rr066_e(collaborative it management)
TRANSCRIPT
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Collaborative IT Management
Driving IT Investment Performance
Scenarios for Successful IT Management Reforms
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CONTENTS
Introduction 1
1. Summary 2
2. The Need or Collaborative IT Management 4
2 - 1. Reasons or Possible Failures in IT Investment 4
2 - 2. About the Survey on Successul IT Investment 6
2 - 3. Involvement o Top Executives 8
2 - 4. Involvement o Business Units 11
2 - 5. Capabilities o IT Department 14
2 - 6. The PDCA Cycle or IT Investment:
Advance Assessment and Follow-up Assessment 17
2 - 7. Conclusion: The Need or Collaborative IT Management 19
3. Undertaking IT Management Reorm Initiative 24
3 - 1. Overview o CIO Interviews 24
3 - 2. Eorts Common to Companies Succeeding in IT Management Reorms 25
3 - 3. Reshaping Awareness in the Three Parties
through Investment Management Structure 26
3 - 4. Achieving Overall Optimization through Interaction at the Planning Stage 27
3 - 5. Establishing a Structure o Responsibilities
through System Ownership Scheme 28
3 - 6. Developing Business-savvy IT Sta through Job Rotation 29
4. Conclusion: Critical Factors o Success in IT Management Reorms 30
Appendix: Case Studies o Successul IT Management Reorms 32
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1. Summary
Factors impeding the success o IT investment include
limitations on local optimization, ambiguities in respon-
sibility structures, and an insuicient development o
business-savvy IT sta. Companies that aim to derive ull
value rom IT investments, they must address these three
issues through the establishment o a collaborative IT
management--in which top executives, business units,
and IT department each ulll their own responsibilities, as
well as work together to ensure that IT investments have
the greater impact..
But how do these three parties take part in IT invest-
ment in individual companies, and how do these ways o
involvement relate to the results o IT investment? The
results o our survey show that irms making successul
IT investments share certain characteristics, as described
below.
Top executivesat successul irms place importance
on IT investment and grasp the complete picture o the
investment. In addition to communicating to employees
throughout the organization both the importance o and
the companys policies or the use o IT, they also provide
specic instructions when making decisions on IT invest-
ment and ensure alignment o IT investment with man-
agement strategies. Furthermore, such companies have
appointed CIOs. Business unitsalso place importance on
making eective use o IT and proactively participate in
projects. The right personnel are appointed as project team
members and their eorts are evaluated accordingly. More-
over, the IT departmentin such irms can proactively
make proposals to business units or discuss IT-related
matters with business units as an equal partner. At least40 percent o the personnel in their IT departments have
experience working in business units, and at least one per-
cent o IT sta are transerred to business units each year.
Such companies also choose and manage vendors appro-
priately.
Companies achieving the mean score or higher or all three
categoriestop-executive involvement, business-units in-
volvement, and IT-department capabilitieshad the highest
rate o success in IT investment: 68 percent. Conversely, it
was ound that the success rate declined sharply even with
only one party scoring low. In act, although the success
rate was 43 percent in companies whose business units
and IT departments both scored highly, all others had suc-
cess rates o 20 percent or less. Furthermore, this survey
conrmed that companies with low scores in terms o IT-
department capabilities were unable to increase their suc-
cess rates no matter how high the other two parties scored.
The results o this survey show that in order to improve
perormance o IT investments it is vital to establish col-
laborative IT management, with high scores or all
three categories. But what kinds o changes are needed in
IT management in order to establish such collaborative
IT management? Our interviews with the CIOs o seven
rms that had made IT management reorms real showed
our types o eorts shared by successul rms.
(1) Reshaping awareness in the three parties throughinvestment management structures
Successul irms provided opportunities or top execu-
tives and business units to participate in discussions on IT
investment and had established structures or managing
IT investment that encouraged active involvement o top
executives and business units. By adopting such struc-
tures, these companies not only get their top executives
and business units more deeply engaged in IT initiatives,
but also make their IT departments more accountable or
IT investment and more closely in line with the rest o the
organization.
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(2) Achieving overall optimization through interac-tion at the planning stage
Successul companies emphasized the interaction at the
planning stage between top executives, business units, and
IT departments, thus leading to better IT alignment with
management and business strategies. This enabled them to
realize overall optimization o IT investment.
(3) Establishing a structure o responsibilitiesthrough system ownership scheme
Successul rms have adopted the scheme o system own-
ership, clariying the roles and responsibilities o system
owners, and standardizing IT-related procedures, stan-
dards, and rules across the lie cycle o IT investment.
Those deployments helped raise awareness o the system
owner to business units and helped business units ulill
their respective roles and responsibilities.
(4) Developing business-savvy IT sta through jobrotation
Successul rms encouraged IT sta to be rotated to busi-
ness units or a set o period. Job rotation between busi-
ness units and IT department enables IT department to
develop business-savvy IT sta who have not only IT
skills but also business knowledge and understand the
operations o business units. On the other hand, such rota-
tion enabled business units to develop IT-savvy business
sta who are capable o planning IT-enabled operational
reorms and are also capable o developing and evaluating
business and system requirements.
These interviews showed what companies need to do to
ormulate IT management reorms. The issue is how to put
such reorms into practice. With this in mind, the ollow-
ing three key points should be noted:
(1) Top-executive involvement in IT reorms
(2) Preparation o a road map or change
(3) Appointment o a CIO to take leadership in making
changes
Enorcement o a Japanese equivalent o the Sarbanes-
Oxley Act would urther increase the importance o overall
optimization in group management. In IT investments,
the enorcement would also lead to growing demand or
an overall, group-wide optimization. For this reason,
the initial ocus should be to establish collaborative IT
managementat the level o individual companies, and
then work toward development ocollaborative group
IT management by expanding these eorts to a group-
wide level.
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2. The Need or Collaborative IT Management
2 - 1. Reasons or Possible Failures in IT Investment
How can companies derive more value rom their invest-
ment in IT? A wide range o suggestions have been pro-
posed to this question, and companies have worked hard
to make smarter IT investments. Despite such eorts, the
hoped-or improvement ailed to occur: the proportion o
companies succeeding in IT investment remains unchanged
rom a survey conducted two years ago.* Why is this issue
o improving perormance o IT investments still unsolved?
* "Successul IT Investment: Best Practices or IT Investment Management"
(ABeam Consulting Ltd., March 2004)
The ailure to improve perormance o IT investments
stems rom overlooking three undamental actors at the
root o the problem, or rom an inability to address these
actors even once they are understood.
(1) Limitations on local optimization
Many IT investment projects begin with proposals rom
business units. Such bottom-up type system proposals can
easily lead to the adoption o IT without a sucient review
o operations. Furthermore, it can lead to problems such as
duplication o eorts in system development and a lack o
collaboration and integration between systems. An accu-
mulation o such bottom-up IT projects result only in local
optimization, not in overall optimization.
(2) Ambiguities in responsibility structures
To derive ull value rom IT investments, companies should
make business units more involved in IT projects and
more accountable or the return on IT investments, more
than just making IT requests. In many cases, however, the
separation o roles, authority, and responsibility between
business units and IT department is not clearly deined
in terms o IT planning and promotion. Such ambiguous
structures o responsibility hinder the companys ability to
get more benet rom IT investments.
(3) Insucient development o business-savvy IT sta
To ensure that IT investment has a strategic impact, com-
panies must ollow the three steps: they make business
concepts, create structures and processes to realize the
concepts, and nally develop IT necessary or these pur-
poses. This requires IT personnel who understand both
business operations and IT and who can bring ideas or IT-
enabled business innovation and implement them. Howev-
er, in most cases it cannot be said that such business-sav-vy IT sta have been suciently developed, as no progress
has been made in the exchange o personnel between IT
departments and business units.
On these points, here we would like to consider the case o
a hypothetical Company X.
For a consumer goods manuacturer like Company X, IT awareness is generally low in the executive level, including
the top executives. There is neither an atmosphere or executive involvement in the discussion on IT strategies, nor is
there sucient interest in requesting a report on progress o IT investments. Furthermore, in recent years the number
o large-scale IT projects to be decided at the top-executive committee has declined, so it is rare that IT projects come
up to their agendas. As a result, there is a great degree o distance between top executives and the IT department. In
addition, business units take a passive approach to IT-enabled business innovation. Although they do make a request
to the IT department or systems development, they show a strong tendency to leave the rest to the IT department,
lacking a sense o ownership regarding costs and results. At Company X, when making a request or IT development,
business units are asked to speciy the purpose o the investment and its anticipated results. Although it is likely that
their sel-assessed results have some bias, the results o IT investments are not verifed. Furthermore, as a result o cost
reductions over the past several years, even the IT department has been subject to restrictions on investment and re-
ductions in numbers o personnel. Although the IT department has strived with limited budgets and stang to meet
the needs o business units, they are incapable o devoting energy to strategic planning and investment management
or IT.
consumer goods manuacturer Company XCase study
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Businessunits
ITdepart-ments
Topexecutives
Businessunits
ITdepart-ments
Approval
Businessstrategies
Managementstrategies
ApprovalApproval
Improvements
Reportingon results
Vendormanagement
Progress reports
P
D
C
A
Vendors
Formulating coherenetIT strategies
Development
Participation
IT strategies
Topexecutives
Businessunits
ITdepart-ments
Top
executives
Businessunits
ITdepart-ments
Topexecutives
Businessunits
ITdepart-ments
Projectrequests
Developmentrequests
Reporting onstatus ofIT operations
Cooperation
Confirmingstatus ofIT operations
Project assessment
ReportingReporting
Verifying results
Operation
The circumstances in which Company X inds itsel are
deinitely not desirable. However, the business units eel
no major dissatisaction with the IT department that lls
their requests. The top executives as well may see the IT
department as perorming well with limited resources. Only
the IT department eels unable to take on their assigned
missions and authorities, vexed by the inability to advance
IT-led business innovation.
You have probably heard the example o the "boiling
rog." A rog is in a pot o water. As the temperature o
the water rises slowly, the rog is not impelled to jump out,
as it is not suddenly alarmed by the heat. However, since
the temperature keeps rising, eventually the rog is boiled
to death. Under its current circumstances, Company X too
risks the ate o the rog i it ails to take steps to improve
the situation.
Breaking out o these circumstances requires that top ex-
ecutives, business units, and IT departments work together
to take on the three undamental causes reerred to above.
The three parties also need to work in tandem through the
IT investment management cycle to establish collabora-
tive IT management, with each party ullling its own
responsibilities. (See Figure 1.)
Figure 1: The IT investment management cycle, with top executives, business units, and IT departments working in tandem
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Topexecutives
Businessunits
ITdepart-ments
Top-executive involvement
Top-executive involvement
Degree of importance given to IT investment
Degree of understanding status of IT investment
In-house communication concerning use of IT
Way of involvement in key IT projects
Alignment of IT investment and management strategies
Appointment of CIO
Involvement of business units
Degree of importance given to use of ITin operations
Degree of involvement in IT projects
Degree of appropriateness of projectteam members
Personnel evaluations of project teammembers
Capabilities of IT departments
Adequacy of required resources
Degree of understanding business-units'operations
Exchange of personnel with businessunits
Vendor management
2 - 2. About the Survey on Successul IT Investment
Although the case o Company X may be an extreme ex-
ample, it is likely that many companies could not say their
top executives, business units, and IT departments each
participate suiciently in IT investment. How do these
three parties participate in IT investment in real-lie com-
panies? Is there a relationship between the way o their
involvement and the results o IT investment?
We conducted a survey to examine elements related to
top-executives involvement, business-unit involvement,
and IT-department capabilities, as shown in Figure 2.
Figure 2: Elements surveyed or each section
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No answer 1%
More than 500 billion18%Less than 50 billion yen
30%
300 billion ~ 500 billion yen
13%
100 billion ~ 300 billion yen
28%
50 billion ~ 100 billion yen
10%
Other4%
Finance 15%
Distribution 13%
Manufacturing 46%
Construction 10%
Electricity and gas 1%
Transportation,telecommunications,
and other services 11%
10,000 or more
12%
5,000 ~ 9,999
10%
3,000 ~ 4,999
12%
1,000 ~ 2,999
28%
Less than 1,000
38%
Exceeded expectationsMet expectations Somewhat inadequate
Clearly inadequate Don't know No applicable investment made
0% 20% 40% 60% 80% 100%
39% 45%
1% 47% 38% 9%2%4%
30% 56% 10% 4%
16% 48%
6%
18%
11%
7% 10%
3%1%
6%
Reducing operational costs andautomating and improving
operations
Increasing sales, improvingproducts and services, and
realizing new business models
Speeding up decision-makingand visualizing and sharing
information
Strengthening informationsecurity and ensuring
compliance
Overall assessment
2%
27%0%
0% 0%
42% 20%
1%
This survey was conducted in February through March
2006, with subjects primarily consisting o CIOs and IT de-
partment general managers in listed rms. Responses were
received rom 141 companies. To begin, we will provide an
overview o rms subjected to this survey.
How did these irms assess the results o IT investment?
Figure 6 shows the results o questioning concerning as-
sessment vs. initial expectations or IT investment over
the past three years, both overall and by purpose o use. A
number o respondents reported that the results met their
expectations or the purpose o "strengthening inorma-
tion security and ensuring compliance" and "reducing
operational costs and automating and improving opera-
tions". On the other hand, many respondents also indicated
that their expectations were not met or the purposes o
"speeding up decision-making and visualizing and sharing
inormation" and "increasing sales, improving products
and services, and realizing new business models." In terms
o overall assessments, 30 percent o respondents reported
that their expectations had been met, 56 percent reported
results that were somewhat inadequate, and 10 percent re-
ported results that were clearly inadequate.
Figure 3: Overview o rms subjected to the survey(by industry)
Figure 5: Overview o respondent rms(by annual sales)
Figure 4: Overview o respondents(by no. o employees)
Figure 6: Results o IT investment
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2 - 3. Involvement o Top Executives
(1) Degree o importance given to IT investment
O successul rms, 93 percent reported that top executives
placed clear importance or some importance on IT invest-
ment, while 83 percent o unsuccessul irms reported the
same. Only 28 percent o unsuccessul irms reported that
the top executives placed clear importance on IT investment,
versus 44 percent or successul rms. O unsuccessul rms,
14 percent reported placing little importance on IT invest-
ment.
Figure 7: Degree o importance given to IT investment
(2) Degree o understanding status o IT investment
O successul rms, 79 percent reported that top executives
had a strong understanding or some understanding o thestatus o IT investment, while 57 percent o unsuccessul
rms reported the same. A large percentage o unsuccessul
irms (43%) reported that top executives had little under-
standing o the status o IT investment.
Figure 8: Degree o understanding status o IT i nvestment
(3) In-house communication concerning use o IT
A look at whether top executives communicate the impor-tance o and the companys policies or the use o IT within
the organization showed that the most common response at
both successul and unsuccessul irms was top executives
communicate "rom time to time". While 77 percent o suc-
cessul rms reported that top executives communicate "re-
quently" or "rom time to time," 63 percent o unsuccessul
irms reported the same. A large percentage o unsuccess-
ul rms (37%) reported that top executives "almost never"
communicate such inormation.
Figure 9: In-house communication concerning use o IT
This section introduces survey results or each element shown above in regard to top-executive involvement, business-unit
involvement, and IT-department capabilities. It categorizes rms whose overall assessment o the results o IT investment
met expectations as successul and those reporting results that were somewhat inadequate or clearly inadequate as unsuc-
cessul and examines the dierences in responses between successul and unsuccessul rms.
