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© 2009 Pearson Education, Inc. Publishing as Prentice Hall
The Top IS Job
Chapter 2Information Systems
Management in Practice
8th Edition
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Today’s Lecture
Introduction Where is the IS organization headed?
The escalating benefits of information technology Traditional functions are being “nibbled away” New roles are emerging Toward “IS Lite”
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Today’s Lecture cont’d
The CIO’s responsibilities CIO’s roles in 3 eras
Leading Creating a vision by understanding the business
Governing Establishing an IS Governance Structure
Investing Shaping the IT portfolio
Managing Establishing credibility and fostering change
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Today’s Lecture cont’d
The Office of the CIO Whither CIOs Conclusion Questions and Exercises References
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Introduction
Growing demand for IT managers in the U.S. and worldwide.
Management of IT in past 50 years has drastically changed. Basic functioning cost reduction decision
support inter-organizational supply-chain and “business eco-system”
Onus on top executives to provide IT vision and leadership.
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Where is the IS organization headed?
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Escalating Benefits of IT
Changing technology and evolving IS role since 1950s. (a parallel process)
“Waves of Innovation”: Wave 1: Reducing costs Wave 2: Leveraging investments (continuous improvement) Wave 3: Enhancing products and services Wave 4: Enhancing executive decision-making Wave 5: Reaching the consumer Wave 6 (new): Leveraging partnerships through supply chain
management or other forms of collaboration
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Escalating Benefits of IT (cont’d)
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The SABRE System (American Airlines) Case example of “Waves of Innovation”
Evolution: Handwritten reservation system (1950s) to Web-based system (2000s).
Waves 1 and 2 (1960s) SABRE (CRS) built to reduce costs of making airline
seat reservations. ROI on staff expenditure.
Wave 3 (1970s) System enhanced to span organizational boundary for
travel agents (provide direct access to CRS)
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The SABRE System (American Airlines) cont’d
Wave 4 (late 1980s) Revenue Management System (provide decision
support to managers) under SABRE Airline Solutions (new division).
Wave 5 (1990s) System extended to provide direct Web access to
customers (CRS, flight information, movie etc.) Wave 6 (2000s)
Sabre (small letters) spun off from AMR in 2000, leveraged partnerships and technology.
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The SABRE System (American Airlines) cont’d Throughout waves of innovation, strong IS
involvement was crucial. Evolving with changes in technology
From money-making to extending organizational boundaries to spinning off.
So what is the function of the IS organization?
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Traditional Functions are Being Nibbled Away Traditional set of responsibilities for IS
Managing operations of data centers, local and remote systems and networks
Managing corporate data and legacy systems Performing system analysis and design and
constructing new systems Planning and integration of systems Identifying opportunities for new systems
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Traditional Functions are Being Nibbled Away cont’d Trends that are moving traditional roles out of
IS: Distributed Systems
Migration of software applications to user areas Ever more knowledgable users Better application packages
Systems development to integration Outsourcing
Based on fiscal and managerial considerations
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Traditional Functions are Being Nibbled Away cont’d
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New Roles are Emerging
IS involves a cluster of functions: Run operations Develop systems Develop architecture Identify business requirements Create IT-enabled innovations
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New Roles are Emerging cont’d
Different set of skills and management strategy needed for each function: Maximize efficiencies of IT operations Better allocation of IT personnel time Prioritize resources to demonstrate usefulness of
new software projects IT-enabled business innovations
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New Roles are Emerging cont’d
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Toward IS Lite
IS started “centralized” and then evolved into “federal” model.
Some things (e.g standards, operations) centralized Others (e.g. applications development) dispersed to best
meet local needs.
Solution: shift attention from roles to processes IS Lite: managing three overall processes
Driving innovation (dispersed) Managing change (dispersed) Supporting infrastructure (centralized)
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Toward IS Lite
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LifeScan
Case example: The “Federal” Model Johnson and Johnson subsidiary New CIO with business-IS alignment agenda 3-stage framework that is focused on execution
and performance measurement (value, on time, budget)
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LifeScan cont’d
Strong project management, not allowing scope creep (business value, on time, within budget) Emphasis on staff with leadership and brokering skills Outsourcing (Tata, J&J outsourcing agreements)
Adopt J&J quality-driven culture into IS processes and working closely with business units for alignment every step of the way.
