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LEADERSHIP

CREATING THE

RIGHTTRANSFORMATIONALCAPABILITY

WORDS: BENOIT LACLAU

Most organisations have to undergo transformation to meet the challenges of the modern business environment.

It has, therefore, become vital to build a capability for managing this scale of business change.

The CIO is often best placed to take a lead on this front as he or she is often the holder of many of the resources needed to enable transformational change. Achieving such an aim will require the CIO to understand the transformational demand the organisation faces, and build the capability needed to meet such demand.

Understanding the demandAn understanding of demand is fundamental, as it will enable a number of activities that will improve the quality and cost of supply, whether that capability is sourced internally or externally.

First, an estimation of total demand is likely to be based on the expected volume of business change to achieve an organisation’s ambitions or as a reaction to regulatory change. This demand is then often capped by budgetary constraints.

To further understand demand, the CIO can use his or her experience to provide insight into what demand looks like in terms of project spend. That figure should be split by purchases of goods - hardware, software and infrastructure - and human capital. There are plenty of bench-marks that give a decent split, but each organi-sation will refine the split based on its business circumstances.

As a minimum, the human capital element must include: portfolio management roles closely linked to project governance and benefit tracking; business architecture for each key organisational area; solution architecture and delivery; engage-ment and change for each core business element. Finally, the CIO will need to assess recurring demand based on three main lenses:

Ô Size of projects – Assess how many large, medium or small projects the organisation is likely to run concurrently each year based on total spend. This analysis will demonstrate the resource profile and highlight how the number of project directors required can vary from one year to the next.

Ô Skills – Assess what expertise is required across the project portfolio, as there may be significant one-off demand. Examples might include a spe-cific software project around SAP, Oracle or IBM WebSphere, or a particular type of development environment, such as agile or waterfall.

Ô Business unit or business process – Assess the source of change within the organisation, in order to determine the sustainability of demand within certain parts of the business, or across key organ-isational processes.

Significant effort is required to conduct such an analysis and the exercise needs to be repeated regularly as part of a resource planning function. This approach, however, will deliver significant

CIOs CAN CHANGE THE BUSINESS FOR THE BETTER IF THEY BUILD A FUNCTION

THAT PLANS THE SUPPLY OF INTERNAL AND EXTERNAL RESOURCES

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benefits. The organisation will understand the minimum level of resource required and it will be aware of the constant demand for recurring capability.

Building the capabilityOnce the demand is understood, organisations must consider the best sourcing options for creat-ing a capability to meet specific business require-ments. In our experience, very few organisations have planned and executed a clear strategy with regards to their transformational capability, which results in the starting position often reflecting his-torical sourcing decisions and legacy IT resources being allocated to transformational capability.

It makes sense to source as much of the con-stant demand for recurring capability inter-nally, except maybe for what can be offshored. By so doing, the CIO creates a pool which can be drawn from for all types of transformational change, while ensuring continuity with respect to knowledge retention amongst permanent staff. However, building a capability based on demand requires a change in the typical mind set of many organisations with regards to how they hire, develop, motivate and reward their workforce. In many ways, the model is more akin to an in-house consulting function.

Demand for non-recurring capability should be met by outsourcing, or by co-sourcing with third parties. The aim should be to maximise the precise knowledge of demand by securing accurate long-

term frameworks, or partnership contracts, with advantageous pricing. Finally, there is a need to put in place short to mid-term arrangements with a number of organisations that can fulfil the varied and changing short-term needs for key skills on-demand.

The CIO must then work hard to ensure a well-functioning ecosystem that is fit for transforma-tion, by blending internal capability with partner-ship contracts. The result can then be a transfor-mational capability. Such capability makes the most of the loyalty, cost and deep knowledge of an internal organisation, while also benefiting from external expertise, and access to offshore and pay-per-use capability for peaks in demand.

In conclusion, it pays for a CIO to invest in a capability function that plans, builds and runs the supply side of transformational change but which is based on a sound understanding of the demand side. Should the CIO get this approach right, he or she will be in the perfect position to partner the business in transformation.

Ô Benoit Laclau (BLaclau@uk.ey.com) is an EMEIA power and utilities advisory partner at Ernst & Young LLP. He has advised CIOs on IT strategy, operating models, organisation and business transformation over the last 20 years. Before joining EY, he was the CIO of one of the largest UK power organisations. Laclau will present his thoughts on transformational project management and methodology in the next issue of the magazine.

An understanding of demand is fundamental