0% 50% 100%
33% 54% 11% 2%
28%
44%
55%
49%
14% 3%
7% 0%
Overall
Successful
Unsuccessful
Top executives place clear importance on IT investment
Top executives place some importance on IT investment
Top executives place little importance on IT investment
Top executives place almost no importance on IT investment
0% 20% 40% 60% 80% 100%
9% 55% 36%
16%
53%
63%
43%
21%
4%
Top executives have a strong understanding ofthe status of IT investment
Top executives have some understanding ofthe status of IT investment
Top executives have little understanding of the status of IT investment
Overall
Successful
Unsuccessful
0% 20% 40% 60% 80% 100%
6% 60% 33% 1%
6%
7%
57%
70%
37% 0%
21% 2%
Top executives frequently communicate such information Top executives communicate such information from time to time
Top executives almost never communicate such information
No answer
Overall
Successful
Unsuccessful
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(4) Way o involvement in key IT projects
At both successul and unsuccessul rms, large percent-ages o respondents reported that top executives were
involved in key IT projects by "providing direction" and
"making comments." However, while 19 percent o suc-
cessul rms reported that top executives "provide specic
instructions," 12 percent o unsuccessul rms reported top
executives were "rarely" or "almost never involved." Sim-
ply put, it could be said that top executives at successul
rms are more deeply involved in key IT projects.
Figure 10: Top-executive involvement in decision-making on key IT
projects
(5) Alignment between IT investment decision-mak-ing and management strategies
This survey examined the degree to which top executives
consider alignment with management strategies when
making IT investment decisions. O successul irms, 91
percent reported their IT investment decision-making was
"ully aligned" or "somewhat aligned" with management
strategies, while 78 percent o unsuccessul rms reported
the same. While 44 percent o successul irms reported
"ull aligned," a large percentage o unsuccessul irms
(22%) reported "little aligned." These results imply that a
large number o successul rms have better aligned IT in-
vestment decision-making with management strategies.
Figure 11: Alignment between IT investment decision-making andmanagement strategies
(6) Appointment o CIO
Next, the survey examined whether a CIO was appointed.While 53 percent o successul irms reported a "CIO o
managing director rank or higher" or a "CIO o another
rank," 30 percent o unsuccessul rms reported the same.
These results show that the percentage o successul rms
that have appointed CIOs is nearly double that o unsuc-
cessul rms.
Figure 12: Appointment o CIO
0% 20% 40% 60% 80% 100%
31% 50% 18% 1%
25%
44%
53%
47%
22% 1%
9% 0%
Fully aligned
Somewhat aligned
Little aligned
Almost no aligned
Overall
Successful
Unsuccessful
0% 20% 40% 60% 80% 100%
24% 13% 63%
19%
35%
11%
19%
70%
47%
CIO of managing director rank or higher appointedCIO of other rank appointed
No CIO appointed
Overall
Successful
Unsuccessful
0% 20% 40% 60% 80% 100%
11% 40% 40%
6%
19%
42%
37%
39%
42%
9%
2%
7%
1%
0%
2%
1%
3%
Top executives provide specific instructions
Top executives provide direction
Top executives make comments
Top executives are rarely involved
Top executives are almost never involved
No answer
Overall
Successful
Unsuccessful
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Furthermore, a look at the percentages o the activities o
persons appointed as CIOs actually devoted to CIO duties
shows that while 22 percent o successul irms reported
that their CIOs spent 100 percent o their time on CIO du-
ties (i.e., were ull-time CIOs), only 7 percent o unsuc-
cessul rms had ull-time CIOs. The percentage o unsuc-
cessul irms reporting that their CIOs devoted less than
30 percent o their time to CIO duties was very high, at 71
percent. Simply put, more than hal o successul rms had
CIOs and these CIOs had spent more time on CIO duties,
while only 30 percent o unsuccessul rms had CIOs and
they spent less time on CIO duties.
Figure 13: Percentage o CIOs time spent on CIO duties
Requests rom CIOs and IT leaders to top executives
This survey asked respondent CIOs or IT leaders to indicate any requests they had or the top executives in order to improveperormance o IT investments.
Particularly notable in this survey were responses concerning requests or top executives to encourage active involvement by
business units in IT investment projects. This shows the importance o reshaping awareness in business units and the sense ocrisis resulting rom limitations on what IT departments can achieve in this area.
"Business units should be guided to be better owners o IT." (Manuacturing)
"The importance o business units involvement should be communicated to business-unit leaders." (Manuacturing)
"Communicating the use o IT to business units is inadequate." (Manuacturing)
"Proactive communication with business-unit should be encouraged." (Distribution)
"Business units should be instructed to get more involved in IT projects." (Manuacturing)
"Business units should be asked to monitor the expected benefts ater implementation." (Finance)
"Management direction to business units and IT department should be presented on the understanding that business units have re-sponsibility or generating value rom IT investment." (Manuacturing)
"Business units should be asked to make a frm commitment to target results and to take the lead in making improvements on thebasis o post-implementation evaluation." (Manuacturing)
"Participants should be motivated to get more involved in the development process and business units should be motivated to use
the newly developed systems in cutover." (Miscellaneous)We thus see the need to strengthen IT governance, or example by clearly defning the separation o responsibilities betweenbusiness units and IT department across the IT investment process.
"Decision-making process and decision-makers should be defned more clearly." (Manuacturing)
"It should be clarifed who take responsibility or generating value rom IT investments." (Manuacturing)
"A strong support rom the top executives is needed to strengthen IT governance." (Manuacturing)
"Generating greater value rom IT investments requires reviewing both operational processes and rules and procedures. Since the lat-ter depends heavily on management leadership, strong support is needed here." (Manuacturing)
0% 20% 40% 60% 80% 100%
60% 15% 6%
71%
48%
7%
22%
7%
6%
22% 0%
13% 0%
7%
4%4%
4%4%
Overall
Successful
Unsuccessful
Less than 30% 30% ~ 50%
50% ~ 80% 80% or higher100% (full-time) No answer
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2 - 4. Involvement o Business Units
With regard to the involvement o business units, this survey inquired about the degree given to the use o IT in operations,
the degree o involvement in IT projects, the degree o appropriateness o project team members, and personnel evaluations
o project team members.
(1) Degree given to the use o IT in operations
What do business units think about the use o IT in opera-
tions? O successul rms, 100 percent reported that busi-
ness units placed clear importance or some importance on
the use o IT in operations, while 87 percent o unsuccess-
ul rms reported the same. While 56 percent o successul
rms reported that business units placed clear importance
on the use o IT, only 33 percent o unsuccessul rms did.
O unsuccessul irms, 12 percent reported that business
units placed little importance on the use o IT. Thus, busi-
ness units in successul rms placed more importance on
the use o IT in operations.
Figure 14: Business-units awareness o the use o IT in operations
(2) Degree o involvement in IT projects
This survey asked about the degree to which business units
proactively participate in IT projects that they planned or
proposed. O successul rms, 86 percent reported getting
involved "proactively" or "somewhat proactively," while
only 62 percent o unsuccessul rms reported the same.
The percentage o unsuccessul irms that reported par-
ticipating "somewhat passively" stood out at 34 percent.
These results indicate that business units in successul
irms more proactively participate in IT projects than do
those o unsuccessul rms.
Figure 15: Degree o business-unit involvement in IT projects
0% 20% 40% 60% 80% 100%
40% 51% 8% 1%
33%
56%
54%
44%
12% 1%
0%
Overall
Successful
Unsuccessful
Business units place clear importance on the use of IT
Business units place some importance on the use of IT
Business units place little importance on the use of IT
Business units place almost no importance on the use of IT
0% 20% 40% 60% 80% 100%
19% 50% 28% 2%
15%
30%
47%
56% 14%
34% 3%
0%
Proactively
Somewhat proactively
Somewhat passively
Passively
Overall
Successful
Unsuccessful
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(3) Degree o appropriateness o project team members
This survey asked about the degree to which business
units assign appropriate personnel to IT projects that they
planned or proposed. O successul irms, 86 percent re-
ported assigning appropriate personnel "most or all o the
time" or "in the majority o cases," while only 57 percent
o unsuccessul rms reported the same. The percentage o
unsuccessul irms that reported not assigning appropri-
ate personnel "in the majority o cases" was markedly high
at 37 percent. These results indicate that business units in
successul rms assign appropriate project team members
to a higher degree than do those o unsuccessul rms.
Figure 16: Degree o appropriateness o project team members
(4) Personnel evaluations o project team members
Whether business units assign appropriate personnel to IT
projects is also related to the personnel evaluation system.
A look at the results o the survey on this point shows
that while 86 percent o successul rms reported person-
nel evaluations o "appropriate" or "appropriate to some
degree," a somewhat smaller percentage (70 percent) o
unsuccessul irms reported the same. While 30 percent
o successul rms reported personnel evaluations o "ap-
propriate", a markedly smaller percentage (8 percent) o
unsuccessul rms did. In addition, the percentage o un-
successul rms that reported personnel evaluations "un-
avorable to some degree" was high, at 25 percent. These
results indicate that successul rms made more appropri-
ate personnel evaluations on project members than did
unsuccessul rms.
Figure 17: Personnel evaluations o business-unit personnel involved in projects
0% 20% 40% 60% 80% 100%
6% 61% 26%
14%
54%
72%
37%
7%
6%
5%
5%
1%
0%
2%
3%
Overall
Successful
Unsuccessful
Appropriate personnel assigned most or all of the time
Appropriate personnel assigned in the majority of cases
Appropriate personnel not assigned in the majority of cases
Personnel assigned could not be considered appropriate
No answer
0% 20% 40% 60% 80% 100%
15% 60% 18%
30%
62%
56%
25%
5%
3%
2%
9%
4%
2%
0%
8%
Appropriate
Appropriate to some degree
Unfavorable to some degree
Unfavorable
No answer
Overall
Successful
Unsuccessful
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Requests rom CIOs and IT leaders to business units
CIOs and IT leaders have a wide range o requests to business units to get greater beneft rom IT investments.Most notable among requests or business units were those seeking more business-unit involvement in IT investments.
"Business units should take more responsibility or generating value rom IT investments, instead o relying on the IT department or ev-erything." (Manuacturing)
"Business units should emphasize using IT to innovate their operations and bring new ideas IT-enabled business innovation, instead orelying excessively on the IT department or everything." (Manuacturing)
"Business units should get more involved in IT projects with sense o ownership, instead o having IT department take care o everything."(Manuacturing)
"Business units should have more sense o ownership and take more responsibility." (Finance)
"Business units should take responsibility or the return on IT investment." (Manuacturing)
"Business units should be more accountable or the outcome o IT investments." (Distribution)
"Business units should have a strong will to realize the benefts o IT investments." (Manuacturing)
"Business units should view IT as a means to an end and thoroughly ascertain the purpose o IT investment and how such investmentleads to benefts." (Manuacturing)
"Business units should frmly deploy measures to make the most o IT investments." (Manuacturing)
In addition, many CIOs and IT leaders mentioned that project requests submitted by business units should promote IT-enabledbusiness innovation, instead o being oriented only toward running the current operations more eciently.
"Business units should stop submitting project requests intended to achieve short-sighted results centered on matters o convenience."(Manuacturing)
"Business units should minimize project requests aimed at improving convenience." (Finance)
"Business units should request development projects to realize IT-enabled business innovation, instead o requesting projects based onexisting operations." (Manuacturing)
"Business units should promote IT investments coupled with business innovation and business process engineering (BPR), rather thansubmit requests based on simply continuing or improving eciency under the status quo." (Manuacturing)
"Business units should start with through BPR in advance o IT initiatives." (Manuacturing)
"Business units should make proposals based on projects impact on business, rather than simply improving day-to-day operations."(Manuacturing)
"Business units should realize IT-enabled new businesses through partnering with organizations both inside and outside the company,instead o ocusing solely on operational eciency inside the company." (Distribution)
"Business units should propose projects that are aligned with strategic goals and directions o the organization." (Manuacturing, Finance)
Moreover, a number o respondents admit the insucient involvement o their business units in project implementations includingrequirements analysis, review, and testing. Thus, they need more business-unit involvement in the system development phase.
"Business units should be more deeply engaged in IT projects." (Manuacturing, other)
"Business units should be more strongly involved rom the planning and design stages." (Manuacturing)
"Business units should share the tasks o systems development." (Manuacturing)
"Business units should proactively participate in the requirement analysis and testing phases." (Manuacturing)
"Business units should get more involved in project implementation, including requirements analysis and testing." (Finance)
With regard to the personnel rom business units involved in projects, there are strong demands or assigning key personnel andhighly skilled personnel who can take leadership in planning and promoting IT initiatives.
"Business units should assign key personnel who are capable o planning and requirement analysis in the planning phase." (Manuacturing)"Highly capable personnel should be involved in IT projects." (Manuacturing)
"Competent team members should be chosen and assigned or IT project." (Distribution)
"Personnel who can discuss projects in detail should be assigned to participate in meetings." (Finance)
"Personnel capable o implementing operational reorms and who do not consider their involvement to be a temporary assignmentshould be chosen as project team members." (Manuacturing)
In addition, capability to conduct a thorough post-investment verifcation was deemed desirable.
"Results should be measured thoroughly, with a heightened awareness o responsibility." (Distribution)
"Eorts to veriy investment perormance should be strengthened." (Finance)
"A thorough ollow-up assessment is desirable." (Distribution)
"The perormance o IT projects should be verifed thoroughly ater the projects are implemented." (Finance)
Furthermore, there were also requests rom the business units or greater executive involvement and leadership in IT matters andor guidance in reshaping the awareness o the entire business unit.
"Executives in business units should participate more proactively." (Manuacturing)
"General managers o business units should take active part in realizing IT investment perormance, rather than leaving things to theirsubordinates or the IT departments." (Manuacturing)
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0% 20% 40% 60% 80% 100%
26% 20% 34%
31%
16%
20%
21%
31%
37%
5%
9%
7%
6% 3%1%
5%5% 5%0%
2%6%4%1%
1%
Less than 0.5% 0.5% ~ 1.0% 1.0% ~ 2.0%
2.0% ~ 3.0% 3.0% ~ 4.0% 4.0% ~ 5.0%
5.0% or higher No answer
Overall
Successful
Unsuccessful
0% 20% 40% 60% 80% 100%
6% 45% 45% 4%
5%
9%
42%
44%
46% 6%
47% 0%
Clearly adequate
Somewhat inadequate
Clearly inadequate
Excessively inadequate to a degree that hinders operations
Overall
Successful
Unsuccessful
0% 20% 40% 60% 80% 100%
5%
9% 60%
54% 41%
30%
72%19% 9%
Can proactively make proposals
Can discuss relevant matters as equals
Little understanding
Overall
Successful
Unsuccessful
(1) Adequacy o required resources
A look at the percentage share o IT department personnel
in the entire workorce shows that the most common re-
sponse among successul rms was "1.0% or more but less
than 2.0%," given by 37 percent o respondents. O unsuc-
cessul rms, the response "less than 0.5%" and "1.0% or
more but less than 2.0%" were each given by 31 percent o
respondents. In general, it can be said that the percentageshare o IT department personnel in the entire workorce is
lower at unsuccessul rms.
Figure 18: Percentage share o IT department personnel in the entireworkorce
Next, the survey asked about the degree o adequacy o
the numbers o IT department personnel. For both suc-
cessul and unsuccessul irms, approximately 90 percent
o respondents reported that numbers were "somewhat
inadequate" or "clearly inadequate." However, a somewhat
larger percentage o successul rms (9 percent) than un-successul irms (5 percent) reported that numbers were
"inadequate." While no successul rms reported that the
numbers were "excessively inadequate to a degree that hin-
ders operations," 6 percent o unsuccessul rms reported
such. It can be derived rom this observation that while
numbers o IT department personnel are inadequate over-
all, such inadequacy appears to be somewhat more marked
among unsuccessul rms.
Figure 19: Adequacy o required resources
(2) Degree o understanding o business units operations
To what degree do IT departments understand business
units operations? O successul rms, 19 percent reported
having the ability to "proactively make proposals," while 5
percent o unsuccessul rms reported the same. Also, 72
percent o successul irms reported having the ability to
"discuss relevant matters as equals," while 54 percent o
unsuccessul irms reported the same. While 9 percent o
successul rms reported having "little understanding" o
business units operations, 41 percent o unsuccessul rms
reported the same, indicating that unsuccessul rms had
relatively lower degrees o understanding o business unitsoperations.
Figure 20: Degree o understanding o business units operations
2 - 5. Capabilities o IT Department
With regard to IT departments capabilities, this survey inquired about the adequacy o required resources, the degree o un-
derstanding o their operations, exchange o personnel, and management o outside resources.
