Corporate Approaches to IT Governance.ppt

CorporateApproachestoITGovernance,March1999MinistryofInternationalTradeandIndustry,WhatisITgovernance?,Govern：tocontrolanddirectthemakingandadministrationofpolicy（WebstersDictionary）ITgovernance：TheorganizationalcapacitytocontroltheformulationandimplementationofIT(informationtechnology)strategyandguidetoproperdirectionforthepurposeofachievingcompetitiveadvantagesforthecorporation.,ChangesofBusinessParadigmsbyIT(1):RearrangementoftheBusinessModelItself(ThecaseofAmazon.Com),Search,ExampleofacompanythathasbeensuccessfulinusingITtochangebusinessparadigms.,Thecustomeractionofpurchasingbooks,Conventionalbookstore:“SalesAgent”(Supplier-orientedconcept),Access,“Customerrequiredtocometothebookstore.”,“Bookstorecomestoyourhouse.”(On-lineaccess),Navigation,“Customersearchesthroughshelves.”,“Easytofindbooksthatyouwant.Systemknowsyourpreferencesandguidesyouaccordingly.”(Providescustomizedinformationbasedonpurchasinghistory.),Availability,“Limitedstockofbooks.Thosebooksnotininventoryhavetobeordered,whichtakestime.”,“Justaccesstheservicetogetanybookyouwant.”(3milliontitles),Purchasing,“Soldatpublisherssuggestedretailprice.”,“Evenbest-sellerssoldatadiscounttomarketprice.”(20-40%off),Bringinghome,“Customercarries.”,“Deliveredtoyourdoor.”(Next-dayshipping),Amazon.Com:“PurchasingAgent”(Consumer-orientedconcept),OrdinaryInternetbookstore(automationofsalesactivities),On-lineaccess,Likethe“newbooks”rackinaconventionalstore.,Likesalesinaconventionalstore.,Samepriceasaconventionalstore.,Possibletobedelivered,butitsquickertocometothestoreandbuyityourself.,ChangesofBusinessParadigmsbyIT(2):ReformingBusinessProcesses(TheGEprocurementsystem),Priorto1995,1996:CompanytocompanyEDI,Inquiry,Bid,Order,Delivery,Inquiry,Bid,Order,Delivery,Delivery,Procurementtime/Procurementcosts:Slightlylower,Procurementtime:50%savingsProcurementprice:30%savings,SubstitutedInternettransmissionsforconventionalpaperandtelephone-basedorderingworkonly.,Changetheinquiry/orderingprocessitself.,GEhasopeneditssystemtoothercompanies,developingitintoaroyaltybusiness.Frominternalsystemtomarketmaker.,Present,HistoryoftheGEprocurementsystem,1997:Web-basedprocurement,Determinationofsupplierprice,Web-basedprocurement,TheexpansionofITapplicationrangehasmadethecontrol(governance)ofITaspartofcorporategovernanceanextremelyimportantmanagerialfactor.,1960s-1970s,1980s-1990s,Decision-makingsupport,RoleofIT,OperationalefficiencyLaborsavings,Saleswhenthepositionis“director”orabove,itisassumedthatdirectreportingismadetothepresident.2.ForCIOsconcurrentlyservinginotherpositions,theratioofdirectreportingtothepresidentisdiscountedfortheIT-relatedworkloadratio.Source:JapanCIOConsultativeCouncil,analysisbyBCG.,ThereappeartobelargedifferencesbetweenJapanandUSAintheamountofIT-relatedinformationmakingitswaytothetopmanagement.,Other8,VicePresidentorabove8,Director11,ManagingDirector7,ExecutiveManagingDirector4,CIOhaslimitedauthority:Onlyresponsiblefor(expense)budgetandpersonnelofheadofficeinformationsystemsdepartment.Investmentauthorityrestswithdirectorinchargeofbusinessdivisionsordirectorinchargeofaccounting.,TheordinaryCIOataJapanesecompanyisinchargeofmanaginginformation.RatherthanbeingresponsibleforformulatingITstrategy,hetendstomanagetheinformationsystemsorganization.,Rangeofdirectorsresponsibility/authorityReportingsystemsoftheITdepartmentOfficerInformationsystemsdepartmenthead,President,DivisionC,DivisionB,DivisionA,AdministrationDepartmentD,AdministrationDepartmentC,AdministrationDepartmentB,AdministrationDepartmentA,InformationSystemsDepartment,InformationSystemsDepartment,InformationSystemsDepartment,ProfileofCIOsintheUSA,*Hassincebeenreplacedbysomeoneelse.Source:BCGinterviews.,FederalExpress,CIO:DennisJonesPreviouspost:VPformarketingTasks:Useandexpansionofcustomerinterfacesystem;satisfactionofcustomerneedsandinternaloperationalneeds,GE,CIO:GaryReinerPreviouspost:VPforstrategyTasks:CreateintegratedmeritsofITinvestmentsacrossmultipledivisions:Web-basedEDI6-sigma(developintoabrandthatgoesbeyondqualitycontrol)Discoveranduseinformationandtechnologythathavebeenaccumulatedwithinthegroup.,MorganStanley,CIO:KevinParker*Previouspost:TraderTasks:Buildandmanageaninter-divisionalITsystem,“TheCIOwerelookingforislikeatriathlonathlete.First,hemustbeabletoserveasaleaderwhocanmotivatethoseaboveandbelowhim.Second,hemustbeabletothinkaboutbusinessinstrategicterms.Third,hemustbeabletohandleextremelycomplextechnicalproblems.”(RusselReynolds),“WeuseITtodevelopthemostadvanceddistributionservicesintheworld,ofwhichourcustomersmaynotbeaware.”,“Shareandusecustomerinformationthatisscatteredamongseveraldivisions.Myjobistosearchfordifferentiatedwaysthatnooneelseisdoing.”,ITOrganizationPatterns,Decentralizedtype,Suitability:Conglomerates;companiesforwhichbuilt-inapplicationsprovideanadvantage.Examples:GE(1980s),Motorola,Centralizedtype,Suitability:Single/similarbusinesses;companiesforwhichcostsprovideanadvantage.Example:Walmart,Mixedtype,Suitability:Portfoliocompaniesabletocapitalizeonsynergy.Examples:HP,GE(today),ProfitCentertype,Suitability:Businessesthatareextremelysensitivetocosts,Outsourcedtype,Suitability:Companieswithdifferinguserneedsandviewcompetitiveadvantages,whenthesecompaniesarenotcost-sensitive.,Intentionallydesignedoroverhauled,ITfunctions/responsibility,SS,Thirdparty,Informationsystemsdepartment,Informationsystemsdepartment,WhatIsNeededtoApplyITtoManagementReform:FromtheOrganizationalPerspective,TheprocessofapplyingITtomanagementreform(=ITgovernance)isexactlythesameastheprocessofformingandimplementingstrategyincorporategovernance.,Topmanagement,Staff,businessunits,Organizationalprocess,Responsibleprincipal,Awareofbusinessenvironment“Senseofcrisis”,AwareofstrategyvariablesWhatcanandshouldbecontrolled,FormationoforganizationalconsensusCleararticulationofthe“organization”wishestodo,Implementation/measurementofresultsImplementationandfollow-upoftheresultsbasedonorganizationalconsensus,(III),FrameworkforCorporateGovernancefromthePerspectiveofOrganizationalStructure,Topmanagement,Stafffunctions,Governancesupportfunctions,President(CEO),Responsibledirectors,Linefunctions,Businessunitservicefunctions,Corporategovernance/Corporatedecision-making,(II),Businessunit(I),.,Corecorporategovernancefunctions,Topmanagement,Example:FinancialGovernance,Stafffunctions,GovernancesupportfunctionsFinancialstrategyFund-raisingstrategy,President/CEO,CFO,Finance/AccountingDepartment,BusinessunitservicefunctionsFund-raisingwork,accountingprocess,Linefunctions,(III),(II),Businessunit(I),.,Topmanagement,DesigningofITGovernanceScoreCard,Stafffunctions,GovernancesupportfunctionsFormulationofITstrategyandplanning,President/CEO,CIO,Linefunctions,HeadOfficeITDepartment(InformationSystemsDepartment),BusinessunitservicefunctionsProvisionofservices,developmentsupport,ITstrategydiscussion/decision-making,ArrangebyTwoHeadings/FourSubheadings,StructureofScoreCard,(III),(II),Businessunit(I),.,I.TopManagementDecision-makingStructure1)Roleofpresident/CEOandfunctionsofthetopmanagementmeetingsandboard2)RoleofCIO,II.PerformanceofStaffFunctions3)Supportfortopmanagement,supportforcompany-wideoptimization4)Servicestobusinessunits,ScoreCardDesignSteps,FormulatingBCGassumptionsconcerningbasicframeworkofscorecard,STEP,Fleshingoutofscorecardmeasurementitems,STEP,Consolidationintoapracticalscorecard,STEP,Definitionof“TwoHeadings/FourSubheadings”,FactoranalysisofframeworkelementsCreationofdetailedquestions,Concentrationintoessentialquestions,2/4Frameworkfactors,125Detailedquestions,25ScoreCardquestions,Keypointsofscorecardcreation,1.InlightofthebasicroleplayedbyITgovernanceincorporatemanagement,thescorecardisdesignedtobefilledinbytheCIOhimself(oranexecutiveofsimilarstatus)Avoidwhereverpossibledetailed,technicalquestions.2.Limitthenumberofquestionstakingintoconsiderationthetimerequired.Shouldtakenomorethan30minutestocomplete(nomorethan30questions).3.Balancethenumberofquestionsamongthetwoheadings(“I.TopManagementDecision-makingStructure”and“II.PerformanceofStaffFunctions”)BalanceisessentialtoITgovernance.4.Makethescoreeasytocompute.25questions4points=100points,ITGovernanceScoreCardQuestions(BCGproposal),Stafffunctions,3.Governancesupportfunctions,1.President/CEO,2.CIO,HeadOfficeITDepartment(InformationSystemsDepartment),4.Businessunitservicefunctions,ITstrategydiscussion/decision-making,Businessunit,I.TopManagementDecision-makingStructure,II.PerformanceofStaffFunctions,BasicFrameworkforITgovernance,Topmanagementteam,1)Roleofpresident/CEOandfunctionsofthetopmanagementmeetingsandboardQ1:AwarenessofbusinessenvironmentQ2:PositionofITinmanagementreform/businessreformQ3:IndicateintentionsregardingITutilizationQ4:ForumfordiscussionofITstrategybytopmanagementQ5:UseofITbytopmanagersthemselvesQ6:CIOsfull-timepositionorconcurrentpositionQ7:PositioningofCIOwithintopmanagement,2)RoleofCIOQ8:RoleandexpectationsofCIOQ9:MissionofCIOQ10:AuthorityofCIOQ11:SkillsofCIOQ12:RelationshipofCIOtouserdivisionsQ13:InvolvementofCIOinoperations,3)Supportfortopmanagement,supportforcompany-wideoptimizationQ14:OrganizationaldesignofheadofficeITdepartmentQ15:VoicingofopinionsonITstrategytotopmanagementQ16:PrioritizationofcompanysinvestmentprojectsQ17:ManagementofskillsofcompanyITpersonnelQ18:LiteracymanagementQ19:Useofunified,standardizedarchitectureforcompany-wideoptimization,4)SupporttouserdivisionsQ20:CommunicationwithuserdivisionsQ21:ApplicationsmanagementQ22:InformationmanagementQ23:Service(cost)managementQ24:ProjectmanagementQ25:Performancereviews,ITGovernanceScoreCardRelease1.0,TableofContents,PurposeofITGovernanceandthisScoreCardHowtocompletethescorecardThescorecardReferenceSamplediagnoses,PurposeofITGovernanceandthisScoreCard,WhatisITgovernance?TheorganizationalcapacitytocontroltheformulationandimplementationofIT(informationtechnology)strategyandguidetoproperdirectionforthepurposeofachievingcompetitiveadvantagesforthecorporation.,PurposeofthisscorecardRapidadvancesinrecentyearsinIT(informationtechnology)havedramaticallyincreasedtheimportanceofITtomanagementasasourceofcompetitiveadvantage.Thisscorecardwasdevelopedasaself-diagnostictoolforthepurposeofencouragingcompaniestoimprovetheirITgovernance.,ITGovernanceScoreCardQuestions,1.President/CEO,2.CIO,ITstrategydiscussion/decision-making,BasicFrameworkforITgovernance,Topmanagementteam,Stafffunctions,3.Governancesupportfunctions,HeadOfficeITDepartment(InformationSystemsDepartment),4.Businessunitservicefunctions,Businessunit,I.TopManagementDecision-makingStructure,II.PerformanceofStaffFunctions,1)Roleofpresident/CEOandfunctionsofthetopmanagementmeetingsandboardQ1:AwarenessofbusinessenvironmentQ2:PositionofITinmanagementreform/businessreformQ3:IndicateintentionsregardingITutilizationQ4:ForumfordiscussionofITstrategybytopmanagementQ5:UseofITbytopmanagersthemselvesQ6:CIOsfull-timepositionorconcurrentpositionQ7:PositioningofCIOwithintopmanagement,2)RoleofCIOQ8:RoleandexpectationsofCIOQ9:MissionofCIOQ10:AuthorityofCIOQ11:SkillsofCIOQ12:RelationshipofCIOtouserdivisionsQ13:InvolvementofCIOinoperations,3)Supportfortopmanagement,supportforcompany-wideoptimizationQ14:OrganizationaldesignofheadofficeITdepartmentQ15:VoicingofopinionsonITstrategytotopmanagementQ16:PrioritizationofcompanysinvestmentprojectsQ17:ManagementofskillsofcompanyITpersonnelQ18:LiteracymanagementQ19:Useofunified,standardizedarchitectureforcompany-wideoptimization,4)SupporttouserdivisionsQ20:CommunicationwithuserdivisionsQ21:ApplicationsmanagementQ22:InformationmanagementQ23:Service(cost)managementQ24:ProjectmanagementQ25:Performancereviews,Howtocompletethescorecard,1.ThisscorecardshouldbefilledinbytheCIOoranotherexecutiveofsimilarstatus.2.Questionsaskforjudgementsofthedegreeofachievementinthiscompany,notthedegreeofimportancetothepersonfillingoutthescorecard.3.Thescorecardconsistsof25questionscoveringimportantaspectsofITmanagement.Itshouldrequireabout30minutestocomplete.4:Iamextremelyconfidentthatithasbeenachieved.3:Ithinkithasbeenachieved.2:Icantsayonewayortheother.1:Idontthinkithasbeenachieved.0:Ithasnotbeenachieved,andIthinkitisamajorproblem.,Istopmanagementsufficientlyawareofthebusinessenvironmentandtheneedformanagementandbusinessreform?DoestopmanagementpositionITasasourceandtoolfor“competitivedifferentiation”and“creationofadded-value”inmanagementandbusinessreform?ITisconsideredonlya“toolforoperationsrationalizationandlabor-savings.”HastopmanagementclearlyarticulatedexactlywhatitwantstoaccomplishwithIT?Topmanagementusesambiguousphraseslike“makefulluseofIT,”oritissuesspecificrequestsandinstructionslike“useITtocutleadtimeinhalf.”Isthereatopmanagementboardspecificallyforthediscussionofcompany-wideITstrategyanddoesitfunctionappropriately?Or,istheresufficientdiscussionofcompany-wideITstrategyattopmanagement-levelmeetings(forexample,managingdirectorsmeeting)?NotjustleavingITtosubordinatesorbeingsatisfiedwithdiscussionsinformonly.DoestopmanagementuseIToutputforobjectiveverificationanddiscussionof,forexample,decision-makingconcerningstrategyformulationorperformanceevaluation?DopeopleatalllevelsofthecompanyhaveanaccurateunderstandingoftheIToutputthattopmanagementuses?Notjustdailysalestrendsorthelike.,1.Awarenessofbusinessenvironment2.PositionofITinmanagementreform/businessreform3.InstructionsregardingITutilization4.ForumfordiscussionofITstrategybytopmanagement5.UseofITbytopmanagersthemselves,I.TopManagementDecision-makingStructure1)Roleofpresident/CEOandfunctionsofthetopmanagementmeetingsandboard,4:Iamextremelyconfidentthatithasbeenachieved.3:Ithinkithasbeenachieved.2:Icantsayonewayortheother.1:Idontthinkithasbeenachieved.0:Ithasnotbeenachieved,andIthinkitisamajorproblem.,“Topmanagement”referstothepresidentandtoafewothercoredirectorswhoareresponsiblefortheoverallrunningofthecompany.Example:Membersofacompany-widetopmanagementmeeting(7-8people),Isthereapersonwhoservesfull-timeasCIO,oristhereaseniordirectorwhovirtuallyservesasCIOandinvestsaconsiderableportionofhistimeinIT-relatedbusiness?IsCIOapositionthatreportsdirectlytothepresident?IstheCIOamemberofthetopmanagementcommittee?,6.CIOsfull-timepositionorconcurrentposition7.PositionofCIOwithintopmanagement,2)RoleofCIO,IstheCIOmerely“headofafunctionaldivision”orishean“agentforchangeinmanagementandbusinesspractices?”Examples:Reformsofengineeringandsupplychains.HasthecompanyarticulatedaclearmissionfortheCIO,includingspecificresponsibilitiesforITthatgoaboveandbeyondmanagementoftheheadofficeITdepartment.Forexample,formulationofanITvisionorstrategy,orevaluationofcompany-wideITinvestments.,8.RoleandexpectationsofCIO9.MissionofCIO,4:Iamextremelyconfidentthatithasbeenachieved.3:Ithinkithasbeenachieved.2:Icantsayonewayortheother.1:Idontthinkithasbeenachieved.0:Ithasnotbeenachieved,andIthinkitisamajorproblem.,(Hereafter,werefertofull-timeCIOs,concurrentCIOs,anddefactoCIOsas“theCIO.”),HoursinvestedasCIO,1008010050803050030,Grading,PositionofCIO,ExecutivemanagingdirectororhigherManagingdirectorDirectorreportingtopresidentDirectornotreportingtopresidentNoCIO,Grading,DoestheauthorityoftheCIOextendbeyondapprovalauthorityattheheadofficeITdepartment?DoestheCIOhaveclearlydefinedauthorityoverITanddoesthisauthorityfunctioninpractice?Example:Approvalauthorityovercompany-wideITbudget,authoritytoevaluateITsystemsofindividualuserdepartments,authorityoverpersonneldecisionsandevaluationsofITofficersinuserdepartments.DoestheCIOhavesufficientmasteryofthefollowingskills?Businesssense:PossessedofdeepinsightsintothepotentialforoptimizingIToperationsbasedonrichbusinessandplanningexperience.Communicationskills:AbletoexplaininanunderstandablewayITandthepotentialforoptimizingIToperationstosomeonewhoknowsalmostnothingaboutIT.Technicalunderstanding:AbletoreadandunderstandpublicationslikeNikkeiComputerandNikkeiCommunication.IstheCIOalways(orwhennecessary)askedtoattendmajorstrategyformulationmeetingsofuserdepartments?Doesheattendvoluntarily?Notjustformalattendancebutrealcontributionsareexpected.IstheCIOindividuallyinvolvedinITprojectsofstrategyimportanceorthoseinthetop10%ofinvestmentamounts(projectbase)?Doeshedirectlycontrolprogressandinvestment?Heleaveseverythingtosubordinates,oronlyreceiveformalreports.,10.AuthorityofCIO11.SkillsofCIO12.RelationshipofCIOtouserdivisions13.InvolvementofCIOinoperations,4:Iamextremelyconfidentthatithasbeenachieved.3:Ithinkithasbeenachieved.2:Icantsayonewayortheother.1:Idontthinkithasbeenachieved.0:Ithasnotbeenachieved,andIthinkitisamajorproblem.,HavetheroleoftheheadofficeITdepartmentanditsrelationshipwithuserdepartmentsbeenclearlydefinedintermsoftheneedforandurgencyofIT-drivenbusinessreformandtheabilitytoutilizeITinthecompany?Haveorganizationsbeendesignedaccordinglyanddotheyoperateaccordingly?Examplesofroles:Centralizedtype:ThemajorityofITfunctionsarecentralizedintheheadofficeITdepartment,withoveralloptimizationthegoal.Decentralizedtype:ITfunctionsarespreadoutamonguserdepartmentswitheachseekingitsownmeritsandtheheadofficeITdepartmentprovidingtheminimumnecessarycoordination.Profitcentertype:TheheadofficeITdepartmentprovidestheadded-valueservicesrequiredbyuserdepartmentsforaprice.WhenitmakesdecisionsonITstrategy,istopmanagementprovidedbytheheadofficeITdepartmentwithanumberofstrategicoptionsthatcouldbetaken?DoestheheadofficeITdepartmentprovidecomparisonsandexplanationsofthemanagerialsignificance,merits,anddemeritsofeach?Proposalsarereturnedbecausethereisnotenoughinformationtoarriveatadecision,oralternativeproposalsarerequested.DoestheheadofficeITdepartmentprioritizeITinvestmentprojectswithinacompany-wideframeworkbasedonthequantifiedinvestmentvalueoftheproject.(Whenprojectsaredifficulttoquantify,doestheheadofficeITdepartmentassignprioritiesafterclearlynotingthepointsonwhichitwouldliketodefertoadecisionbythetopmanagement?)Departmentalegounderminescompany-wideoptimization.,14.Organizationaldesignofheadoffic