in the behavior, when the behavior is continual (rather than occurring a few times), and when the behavior is exhibited by groups
        • Currently, social marketing campaigns rely heavily on the Internet
          • Offline behavioral change activities should translate to the online environment
          • an organization must understand the audience members’ online habits
          • Interactive advertising and marketing promotions on complementary Web sites can drive traffic
          • Nonpaid partnerships with complementary sites are valuable
    • Promotion
      • Promotion is communication to the market about the availability and benefits of the service or product
      • It is important to recognize that promotion is a form of communication
      • goes beyond thinking solely about the wording of an advertisement
      • To be effective, promotion must take all aspects of the communication process into account.
      • An understanding of the receiver will suggest the decoding process that he or she will use and the potential for interpretations
      • a consistent style or tone needs to be established by using appropriate symbols.
      • Marketers also need to decide on the tools they will use to deliver promotion, referred to as the promotional mix
        • major option in this mix is paid advertising
        • might also be possible for a nonprofit to get its services or programs featured in a public service announcement (PSA)
        • Another option is sales promotion. Sales promotions provide short-term incentives designed to stimulate demand, has some downsides
        • More directed methods for promotion may also be used. The most common of these is direct mail
        • The most recent development is the growth of electronic formats for promotion
    • Price
      • Pricing for nonprofits involves a number of complexities that for-profits do not normally encounter. The missions of nonprofits involve nonfinancial goals
      • there may be multiple ways of pursuing a mission and these may entail incompatible ramifications for pricing.
      • prices should not be charged if doing so will threaten the mission or if beneficiaries will have significant difficulties paying
      • a pricing strategy can be established to accomplish a number of different objectives:
        • maximizing profitability
        • cover the cost of production
        • maximize market share
        • Considerations of social equity
      • three approaches to setting prices:
        • cost of producing
        • user demand
        • competition
    • Place
      • addresses the question of how the product, service, or program is made available
      • Two basic aspects of distribution channels are
        • the design of the physical and logistical details of the channel
        • the performance of the channel in meeting the needs and desires of the target market
      • direct distribution - control all aspects of getting the service, product, or program to the user
      • indirect distribution - specialized intermediaries to fulfill some of the distribution function
      • Another important decision in distribution channel design is how many locations will be used and what will be available at each location
      • Three options:
        • Convenience
        • shopping
        • specialty
      • nonprofit can choose a location pattern that is most economical for the organization
      • A second broad concern is the way in which the distribution channel affects the target market’s experience, called the buying experience
      • Another factor is the atmosphere of the place of delivery

Chapter 11, Managing Nonprofit Organizations, Tschirhart and Bielefeld (2012)