Centralization of policies, procedures etc. All IS projects business led and locally owned by
business units.
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The CIO’s Responsibilities
Evolution of CIO’s job emphasis over last 20 years Almost like a “bell curve”
80s: Chief architect (strategic use of IT) 90s: addressing business issues (more than
technology manager) Late 90s to early 2000s (forefront role) Mid 2000s onwards: slide back toward back seat--
more responsibilities, lots of justification and less $
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CIO Roles in Three Eras
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CIO Roles in Three Eras
The Mainframe Era Predominated 1960s – early ’80s Role of DP / IS manager = operational manager of a
specialist function Distributed Era
In the ’80s as PCs become commonplace LANs and WANs linking computers Took on 4 more roles:
Organizational designer Technology advisor Technology architect Informed buyer
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CIO Roles in Three Eras
The Web Era Started in the mid-1990s for some Arose from the emergence of the Internet
(especially WWW) as a business tool Era is still in “infancy” but add to the CIOs job, the
role of business visionary Relationship between CEO and CIO vary
along a wide spectrum.
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CIO Roles Today
Leading Creating vision by understanding the business
Governing Establishing an IS governance structure
Investing Shaping the IT portfolio
Managing Establishing credibility, managing IT functions,
and fostering change
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Leading: Creating vision by understanding the business
Understanding the business Encourage project teams to study the
marketplace Concentrate on lines of business Sponsor weekly briefings Attend industry meetings with line executives Read industry publications Hold informal listening sessions Partner with a line executive
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Leading: Creating vision by understanding the business
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Leading: Creating vision by understanding the business
Creating a vision of the future and selling it CIO must be proactive and not simply reactive
A leader not a follower What is a vision?
Statement of perceived future Why develop a vision?
A vision of a desirable future can provide stability when it sets a direction for an organization
Selling the vision
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British Petroleum (BP)
Case example of creating a vision of the future and selling it 150 business units in 100 countries
Each with own balance sheet and performance criteria Need to reconcile business unit independence
with overarching HQ strategy (“speed matters”) Strong core values and operational excellence How can IT be a value-add?
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British Petroleum (BP)
John Leggate’s “Digital Business” vision. Technology provider to strategy-creation role Strategy, architecture, differentiated services
based on business streams (processes) Living on the Web Socializing technical directions (adoption) Going forward: Foster learning and focus on
explanation (assimilation)
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Leading: Creating vision by understanding the business
Creating a vision of the future and selling it (cont’d) Encouraging champions of IT projects
“Boundary-spanner-in-practice” Typically someone with authority Need information Need resources Need support
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Aetna Life and Casualty
Case example of creating a vision of the future and selling it Vision: “breakthrough technologies” Sought out business champions Pilot studies
Feedback for new technologies experimentation Steering Committees Challenges
Adoption (attention and use) Value (beyond piecemeal payoffs)
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Governing: Establishing an IS governance structure
Definition: IS Governance “The assignment of decision rights and the
accountability framework to encourage behavior in the use of IT.” (Weill & Woodham, 2002)
Governance versus management Governance is about deciding who makes
decisions. Management is about making decisions once
decision rights have been assigned.
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Governing: Establishing an IS governance structure
Importance of corporate IT governance Large and diverse IT assets Striking a balance between global and local
needs IT portfolio (in sync with business needs)
Assigning decision rights Governance style
Definition: who has a decision right and input right. Six governance styles
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Governing: Establishing an IS governance structure
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Duke Energy International
Case example of IS governance Diverse portfolio of natural gas and electric
supply, delivery and trading businesses. CIO: “When am I free to decide on my own versus
when should I involve others?” I involve others if the consequences of my actions will
come to bear on those others. I do not involve others if the consequences of my
actions will come to bear just on me. I inform others when the consequences of my actions
will be of benefit to others.
