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Dr. Martin Mocker
Research Scientist
Center for Information Systems Research (CISR)
MIT Sloan School of Management
Phone: (617) 253-2348, Fax: (617) 253-4424
mmocker@mit.edu; http://cisr.mit.edu
Microsoft Switzerland Executive Circle Summit
The Value Proposition of the IT Unit of the Future
This research was made possible by the support of CISR sponsors and patrons.
December 4, 2012 in Zurich
IT unit
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Mocker
1
Predicting the future…
Trying to predict the future is like trying to drive down a country road
at night with no lights while looking out the back window.
-- Peter F. Drucker
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Mocker
2
CISR Research Patrons
A.P. Moller Maersk (Denmark)
AECOM
Aetna, Inc.
AGL Energy Limited (Australia)
Akamai Technologies
Allianz Global Corporate & Specialty
Allstate Insurance Co.
AMP Services Ltd. (Australia)
ANZ Banking Group (Australia)
Australia Post
Australian Taxation Office
Banco Bradesco S.A. (Brazil)
Banco do Brasil S.A.
Bank of America
BBVA (Spain)
Bemis Company, Inc.
Biogen Idec
Blue Cross Blue Shield of Massachusetts
BNP Paribas (France)
BP (U.K.)
BT Group (U.K.)
Canada Pension Plan Investment Board
Canadian Imperial Bank of Commerce
Capital One Services, LLC
CareFirst BlueCross BlueShield
Chevron Corp.
CHRISTUS Health
Chubb & Son
Commonwealth Bank of Australia
Credit Suisse (Switzerland)
DWS (Australia)
Encana Corp. (Canada)
Equinox Ltd. (New Zealand)
ExxonMobil Global Services Co.
Fidelity Investments
FOXTEL (Australia)
France Telecom
Holcim Brasil S.A.
Insurance Australia Group
International Finance Corp.
Itaú – Unibanco S.A. (Brazil)
Johnson & Johnson
Leighton Holdings Ltd. (Australia)
Level 3 Communications
ManpowerGroup
Marathon Oil Corp.
MetLife
NASA
Nomura Research Institute, Ltd. (Japan)
Origin Energy (Australia)
Parsons Brinckerhoff
PepsiCo Inc.
Principal Financial Group, Inc.
Raytheon Company
Reed Elsevier
Schneider Electric Industries SAS
Sears Holdings Mgmt. Corp.
Standard & Poor’s
State Street Corp.
Sunoco, Inc.
Swiss Reinsurance Co. Ltd.
(Switzerland)
TD Bank (Canada)
Teck Resources Ltd. (Canada)
Telstra Corp. (Australia)
Tetra Pak (Sweden)
Time Warner Cable
Trinity Health
United States Dept. of Health &
Human Services
United States Postal Service
Unum Group
USAA
VF Corporation
Westpac Banking Corp. (Australia)
Woolworths Limited (Australia)
World Bank
MIT CISR gratefully acknowledges the support and contributions
of its Research Patrons and Sponsors.
CISR Research Sponsors
The Boston Consulting Group, Inc.
EMC Corp.
Gartner, Inc.
IBM Corporation
Microsoft Corporation
Oliver Wyman, Inc.
Tata Consultancy Services
MIT CISR’s Mission
 Founded in 1974, MIT CISR delivers
practical, research-based insights on
how digitization enables enterprises to
thrive in a fast-changing global economy.
 MIT CISR engages its community through
research, electronic research briefings,
working papers, meetings, and executive
education.
2012 MIT CISR Research Projects
Doing Business Digitally
 Strengthening Your Digital
Business Model
 Building Digitized Platforms Can Be Slow:
What Are the Alternatives?
 Digital Innovation: Designing
Customer-centric Products and Services
Redesigning Organizations
for the Digital Economy
 The Next-generation Enterprise: Designing
for an Increasingly Digital Ecosystem
 Case Studies in Social Media Innovations
 BYOD: Radical Changes to Managing
Technology and the People and
Processes Relying on It
 Working Smarter: Seizing the
Opportunities Created by Ubiquitous Data
Rethinking the Role of the IT Unit
 Managing Your Firm’s Total Digitization:
The Next Frontier
 Business Complexity: Shifting IT
from Problem to Solution
 Managing IT Supply and Demand:
How to Build a World-Class
Service Organization
5 Cambridge Center
NE25–7th Floor
Cambridge, MA 02142
Ph. 617-253-2348
Fax 617-253-4424
cisr@mit.edu
http://cisr.mit.edu
© 2012 MIT Sloan CISR
27 September 2012
3
Solutions
Digitized
Platform
As the IT unit’s focus shifts from solutions to platforms…
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
4
… the current value proposition of the IT unit becomes
insufficient
= ENABLE
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
5
The new value proposition emphasizes innovation and
business value
 Building and leveraging
platforms involves a value cycle
rather than the traditional value
chain
– Build: delivering new
technology, process, and
information-based capabilities
– Run: ensuring reliable support
of these capabilities
– Exploit: generating ongoing
business value from capabilities
– Commit: allocating resources
to ensure innovations address
strategic priorities More Concentrated in IT
More Distributed
Business
Value
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
6
IT Units are better at Run and Build than Commit and Exploit
Source: Survey of 75 MIT CISR sponsors, November 3, 2011Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
2,3
3,7
Exploit
4,0
Commit
Build
Run
Label 5,0
2,9
But Run and Build are going away (to partners)
1
Ad hoc,
locally driven
processes
2 3
Some
Enterprise-wide
Repeatable
processes
4 5
Consistently
Executed
Enterprise-wide
processes
7
There are many opportunities to exploit a platform
Digital
Innovation
Exploit
Business
Process
Optimization
Business
Intelligence
• Automating tasks machines
do better than people
• Facilitating collaboration
among knowledge workers
• Making products and services
available electronically
• Data warehousing
and analytics
• Empowering front-line
workers with
information
• Facilitating
meaningful access to
unstructured data
• Design of digital products
and services
• Value-added information
based services
• Enabling “sense and
respond” experiments
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
8
Taking charge of the IT value cycle: Commit
 Commit involves articulating a
company’s strategic vision and
then allocating business and IT
resources to enact that vision.