• human resource management considerations should be integrated into strategic planning processes, evaluation practices, and decision making on budgets and action plans
• Human resource capacity refers to the abilities, experience, and talent of the people who conduct the work of the organization internally
• HR capacity may also incorporate contingent workers
  • Contingent workers include consultants, independent contractors, freelancers, temporary contract workers hired through an external labor firm, student interns, loaned executives, workers paid with government stipends
• Strategic HR management provides managers with tools and techniques to motivate their workers and to reduce risk
• Key questions are: Which tasks should be contracted out and which performed in-house? and, What types of workers should be recruited for the tasks—for example, should they be paid or volunteer?
• To assess HR capacity, nonprofi t leaders need a clear understanding of what current workers are able and willing to do
• list the main tasks that need to be done in the organization and match each task to the abilities required to perform it
• conduct an abilities inventory
• Typically, only large, well-resourced nonprofits have the time and dollars to conduct sophisticated forecasting of demands for services. However, even the smallest nonprofits can track when their services are being used and determine whether demand is exceeding capacity
• All nonprofits can look for environmental changes that may lead to significant increases or decreases in service demand
• sampling of factors that can affect service demand:
  • Economic Conditions
  • Population and Demographic Shifts
  • Realization of Mission
  • Natural Environment
  • Other Actors in the Service Network
  • External Funding and Government Reimbursement Policies
  • Technological and Cultural Shifts
• Forecasting HR Capacity Needs
  • Key questions:
    • What skills and knowledge will be needed to meet our strategic goals?
    • What kinds of workers and how many of them are needed?
    • What new jobs will be needed, and what existing jobs will no longer be needed?
    • Can our current workforce fill the needed jobs?
    • How successful are we likely to be in retaining current workers?
    • What do we need to do to develop workers for these jobs?
    • Do we have enough managers and trainers to develop and support the workers?
    • Are our current HR resources and practices adequate for future needs?
  • capacity-building decisions should be informed by an understanding of what each type of worker is likely to be able to provide and what resources will be needed to manage
• The Cycle of Involvement
  • Effective human resource management has multiple activities. These activities can be categorized by their place in the cycle of involvement
  • Stage 1: Initial Involvement
    • four activities: determining the rationale for new workers, attracting candidates, screening and selecting new workers, and establishing written and psychological contracts.
  • Stage 2: Development
    • Basic development activities, which can be repeated throughout an individual’s time with a nonprofit, include socializing, measuring performance, identifying developmental needs, sharing feedback, and providing learning opportunities.
  • Stage 3: Maintenance
    • Examples of these activities are providing compensation and benefits, recognizing and rewarding workers, facilitating a productive and safe work environment, and keeping records and submitting paperwork.
  • Stage 4: Separation
    • The goal of the nonprofit should be to have amicable separations, where workers feel fairly treated and have good feelings toward the organization
      • Understand Reasons for Separation
      • Possibly Renegotiate Position
• the success of any organization depends on having the right people, in the right place, doing the right things
• Good HR management is about aligning workers to the mission