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Investing: Shaping the IT Portfolio
Diminishing marginal increase today but still preposterous amount of IT investments.
Two perspectives in IT investment: Strategic view
What to invest in? Tactical view
How to make investment decisions?
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Investing: Shaping the IT Portfolio
A Strategic view of making IT investments McKinsey Global Institute study of “new economy”
IT, competition, innovation and productivity in virtuous circle
Targeting IT investments Prioritizing on “levers that matter” = greatest
productivity Timing of IT investments
Based on company needs and goals
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Investing: Shaping the IT Portfolio cont’d
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Investing: Shaping the IT Portfolio
Sequencing of IT investments Wal-mart versus Kmart case example
Complementing IT investments “The whole is not the sum of its parts” (synergy) Complementarities between management practices,
business processes and technology
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Wal-mart versus Kmart
Case example: Sequencing and timing IT investments Wal-mart
Step 1: installed systems to automate the flow of products in its internal supply chain
Step 2: turned outward to suppliers, coordinating its own operations with theirs
Step 3: turned to customers to better plan its merchandising mix and replenishment
Step 4: data warehouse
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Wal-mart versus Kmart
Kmart Mistake: used IT to target its marketing promotions
versus investing in supply chain Result: increase in demand from successful
promotions could not be met due to problems getting the products into stores in a timely fashion.
Result: lost sales and revenues
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Investing: Shaping the IT Porfolio cont’d
A tactical view of making IT investments Portfolio (holistic) approach to deciding on how to
make IT investment decisions. Numerous approaches to prioritizing
Business Scorecards 80-20 Principle Cost-Benefit analysis (CBA) Net Present Value (NPV)
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AXA Financial
Case example of tactical view of making IT investments French global financial services organization with
140,000 employees and managing $795 billion in assets.
New governance methodology (beyond IT) Economics-informed investments (precludes
emotional attachment or other non-financial factors) Modeled after fund management Governance committee involve all C-level executives
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Investing: Shaping the IT Portfolio cont’d Benefits from Discussions Categorizing projects for comparisons Address project risks Prioritize quarterly and apportion your budget
accordingly Consistency (team decision-making)
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Managing: Establishing Credibility and Fostering Change
CIOs must first establish credibility in IS before change can come about.
Establishing Credibility Focus first and foremost on the “today” even
before talking about the “tomorrow” Deliver value-added, quality services First impression matters
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Managing: Establishing Credibility and Fostering Change
Fostering Change Technical aspects only half the battle Emphasis on change management
Changing the way people work, bringing it to the next level
Disruptive to current work practices Leads to resistance
Methodologies to implement IT-enabled change
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Managing: Establishing Credibility and Fostering Change
Working across organizational lines CIOs now find that systems they implement affect
people outside their firm boundaries Arms-length to more cordial relationship with partners
(suppliers and customers) Change need buy-in from these external
stakeholders
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REXAM
Case example of working across organizational lines One of the world’s top 5 consumer packaging
companies and the world’s top drink can maker Rethinking interactions with customers (B2B)
Leverage Internet to deliver “exceptional service” “Knock their socks off” Result: cash flow improvements, barriers to switching, profit
increase
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REXAM cont’d
CIO’s role External and business-oriented
Convincing existing customers and business development
Steering Committee’s role Firm-wide commitment from C-level executives for
expanded e-business initiatives envisioned by CIO. Online catalogue
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The Office of the CIO
Chief Information Officer (CIO) Top management, customers, suppliers
Chief Technology Officer (CTO) IT planning, architecture, new technologies
Chief Operations Officer (COO) Daily IS operations
Chief Project Officer (CPO) Projects management
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Conclusion: Recap
Why does the IS organization exist? Constant factor in parallel process of
technological changes and IS evolution What is the role of the IS organization?
Changing across the timeline toward IS Lite CIO’s job
How does the IS organization perform its job Strategies
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Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall