25 Sep 2015
According to BCG research, average IT programs realise just 25 per cent of the expected benefits while leaving companies 80 per cent over budget and 75 per cent over schedule.
"Rolling out complex and sometimes untested technology to transform business is inherently risky but only a poor craftsman blames his tools."
Andrew Arcuri & Richard Helm, Principal at BCG & Partner and Managing Director at BCG
Rolling out complex and sometimes untested technology to transform business is inherently risky but only a poor craftsman blames his tools. In our experience, the problem often lies not with the whizz bang technology but in having an IT function not up to the task of completing the multi-year marathon a transformation represents.
The maturity of the IT team's capabilities can make or break this transformation. Common weaknesses include inadequate management of the portfolio, program and projects, which can erode the full benefits of the transformation, and poor capabilities in managing vendors and contracts, which can allow costs and scope to spiral out of control.
Although the task of improving capabilities is often considered a business-as-usual activity, in a transformation it requires dedicated funding and focus. With stakes this high, it is essential to invest in a strong team you can rely on to reach the finish line.
Organisations that take a disciplined approach to strengthening key IT capabilities deliver transformation programs more consistently and predictably and with greater rates of success.
Specifically, they make better trade-offs and resource-allocation decisions and work better both internally and with third parties, including vendors and system integrators.
To get transformation ready, IT leaders need to develop a strategy that addresses three questions:
1. Which specific capabilities are needed to support the transformation? Different types of transformation require different strengths. For example, during a core-system modernisation, the most critical capabilities will be those associated with large-program delivery
During a structural-cost transformation, capabilities such as sourcing management and cost management will be essential to deliver a simpler and more efficient IT environment.
A transformation focussing on digital innovation should look at strengthening capabilities in the business innovation group to drive alignment, innovation and collaboration between the business and IT teams
Refocussing the IT organisation to describe, provide and support technology service outputs from end to end in a way that was relevant to the businessand to inform business-led trade-offs involving technology volumes, quality, and costs.
Developing the capability to drive real transparency of technology service costs and performance, in particular by linking cost and quality measures to business consumption.
Building a minimum-sufficient capability for capacity forecasting and planning to provide a line of sight into future business supply and demand in terms of IT service outputs rather than just technology inputs.
With the potential to reduce technology costs by as much as 30 per cent, the investment in IT capabilities, which drew heavily on the IT-CMF, is already returning multiples of investment and is seen as central to the success of the company's transformation and productivity agendas.
While the task may seem daunting, highly committed organisations can enhance their most critical capabilities in just a few months by using tried and tested tools which lay the foundation for a successful business transformation.
2. How good are my capabilities today and how good do they need to be? Organisations should identify where, and how much, muscle is required to reach the finish line. Different capabilities are relevant over time.
In the early stages of a transformation, when funding the journey is the priority, cost management is likely to be prominent, while capabilities in portfolio, program and project delivery will come to the fore once savings have been reinvested in IT.
3. What is the right way to improve capabilities? Leaders must define a manageable set of clear, outcome-focused initiatives to improve capabilities in the areas where they are needed most.
To do this they should apply an objective, evidence-based framework to benchmark their IT function against peers and understand where their capabilities are not in line with best practice so they can focus investment in fixing the right areas.
There are tools available to businesses, like the IT Capability Maturity Framework, that explicitly align IT with business value and can be used in a number of different scenarios, whether an organisation needs to reduce costs in the face of high IT spending, target areas for investment to improve capabilities or align its current capabilities with those it needs for the future.
Such tools can help transform IT functions into leaner, more productive and flexible organisations. In the following case study, technology was a critical enabler for the company's target market, based on standard enterprise-resource-planning systems, desktop operating environments and global infrastructure.
Andrew Arcuri, a Principal at BCG and the firm's Asia Pacific Leader for the IT Capability Maturity Framework. Richard Helm is a partner and managing director in BCG's Sydney office and a core member of the firm's Technology Advantage Office.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
25 Sep 2015
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