Brown, Chapter 4

• Part of how nonprofits fulfill priorities is by providing value to significant stakeholders
• There is no long-term advantage to meeting stakeholder interests in ways that can be easily provided by others
• nonprofit value frameworks, which depicts the resource portfolio, management functions, and program activities working together
• three parts to the nonprofit value framework:
  • resource portfolio
  • management functions
  • program activities
• key principles of comparative advantage, or as conceptualized in the corporate strategy, “competitive advantage”
• The idea of competitive advantage can be somewhat controversial in a nonprofit context, as the sector was founded on concepts of cooperation and collaboration
• organizations need to be clear on what they bring to a collaborative relationship and how their contribution is unique
• comparative advantage defines an organization’s capabilities in relation to other providers
• Acquiring, integrating, and lever­aging resources to build a comparative advantage is central to organizational sustainability
• There are several features that make resources strategi­cally viable
  • Value of a resource - two ideas are of particular concern: Can the nonprofit easily use the resource to support strategic priorities and is the resource/asset unique?
  • comparative advantage - Managers should consider such things as the extent to which the resources are rare, costly to imitate, and substitutable
• The utilization or integration of resources is considered a capability
• Considering the nonprofit value frame­ work, managers need to:
  • first coordinate organizational features to produce programs
  • program outcomes need to produce social value
  • public benefits must be valued by influential stakeholders
• Identifying and building core competencies that create such value is a critical task
• cre­ate core competencies that are a mix of resources, management functions, and public benefit activities
• core competencies are difficult for others to replicate
• management literature suggests that an organization can build and maintain only a select number of core competencies (three to five)
• Resource portfolio
  • Beyond these relatively tangible resources are assets that are important but less concrete, such as reputation, external relationships, and capacity to innovate
  • Human capital
    • Human capital is the sum of individuals engaged in the work
    • A typical nonprofit with paid staff will often allocate 70-80% of the budget to compensation
    • The degree to which these human capital characteristics are rare depends on the unique skillsets and capabilities of organizational participants
    • Leadership is another key concept of human capital
    • Leadership is part vision, part message, and part influence
  • Financial assets
  • Information and Innovation
    • Creating and producing innovative products is costly and risky
    • Effective evaluation is built on a reliable and accurate information management system
    • Information and innovation management practices are a resource for many nonprofits Nonprofits are a source of innovation, and philosophical principles of cooperation and collaboration encourage nonprofits to share those innovations
  • Relationships
    • Knowledge and awareness facilitate the ability to nurture relationships, but in practice, relationship management goes beyond accurate record keeping
    • Nonprofits are particularly sensitive to the social context
    • Nonprofits operate in economic and social markets
    • Managing and developing relationships creates social capital. Social capital recognizes the inherent value of relationships
    • Two types of social capital are:
      • bonding relationships - tend to be deeper and more socially homogeneous, tend to bring access to resources
      • bridging relationships - extend to more distant actors and more heterogeneous, facilitates sharing, integration, and utilization of resources
    • Within the organization, healthy relationships facilitate information sharing and learning
    • supervisory/subordinate relationships are enhanced when those involved trust and respect each other
    • organizational cultures and norms are enacted, created, and shared through effective relationships
    • effective control and monitoring practices are facilitated by organizational relationships
    • external connections tend to reflect bridging relationships that can result in increased access to resources and ease partnerships
    • It is difficult to assess the level of social capital that exists in an organization. Assessment typically entails looking at the nature and character of relationships across various stakeholder groups
    • Relationship or stakeholder management then becomes a core function to create social capital
    • In principle, healthy relationships, rich in social capital, are difficult to replicate and thereby can provide tremendous strategic advantage
  • Reputation
    • Reputation is another “soft” asset that is difficult to quantify and create, but it offers significant benefits
    • Reputation, like social capital, is a fairly complex idea but in principle it entails three componenets:
      • name recognition (awareness)
      • an overall impression of the organization
      • for some stakeholders, judgements on how it does
    • Perceptions and thereby reputation can be idiosyncratic to different individuals or stakeholder groups
    • General management guidance suggests that positive reputations take a long time to develop and can be lost much more quickly
    • The idea of name recognition or “being known” is similar in many ways to brand recognition or awareness
    • Most recognized organizations tend to be national in scope, having long histories of providing services, and tend to have extensive networks of local affiliates
    • Organizations should have a sense should have a sense of what stakeholders expect from them and what they value, because this can be an issue if expectations are too high
    • Research suggests that reputation is positively associated with a number of desirable outcomes
    • Increased recognition and awareness also might lead to high expectations and potentially increased scrutiny
    • many stakeholders look beyond these messages and make informed judgments about actual performance
    • Reputation is socially constructed
    • As stakeholders learn about the organization and what it does they build expectations, and the organization must consider its capacity to support the impressions of stakeholders
    • consistency in organizational practices is very critical to reputation management as it simplifies the “message” of what the organization does and how it acts
• Organizational systems exploit the resource portfolio to fulfill public benefit functions
• How and to what extent the interplay is enacted is a critical and significant organizational advantage
• Using the competing values framework, management functions can be clustered into four general areas
• The framework organizes tasks by considering four diametrically opposed features:
  • internal versus external orientations
  • control versus flexibility structures
• Internal orientations reflect the needs of coordinating elements inside the organization, whereas external orientations reflect the interface between the organization and the external environment
• Control versus flexibility perspective balances the need to be responsive to individuals and opportunities while building consistency and stability
• The four functional areas are related to the nonprofit value framework
• The NVF facilitates identification of key internal components that must be coordinated to achieve objectives
• Managing people is a mix of structural systems that facilitate coordination while also developing relationships that support professional development and engagement. Measures of performance include concepts of engagement, commitment, and satisfaction.
• Internal process tasks are those activities that are more internal and control oriented
• Includes aspects of the information technology infrastructure, but also accounting procedures and the like
• Open systems tasks reflect an orientation toward the external environment and tend to require more flexible structures that facilitate learning and innovation
• Goal and production tasks are those activities focused on the service beneficiary and attending to meeting the public benefit goals of the organization
• Given the complexity of the nonprofit sector, it is difficult to easily distill practices
• Ultimately, managers try to define a limited set of core systems that are strategically optimal. That is, managers nurture organization system that provide distinctive value to stakeholders
• critical concern is the extent to which public benefit activities create social value that is appreciated by key stakeholders

IDSC

The CIO as Venture Capitalist, CISR Research Briefing Vol XVI, June 2016

• We think there is a sea change coming for CIOs and it will be about helping the company drive more innovation and growth.
• innovation is becoming an increasingly important role of CIOs
• startling difference between the CIOs of top-performing firms and bottom-performing firms
• CIOs of top-performing firms spend 53% of their time on innovation, CIOs at bottom performing firms spend only 19%
• Bottom line impacts were clear: 49% of top-performing firms’ revenues came from products or services introduced in the last three years
• In this briefing we explore an emerging new role for the CIO: acting as a venture capitalist (VC).
• CIOs acting as VCs work with a broad range of companies, typically smaller ones, to bring innovations into the company and accelerate time to market
• three approaches that the CIO Venture Capitalist takes to increase innovation are:
  • Learn: Invest to Develop Capabilities You Don’t Have but Need
  • Acquire: Bring in Revenue Streams or Talent-or Both
  • Partner: Build a Portfolio of New Business Experiments
• the IT unit has to become the first place to look in the enterprise for IT-based innovation
• change can’t happen overnight-the IT unit has to be perceived not only as being business focused but also possessing strong innovation and technology skills
• four skills that are key for a more proactive role in innovation:
  • Scanning the environment for new technology opportunities and then proactively helping the enterprise learn, acquire, and partner to produce benefits
  • Investing and experimenting with a portfolio of high-potential technologies
  • Working on teams with line-of-business executives to identify opportunities for value creation from new technologies
  • Brokering, negotiating, funding, investing, joint venturing, and then integrating new technologies into the enterprise
• The CIO-and by extension, the IT unit-needs to become more of a venture capitalist, helping the rest of the company to incorporate and leverage the innovative capacity of new technologies

Ross, J and Beath C. “Beyond the Business Case: New Approaches to IT Investments”, Sloan Management Review, Winter 2002

• As IT becomes more closely tied to business objectives, successful investment must consider two dimensions: technology scope and strategic objectives
• In the last 15 years, a tidal wave of IT-enabled initiatives, from business-process reengineering to enterprise-resource planning, has elevated the importance of investing strategically in IT.
• although the opportunities seem limitless, the resources required (capital, IT expertise, management focus and capacity for change) are not.
• Traditional approaches to IT investment attempt to identify projects with the best profit potential
• heightened strategic importance of IT, however, has forced companies to think differently
• complex trade-offs are leading to new IT-investment patterns
• Our perspective is that lasting pressures have permanently changed how companies approach the problem of justifying IT investments.
• technological and market changes are intensifying dependence on IT
• prudent to adopt new investment strategies not as exceptions, but as part of a deliberate rationale that says success comes from using multiple approaches to justifying IT investments
• Investments differ along two dimensions: strategic objectives and technology scope
• To address both dimensions companies need to make four distinct types of investment:
  • Transformation
    • Transformation investments are necessary when an organization’s core infrastructure limits its ability to develop applications critical to long-term success
    • triggered by the growing need for integrated customer data, end-to-end processing and platforms that provide around-the-clock support
    • often risky, undertaken when companies have determined that not rebuilding infrastructure significantly is even riskier
  • Renewal
    • potential benefits of renewal initiatives include improving maintainahility, reducing support and training requirements, and making existing capacity more efficient
    • may be driven by a vendor’s decision to withdraw support from older products
  • Process Improvement
    • Business process improvements should be low-risk investments because, unlike transformation initiatives, they focus on operational outcomes of existing processes.
  • Experiments
    • Successful experiments can lead to major organizational change with accompanying infrastructure changes or to more incremental process-improvement initiatives.
• Although the four types of IT investment are conceptually distinct, they are difficult to distinguish in practice
• Investments in shared infrastructure will shape, for better or worse, the opportunities available. If senior management directs transformation investments with that in mind, the company’s overall IT capability is more likely to support its strategic business direction.
• Distinguishing between experiments and the investments that successful experiments trigger presents a different challenge
• companies can, and should, make a distinction between an investment in an experiment designed to reveal profitability estimates and an investment in a process improvement that is expected to yield additional profits
• toughest distinction is between transformation and renewal
• Renewal may foster process improvement, but that is not its primary objective. Transformation, on the other hand, intentionally changes an enterprise’s infrastructure in ways that not only enable, but usually demand, process change
• Process owners should not fund renewals of technologies that are expensive for IT to support unless they accept responsibility for achieving the expected IT-service efficiencies.
• need a pool of resources for each type of investment. That raises two issues:
  • how to distribute funds across investment types
    • Companies that leverage IT effectively instinctively make distinctions similar to those described in our IT-investment framework
  • how to establish priorities within investment types
    • Ways of prioritizing differ according to the investment’s technology scope and business objectives.
      • Funding Transformation
        • transformation investments demand significant senior-management commitment to invest the funds, guide implementation and process change, and steer the organization toward opportunities to leverage the investments.
        • effective IT transformation starts with understanding IT costs in a company and applying principles of activity-based cost management.
        • ultimately most companies rely on competitive analysis and executive instinct
      • Funding Renewal
        • Most renewal initiatives reduce the cost and raise the quality of IT services and thus can be justified with traditional business case
      • Funding Process Improvement
        • usually cross-functional and strategic. Thus they often are funded centrally
        • funding process-improvement projects separately from infrastructure allows companies to clarify the goals and expected returns of each investment alternative
      • Funding IT Experiments
        • No one we talked to had figured out a way to put a value on the learning benefits so as to persuade a capital-budgeting committee to invest in experiments
        • For the foreseeable future will likely be based on the enthusiasms and intuitions of sponsoring business managers or specially funded organizational unit
• Companies should formally establish four pools of resources and then avoid the temptation to underfund one or more of the IT-investment type
• multipronged approach to IT investment is crucial for companies attempting to harness the power of IT in shaping business opportunities

Nils Fonstad and David Robertson, “Transforming a Company Project by Project: the IT Engagement Model”, MISQ Executive, Vol 5(1), 2006

Executive summary:

• Information Technology (IT) organizations have long struggled with achieving companywide strategies while simultaneously responding to urgent requests from business units
• Our studies suggest that successful approaches address two fundamental goals:
  • alignment between IT and the rest of the business
  • coordination across multiple organizational levels
• define our model as the system of mechanisms that brings together key stakeholders to ensure that projects achieve both local and company-wide objectives
• three general components:
  • company-wide IT governance
  • project management
  • linking mechanisms
• linking mechanisms are crucial but not well understood

Text:

• Two streams of research have addressed the challenge of IT organizations aiming to achieve company-wide strategies while simultaneously responding to urgent request
• top-down research approach has focused on IT governance
  • This research has studied the key decisions that IT and non-IT senior managers must address
• bottom-up research approach has focused on project management
  • This research has studied how IT departments ensure that projects are on time and on budget
• Neither approach fully addresses how IT organizations can simultaneously pursue both company-wide and local objectives.
• Success requires the concerted efforts of multiple stakeholders and maintaining a healthy balance between strategic and tactical demands
• details of a final solution often only emerge over time and can be difficult to anticipate
• successful approaches address both alignment between IT and the rest of the business and coordination across multiple organizational levels.
• They achieve both alignment and coordination by linking company-wide IT governance with project governance and by engaging multiple stakeholder groups
• We define our IT engagement model as the system of mechanisms that brings together key stakeholders to ensure that projects achieve both local and company-wide objectives. Consists of three components
  • Company-wide IT governance
  • Project management
  • Linking mechanisms
• Each component is made up of a set of mechanisms, which can include groups, processes, and roles
• As a set, these mechanisms enable and constrain communication among stakeholders
• Linking mechanisms are the heart of a company’s IT engagement model because they enable ideas to flow back and forth between company-wide IT governance and project management.
• ensure that high-level governance decisions are understood and implemented by project teams
• Linking mechanisms connect key governance decisions with projects by means of regular access points
• enable stakeholders from different organizational levels to manage interdependencies, identify commonalities across business units and projects, and negotiate conflicting demands
• Problems with Two Traditional Approaches to IT Projects
  • “big bang” approach often used For company-wide initiatives, like ERP, CRM, or SCM
    • difficulties encountered in this approach are well known
    • responsibility for implementing new systems and associated business process changes is too often handed off to IT
    • IT’s effectiveness has often been limited by its lack of engagement with the rest of the business
  • solutions tailored to specific local needs are often favored for local business initiatives
    • higher probability of locally defined “success”
    • When developed without coordination via company-wide IT governance, these solutions provided little help in achieving company-wide goals
    • IT infrastructure spaghetti
    • Presents a significant source of operational, financial, and strategic risk to the company
• Six stakeholder groups
  • high-level managers seek to optimize resource use, reduce redundancies, and coordinate activities across the company.
  • top-level IT personnel (CIO, chief architect, and their direct reports) aim to maximize business value from IT
  • managers look across many projects to make sure they collectively meet business unit goals
  • IT group at the business unit level focuses on maximizing the value from IT for that business unit
  • business managers are primarily interested in optimizing their project
  • Project-level IT managers seek to support their business counterparts by developing the best IT solutions as quickly as possible
• Company-wide IT Governance
  • Weill and Ross definition of company-wide IT governance as the organizational distribution of “decision rights and accountabilities to encourage desirable behavior in the use of IT.”
  • five major IT decisions (which they call domains):
    • IT principles
    • enterprise architecture
    • infrastructure strategies
    • business application needs
    • investment priorities
  • effective IT governance involves both IT and non-IT stakeholders
  • Companies with good governance get 40% more value from IT
  • Examples of mechanisms used for company-wide IT governance:
    • enterprise architecture committee
    • CIO representation on senior business strategy team
    • chargeback processes
    • formal IT investment and prioritization process
• Project Management
  • emerged as a critical competence
  • A good project management methodology has well-defined process steps with clear deliverables and metrics to be reviewed at regular checkpoints
  • presents a valuable opportunity for engagement between IT and non-IT decision makers
  • Examples of mechanisms used for company-wide IT governance:
    • project management office
    • industry-standard methodology
    • project tracking software tool
    • project manager role
• Linking Mechanisms
  • linking mechanisms are mechanisms that link project management with company-wide IT governance
  • they ensure that project teams remain coordinated and aligned with higher-level strategies throughout their lifecycle
  • enables independent stakeholders to negotiate their differences, influence one another, learn from each other, develop trust across the company, and collectively achieve local and company-wide objectives.
  • three categories of linking mechanisms:
    • Business linkage mechanisms work vertically up and down the organization, linking projects to company-level and business-level strategies. They include:
      • Process owners responsible for the structure and performance of standard business processes
      • Strategy boards that manage across project
      • Funding reviews
      • Reward systems that encourage the achievement of company-wide goals
    • Architecture linkage mechanisms work vertically, linking projects to company and business unit architectures. Companies may put together a system of such mechanisms, such as:
      • an architecture office
      • architects on projects
      • an exceptions-handling process to:
        • establish and update standards
        • review projects for compliance
        • approve and manage exceptions
      • Another powerful mechanism is an architecture-driven funding process
    • Alignment linkage mechanisms work horizontally, linking IT with the rest of the business
      • Both company-wide IT governance and project management include mechanisms that companies use to improve alignment.
      • several firms introduced additional mechanisms, most common of which was to formally introduce the role of integrator
      • in the companies that we studied, alignment linkage mechanisms were always integrated into a broader system of mechanisms.
• seven principles for ensuring that IT governance, project management, and linking mechanisms lead to successful engagement:
  • Build on a foundation of good IT governance and project management
  • Make strategic objectives clear, specific, and actionable
  • Motivate to meet company goals
  • Define enforcement authority
  • Emphasize early intervention and prevention
  • Maintain transparent, regular, two-way communication
  • Involve the right people
• two major predictors of the strategic effectiveness of architectural initiatives:
  • degree to which senior managers were involved in defining and overseeing architecture initiatives
  • degree to which the architecture effort was well linked to project activities
• Companies generally test out a variety of mechanisms to see which ones fit their situation best. As stakeholders learn to engage, they adapt existing mechanisms or replace them with new ones.
• Linking mechanisms, integrated with the mechanisms that make up company-wide IT governance and project management, form a system of mechanisms that we call the IT engagement model.
• Two ways to illustrate your company’s system of mechanisms:
  • first approach is to draw a top-down organizational view
  • ask yourself four questions:
    • What mechanisms do our IT governance bodies use to reach and to enforce their decisions?
    • How do these mechanisms interact with our projects?
    • How are our projects coordinated?
    • What linking mechanisms connect our projects to business leadership? To IT leadership? To IT architects?
  • second approach is to take a project-focused view.
  • Choose an important strategic initiative and ask the project manager three questions:
    • If you were to attach yourself to the initiative and follow it from inception to completion, what mechanisms would it experience?
    • For each mechanism, describe who provides inputs and who is authorized to make the final decision.
    • How do these mechanisms enable or constrain business-IT alignment across organizational levels? How do the mechanisms enable or constrain coordination across the company and within IT?
• Once you have drawn these two pictures ask yourself the following five questions:
  • Are the right people involved? Is there good involvement at all levels?
  • Is there real authority, or are people ignoring the mechanisms when they’re not convenient?
  • Do people understand how the IT strategy and enterprise architecture support the business strategy?
  • Does IT get involved early in projects?
  • Is it clear to everyone why the engagement model exists and how it functions?
• the three key components of the engagement model—IT governance, project management, and linking mechanisms—help companies take on the right projects, execute them well, and, when taken together, collectively help the company achieve its goals.
• By effectively engaging across all parts of the company, real company-wide transformation can be achieved, funded by business-driven initiatives, one project at a time.