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0% 20% 40% 60% 80% 100%
69%
64% 13%
16%
11% 5%
9%
5%
7%
7%51%
8%
21% 12%
2%
Overall
Successful
Unsuccessful
Less than 20%
20% ~ 40%40% ~ 60% 60% ~ 80%
80% or higher
0% 20% 40% 60% 80% 100%
70%
61% 7%
5%
13% 9%
9%
6%
7%
2%
2%
12%42% 2%
8%
26% 9%
9%
Overall
Successful
Unsuccessful
Less than 0.5% 0.5% ~ 1.0%
1.0% ~ 3.0% 3.0% ~ 5.0%
5.0% or higher No answer
0% 20% 40% 60% 80% 100%
11%9%12%
43%44%
42%
84%74%
89%
59%70%
53%
70%67%
70%
4%7%
2%
Overall Successful Unsuccessful
Planning
Design
Development
Operation
Maintenance
Not used
(3) Exchange o personnel with business units
Since IT department personnel need specialized techni-cal abilities, it is said to be diicult or IT departments
to exchange personnel with business units. A look at the
percentage o IT department personnel with experience
working in business units shows that the most common
response among both successul and unsuccessul irms
was "less than 20%." However, while the response "40%
or more" was given by 42 percent o successul irms, it
was given by only 15 percent o unsuccessul rms. These
results show that the percentage o IT department person-
nel with experience working in business units is relatively
higher at successul rms.
Figure 21: Percentage o IT department personnel with experienceworking in business units
Next, the survey asked about percentages o personnel
transerred rom IT departments to business units. The re-
sponse "less than 0.5%" was given by an overwhelmingly
high percentage o unsuccessul rms (70 percent), while
only 23 percent o such rms gave the response "1.0% or
higher." From these results, it can be seen that exchange
o personnel between IT departments and business units
is virtually nonexistent at unsuccessul rms. At the same
time, the response "less than 0.5%" was given by only 42percent o successul rms, while 44 percent o such rms
gave the response "1.0% or higher." Although exchange
o personnel between IT departments and business units is
dicult, more successul than unsuccessul rms are mak-
ing such eorts.
Figure 22: Percentages o personnel transerred rom IT departmentsto business units
(4) Management o outside resources
Use o outside resources such as IT vendors has become
commonplace. In this survey as well, the number o com-
panies using no outside resources was extremely small. A
look at the tasks in which such resources are used shows
no major dierences between successul and unsuccessul
rms, with such resources used in the areas o develop-
ment, operation, and maintenance.
Figure 23: Use o outside resources by task
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0% 20% 40% 60% 80% 100%
1%
35%
9% 30%
30%
10%
12% 57%
5%
49%
0%
1%
33%26% 2%
Always enforced Enforced more often than not
Not enforced very often
No standardized vendor-selection criteria
No answer
Overall
Successful
Unsuccessful
0% 20% 40% 60% 80% 100%
38%
43% 43%
47%
13%
15% 0%
1%
35%56% 5%5%
Prepared in-house
Summaries of RFPs are prepared in-house and details prepared by vendors
Prepared by vendors No answer
Overall
Successful
Unsuccessful
0% 20% 40% 60% 80% 100%
16%
23%
18% 33%
33%
20%
22% 29%
16%
28%
0%
1%
35%23% 2%
Always enforced Enforced more often than not
Not enforced more often than enforced
No company development rules or documentation standards
No answer
Overall
Successful
Unsuccessful
Although both successul and unsuccessul rms use outside resources such as IT vendors widely, whether such use is suc-
cessul depends on whether the outside resources are managed appropriately. On this point, this survey asked about the level
o respondents enorcement o vendor-selection criteria, those who prepare requests or proposals (RFPs), enorcement o
development rules and documentation standards, and conclusion o service-level agreements (SLAs).
(4) - 1. Enorcement o vendor-selection criteria
When asked about the degree to which standardized selec-
tion criteria are enorced when choosing vendors, 26 per-
cent o successul rms reported "always" enorcing such
criteria, while 33 percent reported enorcing such criteria
"more oten than not." In contrast, the most common re-
sponse among unsuccessul irms was "no standardized
vendor-selection criteria," given by 57 percent o such
rms.
Figure 24: Enorcement o standardized vendor-selection criteria
(4) - 2. Preparation o requests or proposals (RFPs)
When asked about those who prepare RFPs, 56 percent
o successul irms reported that RFPs are "prepared in-
house," while 35 percent reported that "summaries o RFPs
are prepared in-house and details prepared by vendors." Incontrast, the most common response among unsuccessul
rms was "summaries o RFPs are prepared in-house and
details prepared by vendors," given by 47 percent o such
irms, while 15 percent o such irms reported that RFPs
are "prepared by vendors."
Figure 25: Preparation o RFPs
(4) - 3. Enorcement o development rules and documentation standards
With regard to enorcement o the companys develop-
ment rules and documentation standards to vendors, there
were no major dierences between responses rom suc-
cessul rms and those rom unsuccessul rms. However,
percentages o successul rms reporting that such devel-
opment rules and documentation standards are enorced
"always" or "more oten than not" were somewhat higher
than those o unsuccessul rms.
Figure 26: Enorcement o development rules and documentation
standards
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(4) - 4. Conclusion o service-level agreements (SLAs)
With regard to conclusion o SLAs on projects related tooperations, 26 percent o successul irms reported "al-
ways" concluding such agreements. In comparison, only 8
percent o unsuccessul rms reported "always" concluding
SLAs, and 68 percent reported that SLAs were not conclud-
ed "more oten than concluded."
Figure 27: Conclusion o SLAs on projects related to operations
2 - 6. The PDCA Cycle or IT Investment:Advance Assessment and Follow-up Assessment
0% 20% 40% 60% 80% 100%
8%
9%
14% 23%
25%
59%
68% 0%
44%
4%
21%26%
Always concluded Concluded more often than not
SLAs not concluded more often than concluded
No answer
Overall
Successful
Unsuccessful
0% 20% 40% 60% 80% 100%
34%
56%
40%
35%
49%
54% 12%
9%
11%
Both implemented
Only advance assessment implemented
Neither implemented
Overall
Successful
Unsuccessful
We mentioned earlier that running through the PDCA cycle
or IT investment is required to improve returns on such
investment. In running through the PDCA cycle or IT in-vestment, advance assessment and ollow-up assessment
are both vital. Figure 28 shows the state o implementa-
tion o advance assessment and ollow-up assessment at
respondent irms. O successul irms, 56 percent imple-
mented both advance assessment and ollow-up assess-
ment, and 35 percent implemented only advance assess-
ment. At the same time, only 34 percent o unsuccessul
rms implemented both advance assessment and ollow-up
assessment, while 54 percent implemented only advance
assessment. These results show that while most successul
rms implemented both advance assessment and ollow-up
assessment, most unsuccessul rms implemented only ad-
vance assessment with no ollow-up assessment, showing
that such rms do not run through the PDCA cycle.
Figure 28: State o implementation o advance assessment and ollow-upassessment
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Overall Successful Unsuccessfu
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
72%77%
71%
30%32%
29%
17%9%
20%
20%5%
25%15%
5%18%
2%0%
3%
16%14%17%
5%9%
3%
No clear standards
Inadequate materialsfor making judgments
No personnel capableof making related
decisions
Depends on capabilities
of business unitsIT department has
weak influence
CIO has weakauthority
Decided on the quickthought of top executives
Other
0% 20% 40% 60% 80% 100%
17%
0%8%
27% 50%
51%
20%
27% 5%
8%
3%
Functional Somewhat functional
Somewhat dysfunctional Mostly dysfunctional
49%44%
Overall
Successful
Unsuccessful
In addition, at unsuccessul rms the process o assigningpriorities based on advance assessment does not unction
adequately (see Figure 29). When asked why, although the
number o such rms citing "no clear standards" was over-
whelmingly high, among unsuccessul rms the responses
"business units have strong infuence," "no personnel ca-
pable o making related decisions," and "IT department has
weak infuence" stood out. The numbers o successul rms
giving such responses were extremely small.
Figure 29: Internal assessment o efectiveness o priority-assigna-tion processes
Figure 30: Reasons why priority-assignation processes do not unc-tion adequately
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2 - 7. Conclusion: The Need or Collaborative IT Management
Fiteen characteristics o successul frms
With regard to involvement o top-executives, involve-
ment o business units, and capabilities o IT departments,
a comparison o successul and unsuccessul rms shows
marked dierences between these two categories on the 15
items shown in Figure 31. These 15 points can be reerred
to as characteristics o successul rms.
Categorization o these points shows that successul rms
in terms o IT investment t the ollowing description.
Top executives at successul irms place impor-
tance on IT investment and grasp the complete picture
o the investment. In addition, they communicate to
employees throughout the organization both the im-
portance o and the companys policies or the use o
IT. In making decisions on IT investment, they provide
speciic instructions and ensure alignment o IT in-
vestment with management strategies. Furthermore,
such companies have appointed Chie Inormation O-
cers (CIOs).
Figure 31: Prole o successul rms (summary)
Successulfrms
Unsuccessulfrms
Involvement otop executives
Importance attached to IT investment 93% 83%
The complete picture o IT investment grasped 79% 57%
Matters concerning use o IT communicated requently or rom time to time 77% 63%
Specifc instructions provided in decision-making on IT investment 19% 6%
Alignment o IT investment with management strategies ensured 91% 78%
A CIO has been appointed 53% 30%
Involvement obusiness units
Importance attached to use o IT in operations 100% 87%
Proactive participation in projects 86% 62%
Personnel rom business units involved in projects are mostly appropriate 86% 57%
Personnel evaluations o project team members are appropriate 30% 8%
Capabilities o IT
departments
Can make proposals to business units or discuss IT-related matters as equals 91% 59%
At least 40% o IT department personnel have experience working in business units 42% 15%
At least 1% o IT department personnel are transerred to business units each year 44% 23%
Vendor-selection criteria are enorced more oten than not 59% 31%
RFPs prepared in-house 56% 38%
Notes: Scores for item and item represent ratios of companies that reported placing much weight or some weight on the relevant matter. Scoresfor item represent ratios of companies that reported strong understanding or some understanding of the realities of IT investment. Scores foritem represent ratios of companies that reportedfully alignedorsomewhat alignedwith management strategies. Scores for item representratios of companies that reported participatingproactivelyorsomewhat proactivelyin proposed projects. Scores for item represent ratios ofcompanies that reported assigning appropriate personnelmost or all of the timeorin the majority of cases.
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0%
20%
40%
60%
80%
100%
1
2
3
4
5
6
7
89
10
11
12
13
14
15
Involvement ofbusiness units
Involvement oftop executives
Capabilities ofIT departments Specific instructions provided
in IT investment decision-making
Alignment of IT investmentwith management strategies
ensured
A CIO has been appointed
Importance attached to use ofIT in operations
Matters concerning use of ITcommunicated frequently orfrom time to time
The complete pictures ofIT investment grasped
Successful firms
Unsuccessful firms
Importance attached toIT investment
Proactive participation inprojects
Personnel from businessunits involved in projectsare mostly appropriate
Personnel evaluations ofproject team members areappropriate
Can make proposals tobusiness units or discussIT-related matters as equals
At least 40% of IT departmentpersonnel have experienceworking in business units
At least 1% of IT departmentpersonnel are transferred tobusiness units each year
Vendor-selection criteria areenforced more often than not
RFPs prepared in-house
Figure 32: Prole o successul rms (radar chart)
Business units at successul rms also place im-
portance on making eective use o IT in operations
and proactively participate in projects they have
planned or drated. Furthermore, right personnel rom
business units are appointed as project team members
and their eorts are evaluated appropriately.
IT departments in successul irms can proac-
tively make proposals to business units and can dis-
cuss IT-related matters with them as an equal partner.
At least 40 percent o IT department personnel have
experience working in business units, and at least one
percent o IT sta are transerred to business units
each year. In addition, many such irms apply stan-
dardized vender-selection criteria when choosing ven-
dors and prepare RFPs in-house.
The ollowing radar chart (Figure 32) summarizes the pro-
le o successul rms.
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Collaborative IT management and success rates
These iteen characteristics o successul irms comprisesix characteristics related to involvement o top executives,
our related to involvement o business units, and ve re-
lated to the capabilities o IT departments. Grading each
o these makes it possible to calculate scores on degree o
involvement by top executives, degree o involvement by
business units and capabilities o IT departments. (See Fig-
ure 33.)
A comparison o section scores and average scores or de-
gree o involvement by top executives, degree o involve-
ment by business units, and capabilities o IT departments
makes it possible to separate companies into two groups:
those with scores equal to or above the average and those
with scores lower than the average. Figure 34 shows the
percentages o successul rms (success rates) among rms
whose sections are in the high-scoring group and those
whose sections are in the low-scoring group. A look at this
table shows that the success rate or rms whose IT depart-
ment capabilities scored high was highest at 53 percent. On
the other hand, the success rate at rms with high scores
on degree o involvement by top executives was only
38 percent. These results show that even rms with high
scores on degree o involvement by top executives were
unable to increase their success rates i their scores on de-
gree o involvement by business units and capabilities o
IT departments were low.
Figure 33: Scores by section or measuring degree o collaborative IT management
Degree o involvement
by top executives
Degree o importance attached to IT investment 4
Degree o understanding o the complete picture o IT investment 4
Degree o communication on importance o and policies or use o IT 3
Degree o involvement in key IT-investment projects 5
Degree o alignment o IT investment with management strategies 4
Whether a CIO has been appointed 3
Degree o involvement
by business units
Degree o importance attached to use o IT in operations 4
Degree o involvement in projects 4
Degree o appropriateness o project team members assigned rom businessunits 4
Degree o appropriateness o personnel evaluations o project team membersassigned rom business units 4
Capabilities o IT
departments
Degree o understanding o business unitsoperations 4
Percentage o IT department personnel with experience working in businessunits 3
Percentage o IT department personnel transerred to business units 3
Degree o enorcement o vendor-selection criteria4
Main entity in charge o preparing RFPs 3
Note: Figures at right indicate the highest scores for each item.
Figure 34: Section scores and success rates
ScoreSuccessul
frmsUnsuccessul
frmsSubtotal Success rate
Degree o involvement by
top executives
High 33 54 87 38%
Low 5 36 41 12%
Degree o involvement by
business units
High 35 45 80 44%
Low 3 45 48 6%
Capabilities o IT
departments
High 33 29 62 53%
Low 5 61 66 8%
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Although the success rate or rms whose IT department
capabilities scored high was 53 percent, success rates vary
by degree o involvement by business units and by capa-
bilities o IT departments. For this reason, success rates
need to be analyzed by combining the scores or degree o
involvement by top executives, degree o involvement by
business units, and capabilities o IT departments.
When categorizing rms into our groups (those in which
all three sections have high scores, those in which only
two sections have high scores, those in which only one
section has a high score, and those in which no sections
have high scores), the breakdown o respondent rms is as
shown in Figure 35. Firms in which all three sections have
Topexecutives
Businessunits
ITdepartments
PatternSuccessul
frmsUnsuccessul
frmsSubtotal Success rate
All three sections have
high scores High High High HHH 28 13 41 68%
Only two sections havehigh scores
Low High High LHH 3 4 7 43%
High Low High HLH 1 5 6 17%
High High Low HHL 4 16 20 20%
Only one section has ahigh score
Low Low High LLH 1 7 8 13%
Low High Low LHL 0 12 12 0%
High Low Low HLL 0 20 20 0%
All three sections have
low scores Low Low Low LLL 1 13 14 7%
Total 38 90 128 30%
Successulfrms
Unsuccessulfrms
Subtotal Success rate
All three sectionshave high scores 28 13 41 68%
Only two sectionshave high scores 8 25 33 24%
Only one or nosection has a highscore
2 52 54 4%
Total 38 90 128 30%
high scores accounted or 32 percent o the total, those in
which only two sections have high scores or 26 percent,
those in which only one section has a high score or 31
percent, and those in which no sections have high scores
or 11 percent o the total.
A look at the success rate or each group shows that rms
in which all three sections have high scores had the high-
est success rate, at 68 percent. The success rate or rms
in which only two sections have high scores ell all the
way to 24 percent. Furthermore, the success rates at rms
in which only one or no section has a high score were ex-
tremely low at 4 percent.
26%
31%
11%
32%
All three sectionshave high scores
Only two sectionshave high scores
Only one sectionhas a high score
All three sectionshave low scores
Figure 35: Section score combinations and success rates
Figure 36: Success rates or each o the eight groups
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Figure 36 represents combinations o scores o the three
types o sections and success rates in more detail. This
table shows that success rates among rms in which two
sections have high scores varied according to which sec-
tions these were. The success rate or rms in which both
user and IT departments had high scores was 43 percent
second only to the rate or rms in which all three sections
have high scores. At rms in which only one section has a
high score, i that section was the IT department the suc-
cess rate was 13 percent, while it was zero when that sec-
tion was top executives or business units. When all three
sections had low scores, the success rate was 7 percent.
Although success rates or groups with small sample sizes
should be used only or reerence purposes, these results
can be said to be very interesting.
Low
HighHLH HHH
LLH LHH
68%17%
43%13%
IT departmentcapabilities
high
Success rate
53%
Degree of involvement by business units
Degreeofinvolvementbytop
executives
Low High
Figure 37: Success rates and combinations o IT department scores and other sections scores
As we have already seen, the success rate when the IT de-
partment had a high score was 53 percent. I the other two
sections also had high scores the success rate increased to
68 percent, while i the other two sections had low scores
the rate decreased all the way to 13 percent. (See Figure
37.)
The results o the above analysis imply that in order to im-
prove results o IT investment it is vital to establish collab-
orative IT management, by achieving high scores in terms
o all three o the ollowing: degree o involvement by top
executives, degree o involvement by business units, and
capabilities o IT departments.
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3 - 2. Eorts Common to Companies Succeeding in IT Management Reorms
The results o our interviews with CIOs make it clear that
the ollowing our eorts are common to companies that
have implemented IT management reorms working toward
achieving collaborative IT management. (See Figure 39.)
(1) Reshaping awareness of the three parties through in-vestment management structures
(2) Achieving overall optimization through interaction at
the planning stage
(3) Establishing a structure of responsibilities through
system-ownership scheme
(4) Developing business-savvy IT staff through job rota-
tion
Managementstrategies
Four effortsrequired for ITmanagement
reforms
C
PA D
Businessstrategies
IT strategies
1Reshaping awareness of the three partiesthrough investment management structures
3Establishing a structure of responsibilitiesthrough system-ownership scheme 4
Developing business-savvy IT staff throughjob rotation
2Achieving overall optimization throughinteraction at the planning stage
Topexecutives
Topexecutives
Businessunits
Businessunits
Businessunits
IT depart-ments
IT depart-ments
IT depart-ments
Businessunits IT depart-mentsIT humanresources
Overalloptimization
Roles
Topexecutives
Topexecutives
Figure 39: Eforts required or IT management reorms
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A
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3 - 3. Reshaping Awareness in the Three Parties through Investment Management Structures
In order to improve perormance o IT investments, it is
important to run through the PDCA cycle or IT manage-
ment, with top executives, business units, and IT depart-
ments working in tandem. For this reason, it is desirable
to provide opportunities (meetings) or top executives and
business units to participate in discussions on IT invest-
ment. In act, successul rms have created structures or
managing IT investment that encourage active participa-
tion o top executives and business units. Adopting such
structures makes it possible not only to get top executives
and business units more deeply engaged in IT investment
but also make IT departments more accountable or IT in-
vestment and more closely in line with business units.
To ensure the success o such meetings, it is vital that
communication tools be prepared and that the oice in
charge make meticulous preparations in advance. In par-
ticular, in meetings with top executives present, pertinent
inormation must be communicated in a shared language
understandable to them. Successul rms use tools such as
IT strategy maps and IT-investment perormance metrics to
eectively communicate with top executives.
However, at many companies IT departments are so busy
with their day-to-day operations that they are unable also
to serve as the operational oice or these meetings. In
such a case, it would seem necessary to prepare an orga-
nizational structure in addition to securing the personnel
needed to run through the PDCA cycle in IT investment
management.
At Company A, in order to increase business units
awareness o IT investment, management adopted an ap-
proach three years ago that allows IT investments to be
managed systematically rather than leaving all IT-related
matters up to the IT department. In addition, three com-
mittees were established simultaneously, as ollows: IT
strategy committee, IT investment assessment committee,
and IT asset assessment committee. Over the past three
years, both top executives and business units have gradu-
ally reshaped their IT awareness and have developed an
interest in use o IT and return on IT investment.
At Company B, in order to educate top executives on ITs
strategic impact, an IT strategic plan was ormulated to
meet their midterm management goals and presented to
the board together with the companys IT vision, invest-
ment amounts and other matters. Furthermore, in order to
develop a sense o ownership among business units, an IT
committee was established in which business-unit leaders
participate. This committee meets quarterly to discuss key
projects.
At Company C, an IT planning section was established
separately rom its existing IT department. This newly cre-
ated IT planning section was led by the general manager
o the corporate strategies division who also served as the
CIO. The company also proceeded with preparations or
implementing the PDCA cycle or IT investment, with such
eorts centered on the IT planning section. Speciically,
business units were asked to submit an application or IT
project, which specied inormation such as the need or
new systems and anticipated results. Furthermore, a com-mittee made up o the IT planning section, business units,
and IT departments was established. In this committee, the
purposes and eects o proposed systems are discussed
thoroughly, based on the content o the applications.
At Company E, IT investment projects other than inra-
structure projects are submitted by business units. Invest-
ment projects are deliberated by the IT leadership commit-
tee, where project candidates are evaluated and prioritized
in light o benets o the investment, including quantita-
tive results.
At Company F, an operational eiciency promotion
committee was established ve years ago. This committee
gathers business-unit executives and discusses all IT in-
vestment projects monthly. The results o its deliberations
are reported to the board meeting. The operational e-
iciency committee prioritizes projects and approves or
unding, based on the IT plans prepared by business units,
and it veriies the results o projects ater six months o
cutover.
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C
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3 - 4. Achieving Overall Optimization through Interaction at the Planning Stage
When IT projects are approved on the basis o bottom-up
system proposals, overall optimization cannot be realized
even when running through the PDCA cycle. Successul
irms embrace the approach o thorough interaction be-
tween top executives, business units, and IT departments
at the planning stage, thus leading to better alignment be-
tween corporate, business, and IT strategies. In addition, all
three parties ormulate a common understanding on busi-
ness concepts, structures and processes to realize the con-
cepts (i.e., operational reorms), and IT necessary or these
purposes. The investment management cycle is repeated
or individual investment projects within this ramework.
At Company B, the companys IT plan is broken down
by business unit and both corporate and business-unit IT
plans are explained at the rst meeting o the IT commit-
tee every scal year. Eorts are also made to ensure closer
alignment between midterm corporate plans, IT plans, an-
nual plans, and individual projects.
At Company C, instead o bottom-up system proposals
by business units, the system plans are designed to meet
the midterm management objectives and they are compiledinto an IT strategy map to oster communications with
business-unit executives and leaders. This is intended to
achieve better IT alignment with management strategies as
well as overall optimization.
Company E develops IT plans in addition to midterm
management plans. In ormulating IT plans, each business
unit and the IT department work together to identiy IT
needs and initiatives or the next ve years. Once IT plans
have been approved by the executive committee, they are
broken down into business-unit IT plans. In this way, the
company is able to ormulate IT plans that are properly
aligned with its management plans.
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D
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In order to derive ull value rom IT investments, business
units should proactively participate in projects as system
owners and take responsibility or realizing the beneits
o the investments. However, business units oten lack the
sense o ownership and do not ulll their expected roles
and responsibilities.
For this reason, in such a case management structures
must be changed to ones in which business units perceive
themselves as system owners and can ulll their expected
roles and responsibilities. Many successul rms have im-
proved results by adopting the scheme o system owner-
ship and clariying the roles and responsibilities o system
owners as shown in Figure 40, as well as standardizing
IT-related procedures, standards, and rules. Furthermore,
successul rms are also characterized by appointing busi-
ness-unit executives as system owners and having them
take responsibility or the whole cycle o IT investment
rom proposing IT investment through realizing the ben-
ets o such investment.
Figure 40:Roles o system owners (business units) and IT departments
System owners(business units)
IT departments
Projects requests
Clariying anticipated results
Proposing system projects
Requesting development
Appointing project team members, etc.
Estimating approximate costs
Studying development structure, etc.
Systemdevelopment
Finalizing operational requirements
Confrming external requirements
Implementing test and verifcation
Conducting user training, etc.
Finalizing system requirements
Finalizing schedule, budget, and structure
Preparing o external requirements
Providing test environment, etc.
Cutover/operation
Utilizing the system
Comfeming the stratus o utilization
Veriying and reporting on the results o in-vestment, etc.
Assessing and reporting on developmentquality, cost, and delivery (QCD)
Providing operation services
Managing operational service levels
Veriying and reporting on operationdeliverables
Improvements
Identiying and examining issues
Proposing and implementing improve-ments
Measuring and reporting on results o im-provements, etc.
Identiying and examining issues
Proposing and implementing improve-ments
Measuring and reporting on results o im-provements, etc.
3 - 5. Establishing a Structure o Responsibilities through System Ownership Scheme
Company C has adopted a system ownership structure
and a business-unit executive was asked to take on the re-
sponsibility o the system owner. In this way, the company
attempted to make business units more accountable or the
return on IT investments and to enhance their commitment
to improving the perormance.
Company D has changed the structure and process o IT
project implementation. Under the new structure, business
units were asked to take the project leadership. This was
intended to ensure that the business units were responsible
not only or making project requests but also or devel-
oping and overseeing their systems, and or deriving ull
value rom their investments. At the same time, corporate
policy and guideline or IT use was developed to better
align IT with management plans and was communicated
to business units. This helped achieve overall optimization.
Furthermore, project leaders were appointed rom business
units and the IT department provided support on techni-
cal aspects o the project. Responsibilities are made clear
by appointing leaders on a ull-time basis, and in principle
results must be achieved within two years.
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F
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3 - 6. Developing Business-savvy IT Sta through Job Rotation
Despite the need or IT personnel who can understand both
operations and IT and can plan and promote IT-enabled
operational reorms, ew irms make deliberate eorts to
develop such business-savvy IT personnel. One method
o developing business-savvy IT personnel is to rotate the
sta between IT department and business units. However,
as our survey showed, such job rotation between IT depart-
ment and business units happens rarely.
Successul rms encourage IT sta to be rotated to busi-
ness units or a set o period. Job rotation between IT
department and business units enables IT department to
develop business-savvy IT sta who not only have solid
IT skills but also understand the operations o business
units. On the other hand, such rotation also enables busi-
ness units to develop IT-savvy business sta who can plan
IT-enabled operational reorms and also can develop and
evaluate business and system requirements.
Company D proactively promotes the exchange o IT per-
sonnel with business units in order to help IT sta develop
a deeper understanding o business-unit operations. How-
ever, i personnel transerred rom IT department to busi-
ness units do not return to the IT department, the benetso this exchange o personnel cannot be expected to take
eect. For this reason, sta members transerred to business
units always return to the IT department three years later.
Company F reports that insucient communication be-
tween business units and IT department are caused partly
by IT department sta: the IT department lacks personnel
with an acute sense o business. Furthermore, sta mem-
bers also need to develop the ability to recognize issues,
the ability to propose solutions, and the skills to manage
projects. The company has implemented job rotation and
other sta development methods to develop personnel with
experience both in system development and in business
operations.
Company Gs IT department (an IT subsidiary) had been
virtually in the position o an IT vendor. This position was
changed to one in which the subsidiary would support and
promote the parent companys IT strategies. A member
o Company Gs IT strategy committee was appointed IT
subsidiarys executive, and the operational oce o the IT
strategy committee was let to the IT subsidiary. In addi-
tion, the company plans to exchange personnel between
its business units and the IT subsidiary more proactively inthe uture.
At Company F, business units were requested to share
the responsibility and ownership o projects with the IT
department. In this way, the company adopted a system
ownership structure and specied the roles and responsi-
bilities o the system owners (business units) and those o
the IT department across the IT investment liecycle--rom
proposing IT projects through their development, opera-
tion, verication, and improvement. As the system owner,
the business-unit executive should be accountable or the
results o IT investment. The system owner was asked to
veriy the results ater cutover and to implement measures
to improve the perormance when the results all short o
expectation.
At company G, a system-ownership scheme was adopted
and an IT strategy committee was established to reshape
the awareness o business units. The system owner takes
responsibility or all aspects o the project--rom concept
development through project deinition, development,
and utilization. For projects involving costs o a certain
amount or more, a member o the executive team is ap-
pointed system owner. The IT strategy committee not only
examines IT investment projects and submits them to the
executive committee but also supports the system owners
eorts.
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In conclusion, we will discuss three critical actors needed to ensure the success o IT management reorms.
articulate IT visions, and leading IT investments toward
overall optimization. Leadership is vital to making these
changes real. Even i IT-department general managers are
able to strengthen the capabilities o their sections, it will
be dicult or them to persuade top executives and busi-
ness units to become deeply engaged in IT investments. An
eective means o addressing this challenge is by appoint-
ing a CIO to take leadership in making changes.
A CIO that can take leadership in making changes does
not need to be well-versed in IT, and in act need not even
have any experience in the IT eld. The key ingredients are
a trusted relationship with top executives, strong infuence
on business units, and a wealth o managerial experience.
In act, many CIOs at rms that have succeeded in IT man-
agement reorms have experience as company presidents
at subsidiaries or have backgrounds as general managers
in charge o management planning or operational reorms.
It must not be orgotten that close behind this pressing
need or establishing collaborative IT management is
the enorcement o a Japanese equivalent to the Sarbanes-Oxley Act. Such a law would require companies to improve
their internal controls, with the goal o ensuring the reli-
ability o inancial reports. The proposed law explicitly
mentions IT as one o the undamental elements o internal
controls. The Japanese equivalent to the Sarbanes-Oxley
Act would assume reporting on a consolidated basis, with
all consolidated subsidiaries subject to internal controls.
Implementation o this Japanese equivalent to the Sar-
banes-Oxley Act would lead to urther increases in the im-
portance o overall optimization in group management and
the same holds true or IT investment. For this reason, it is
necessary rst o all to establish an IT investment manage-
ment cycle at the level o individual companies, through
coordination between top executives, business units, and
IT department, and then to work toward development o
collaborative group IT management by expanding
these eorts to the groupwide level. Responding to a Japa-
nese equivalent to the Sarbanes-Oxley Act will provide an
excellent opportunity or companies to proceed with IT
management reorms.
4. Conclusion: Critical Factors of Success in IT Management Reforms
(1) Top-executive involvement in IT reorms
At the beginning o this report, we pointed out the ollow-
ing three undamental actors impeding the success o IT
investment: limitations on local optimization, ambiguities
in responsibility structures, and insuicient development
o business-savvy IT sta. Progress stalls in addressing
these actors when only ew members o top executives
view IT investment as a management issue and take IT re-
orms seriously. No IT management reorm will succeed i
the companys top executives are unaware o the demand
or reorms and i they do not express their commitment to
actively enact such reorms. The rst step toward a compa-
nys success in this area is to examine the present situation
o its IT investments and to make top executives deeply
involved in IT management reorms.
(2) Preparing a road map or change
The road to the goal ocollaborative IT management
diers depending on a companys situation regarding IT
management. For this reason, the company needs to devel-
op a correct understanding o the present situation and to
prepare a reorm road map, one that will take the company
rom its current starting point to the goal o collaborative
IT management.
As discussed in this report, an eective means o examin-
ing the present situation o a companys IT management
begins by breaking down and assessing it in terms o three
parties: top-executive involvement, business-unit involve-
ment, and IT department capabilities. Next, the company
must decide with which party to begin reorms. For ex-
ample, i a companys IT department capabilities are low, it
should initiate the IT department reorms. (See Figure 41.)
However, we must bear in mind that IT department reorms
a