mit cisr wp397 demandshapingsurvey (1)
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CENTER FOR
INFORMATION
SYSTEMS
RESEARCH
Massachusetts
Institute of
Technology
Sloan Schoolof Management CambridgeMassachusetts
The IT Unit of the Future:Novel Approaches to Delivering Value to the Enterprise
Barbara H. Wixom, Karthic Kosgi, Jeanne W. Ross, andCynthia M. Beath
October 2014
CISR WP No. 397
2014 Massachusetts Institute of Technology. All rights reserved.
Research Article:a completed research article drawing on one ormore CISR research projects that presents management frameworks,findings and recommendations.
Research Summary:a summary of a research project withpreliminary findings.
Research Briefings:a collection of short executive summaries of keyfindings from research projects.
Case Study:an in-depth description of a firms approach to an ITmanagement issue (intended for MBA and executive education).
Technical Research Report:a traditional academically rigorousresearch paper with detailed methodology, analysis, findings andreferences.
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CISR Working Paper No. 397
Title: The IT Unit of the Future: Novel Approaches to Delivering Value
to the Enterprise
Authors: Barbara H. Wixom, Karthic Kosgi, Jeanne W. Ross, and Cynthia M. Beath
Date: October 2014
Abstract: The October 2014 MIT CISR research briefing, Demand Shaping: Changing the
Conversation About IT, communicates how a set of IT management practiceswhichwe call demand shaping practicesand IT governance change the nature of
conversations regarding IT investment, and ultimately result in better firm performance.
The briefings message is informed by a large-scale survey that was completed byexecutives from 195 organizations. This research summary provides detailed survey
results, and can be used to benchmark IT management practices at your organization
against those reported by the sample.
Keywords: Demand management
9 Pages
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The MIT Center for Information Systems Research (CISR) surveyed 195 executives in Q1 2014 regarding or-ganizational practices that positively influence the quality of the IT portfolio. The practiceswhich we refer to
as demand shaping practicesfacilitate ongoing negotiation and learning about a companys most valuable and
achievable business change opportunities. The survey results suggest that demand shaping practices generatehigher levels of executive IT understanding and more strategic IT investment portfolios, which in turn influence
firm-level outcomes, including net profitability.
Our analysis found that IT portfolio quality is related to executive perceptions of financial performance. For the
106 companies in our sample with publicly available financial results, perceived performance was correlatedwith actual industry-adjusted profitability. Our research suggests that executive IT understanding, demand
shaping practices, and IT governance processes create a virtuous learning cycle that leads to consistent improve-
ments in the IT portfolio, and ultimately, improved financial performance.1These findings are communicated in
the October 2014 MIT CISR research briefing2by Jeanne W. Ross, Cynthia M. Beath, and Barbara H. Wixom,
Demand Shaping: Changing the Conversation About IT.
Massachusetts Institute of Technology
Sloan School of Management
Center for Information Systems Research
The IT Unit of the Future:
Novel Approaches to Delivering Value to the Enterprise
These survey results were prepared by Barbara H. Wixom of the MIT Sloan Center for Information Systems Research, Karthic Kosgiof the MIT School of Engineering and the Sloan School of Management, Jeanne W. Ross of the MIT Sloan Center for Information
Systems Research, and Cynthia M. Beath of the University of Texas at Austin. Rajiv Kohli of The College of William & Mary also
contributed to this work. The authors would like to acknowledge and thank survey respondents for their participation.
2014 MIT Sloan Center for Information Systems Research. All rights reserved to the authors.
1The survey research confirms relationships among the three factors listed here and between those factors and IT portfolio quality.While the survey research cannot confirm causality, MIT CISR has conducted five case studies and interviews with twenty-six ITleaders that support the causal relationships discussed here.
2See also related publication J.W. Ross and C.M. Beath, Demand Shaping: The IT Units New Passion,MIT CISR ResearchBriefing Volume XIV, No. 1, January 2014.
http://cisr.mit.edu/blog/documents/2014/10/16/2014_1001_demandshaping_rossbeathwixom.pdf/http://cisr.mit.edu/blog/documents/2014/10/16/2014_1001_demandshaping_rossbeathwixom.pdf/http://cisr.mit.edu/blog/documents/2014/10/16/2014_1001_demandshaping_rossbeathwixom.pdf/http://cisr.mit.edu/blog/documents/2014/01/16/2014_0101_itsd_rossbeath.pdf/http://cisr.mit.edu/blog/documents/2014/01/16/2014_0101_itsd_rossbeath.pdf/http://cisr.mit.edu/blog/documents/2014/01/16/2014_0101_itsd_rossbeath.pdf/http://cisr.mit.edu/blog/documents/2014/01/16/2014_0101_itsd_rossbeath.pdf/http://cisr.mit.edu/blog/documents/2014/10/16/2014_1001_demandshaping_rossbeathwixom.pdf/ -
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Figure 1
195 Executive Responses
Survey respondents included 100 Enterprise CIOs, 19 Division or Business Unit CIOs, and executive leaders
from Strategy (16), IT Development (47), or other areas (13). The majority (85%) answered the survey from the
perspective of the entire organization, while the remaining executives responded based a single business unit.
Figure 2
Industries Represented
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Figure 3
Perceived Firm Performance Correlates with Actuals
We analyzed actualindustry-adjusted net
profitability for 106 publicly
traded companies in our
sample. Of those companies,
42% performed better than
industry average, and all
scores were significantly
correlated with respondent
reports of profitability andROA. The mean industry-
adjusted net profitability for
the 106 firms was -2.7%.
Executives provided their personal assessment of firm performance by rating how their company compared to
other firms: (1) Performing significantly below competitors, (2) Performing below competitors; (3) Performing
about industry average, (4) Performing above industry average, and (5) Performing far better than competitors.
Correlations exist (a) between the above four measures of IT portfolio quality and with respondent reports of profitability and ROA, and (b) respondent
reports of profitability and ROA and actual industry-adjusted profitability.
Figure 4
Senior Executive IT Understanding Is Associated with IT Portfolio Quality
On average, companies that
received scores in the top quartile of IT
portfolio quality had
a significantly higher percentage of
senior executives who understood IT.
For example, IT portfolio
quality top quartile companies
responded that on average 68%
of their senior executives understood
how their companys
IT investment process works.
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Figure 5
IT Understanding, IT Portfolio Sample Means
IT Understanding: The percentage of senior executives who understand enterprise IT and IT-enabled change
from (1) Strongly Disagree to (5) Strongly agree.
IT Portfolio: Executives provided their personal assessment of IT Portfolio by rating their organizations from
(1) Strongly Disagree to (5) Strongly Agree.
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Figure 6
Demand Shaping Is Associated with Key Outcomes
Figure 7
Business Relationship Management
Demand Shaping Practices
Executives provided their personal assessments of six demand shaping practices, using the following scale: (1)
We dont do the practice at all; (2) Just experimenting; (3) We do it sporadically, to some extent; (4) Standard,
pervasive practice; and (5) Ours is a best practice.
In the following exhibits, we provide means for the items that represent the six practices.
There was some variation in maturity across practices, with most companies more pervasively adopting
business relationship management and roadmapping.
Post-implementation value assessments had the lowest adoption rates.
Alignment between the IT unit and its business customers, usually involving an individual with formal responsibility
to both an IT leader and a business leader. A BRM individual understands the customers business processes and busi-
ness goals and provides technology guidance to ensure maximum return on investment in information technology.
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Figure 8
Roadmapping
Development of a plan that lays out both short-term and long-term steps for changing IT-enabled capabilities
from an as-is state to a future desired state. The plan communicates how initiatives should be sequenced to
meet some objective.
Figure 9
Agile Methods
An incremental method of software development. Applications are developed in short sprints at the end of
which some level of functionality is delivered to users, customers feedback is obtained, and priorities are reevalu-
ated and used to drive the next iteration.
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Figure 10
Strategic Program Management
A group of interdependent projects that serve the same strategic goal are overseen by a senior executive who
has sufficient insight and authority make decisions about the projects and tradeoffs among them so as to
achieve the strategic goal.
Figure 11
Operating Cost Transparency
Organizing to manage the total cost to deliver and maintain the infrastructure services offered to the business
(e.g., help desk, email, data center, network). It usually involves integrating financial information and opera-
tional data to provide a single, integrated view of IT costs for specific infrastructure services.
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Figure 12
Post-implementation Value Assessment
A particular type of post-implementation audit that focuses on application usage or adoption, customer satis-
faction, and whether the business case for the investment was achieved or the desired business value was de-
livered (not whether the project was delivered on time, on budget, and with expected functionality).
Figure 13
Top Performers Vs. Low Performers
Across all demand shaping practices, top-performing companies had means above the average, and they more
often classified their practices as standard/pervasive and best practice. Low performers more often rated them-
selves as not doing the practice or as just experimenting.
The sample was divided into
quartiles based on
IT Understanding scores.
The means between top and
bottom quartile companies
were statistically different
across all demand shaping
practices.
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Figure 14
IT Governance
IT governance also influences the quality of the IT portfolio and other outcomes. Executives provided their person-
al assessment of IT Governance by rating their organizations from (1) Strongly Disagree to (5) Strongly Agree.
Figure 15
Influences on IT Understanding, Portfolio Quality
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