Meridith Levinson. “Don’t Stop Thinking About Tomorrow.” CIO.com, 2000

• with scenario planning you can devise strategies based on what you can discern about the future
• scenario planning can:
  • Help you manage risk
  • Make you aware of the factors influencing your decisions
  • Provide you and your colleagues with a common vocabulary for discussing strategies
• Scenario planning can work for any company, provided that company has the time, resources and commitment of its executive team
• Scenario planning is an exercise in contingency thinking
• in order to create a vision for the future that makes sense to the company, you have to get into the minds of the decision-makers.
• After narrowing the bank’s possible future to those three, the team compiled a list of 150 internal and external events that might influence any of the outcomes
• the first day of the three-day workshop, executives gathered in a conference room, were divided into four groups and told to rank all 150 events based on likelihood to occur
• purpose of this part of the workshop is to sensitize participants to the assumptions and biases they have about various issues.
• If participants were split on the likelihood of an event, they attempted to reach a consensus.
• Next, each group was assigned a possible scenario and over two days were charged with analyzing how the various events that they ranked might influence it
• “This scenario-based planning exercise recognizes that an end-state four or five years from today is really not just a single end-state but a journey from today through a lot of events leading up to that endpoint”
• With scenario planning, National City may still not ultimately control its fate, but at least all its business units now share a single strategic vision
• “Scenario planning helped [the IT group] understand the issues the business heads handle every day,”
• “Scenario planning forced us to ask the business side specific questions about the level of customization they wanted”
• Participants on the business side also gained valuable perspective
• The exercise “established a short-hand or common nomenclature for some generic strategies that still facilitates communication today,”
• Because of the exercise, the company now draws up a yearly set of critical initiatives around its strategy
• “Scenarios help companies recognize the future as it unfolds so that they can see the signals of change in a more timely way,”
• “It enables you to manage risk differently. Because you understand your risks better you have more maneuvering room and can act with more confidence”
• Here’s a framework you can follow:
  • Before the workshop
    • Build end-states and events
    • Rank outcomes
  • During the workshops
    • Assess the likelihood of events
    • Build and advocate scenarios
    • Revise rankings
    • Compare old and new thinking
    • Develop event-driven strategy
• There are, of course, drawbacks to scenario planning. “This is not something that can be done quick and dirty and cranked out by a junior staffer. It takes serious research, significant resources, time and engagement [from the management team]”
• To do it well companies must first understand the question or decision they’re dealing with