 Commit requires that
management articulate a
vision in operational terms
 Most firms aren’t very good at
commit
– Only 39% of CIOs rate their
senior executives as effective
in making prioritization
decisions1
 Commit requires very different
thinking about business
strategy
1Source: MIT CISR/BCG survey of 82 CIOs in Fall 2009.
Business
Value
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
9
Committing on one of four operating models
Source: Adapted from Enterprise Architecture as Strategy: Creating a Foundation for Business
Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
BusinessProcessIntegration
HighLow
Low High
Business Process Standardization
Diversification
 Independent business units with
different customers and expertise
 Key IT capability: provide economies
of scale without limiting independence
Coordination
 Unique business units with a need
to know each other’s transactions
 Key IT capability: access to shared
data, through integrated interfaces
Unification
 Single business with global process
standards and global data access
 Key IT capability: enterprise systems
reinforcing standard processes and
providing global data access
Replication
 Independent but similar business
units sharing best practice
 Key IT capability: provide standard
infrastructure and application
components for global efficiencies
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
10
Where IT is in the org chart does NOT matter
– What IT “does” does
Source: J. Ross and C. Beath, “USAA: Organizing for Innovation and Superior Customer
Service,” MIT CISR Working Paper No. 382, December 2010.
President and CEO
4 Additional Shared Services:
People, Finance, Legal,
Communications
Enterprise
Strategy &
Planning
3 Lines of Business:
P&C, FASG, Bank
Member
Experience
Chief Admin
Officer
IT
Enterprise
Strategy
Enterprise
Transformation
Business
Solutions
Innovation
Architecture
Project
Delivery
Enterprise
Business
Services
Business
Applications
Support
IT Operations
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
11
Some practices that help reposition the IT unit for Exploit and
Commit
 Start debates on your enterprise’s most important operational
capabilities
 Focus the IT unit on delivering and exposing business value
 Help IT people learn to say “no” regularly (albeit
diplomatically)
 Seed business functions with IT expertise; seed IT with
business expertise
 Prepare for consumerization and The Cloud—they accelerate
the opportunities for using IT strategically
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Ross
12
Predicting the future…
Trying to predict the future is like trying to drive down a country road
at night with no lights while looking out the back window.
-- Peter F. Drucker
The best way to predict the future is to create it.
-- Abraham Lincoln
Center for Information Systems Research (CISR)
© 2012 MIT Sloan CISR - Mocker

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The value proposition of the IT unit of the future

  • 1. Dr. Martin Mocker Research Scientist Center for Information Systems Research (CISR) MIT Sloan School of Management Phone: (617) 253-2348, Fax: (617) 253-4424 mmocker@mit.edu; http://cisr.mit.edu Microsoft Switzerland Executive Circle Summit The Value Proposition of the IT Unit of the Future This research was made possible by the support of CISR sponsors and patrons. December 4, 2012 in Zurich IT unit Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Mocker
  • 2. 1 Predicting the future… Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window. -- Peter F. Drucker Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Mocker
  • 3. 2 CISR Research Patrons A.P. Moller Maersk (Denmark) AECOM Aetna, Inc. AGL Energy Limited (Australia) Akamai Technologies Allianz Global Corporate & Specialty Allstate Insurance Co. AMP Services Ltd. (Australia) ANZ Banking Group (Australia) Australia Post Australian Taxation Office Banco Bradesco S.A. (Brazil) Banco do Brasil S.A. Bank of America BBVA (Spain) Bemis Company, Inc. Biogen Idec Blue Cross Blue Shield of Massachusetts BNP Paribas (France) BP (U.K.) BT Group (U.K.) Canada Pension Plan Investment Board Canadian Imperial Bank of Commerce Capital One Services, LLC CareFirst BlueCross BlueShield Chevron Corp. CHRISTUS Health Chubb & Son Commonwealth Bank of Australia Credit Suisse (Switzerland) DWS (Australia) Encana Corp. (Canada) Equinox Ltd. (New Zealand) ExxonMobil Global Services Co. Fidelity Investments FOXTEL (Australia) France Telecom Holcim Brasil S.A. Insurance Australia Group International Finance Corp. Itaú – Unibanco S.A. (Brazil) Johnson & Johnson Leighton Holdings Ltd. (Australia) Level 3 Communications ManpowerGroup Marathon Oil Corp. MetLife NASA Nomura Research Institute, Ltd. (Japan) Origin Energy (Australia) Parsons Brinckerhoff PepsiCo Inc. Principal Financial Group, Inc. Raytheon Company Reed Elsevier Schneider Electric Industries SAS Sears Holdings Mgmt. Corp. Standard & Poor’s State Street Corp. Sunoco, Inc. Swiss Reinsurance Co. Ltd. (Switzerland) TD Bank (Canada) Teck Resources Ltd. (Canada) Telstra Corp. (Australia) Tetra Pak (Sweden) Time Warner Cable Trinity Health United States Dept. of Health & Human Services United States Postal Service Unum Group USAA VF Corporation Westpac Banking Corp. (Australia) Woolworths Limited (Australia) World Bank MIT CISR gratefully acknowledges the support and contributions of its Research Patrons and Sponsors. CISR Research Sponsors The Boston Consulting Group, Inc. EMC Corp. Gartner, Inc. IBM Corporation Microsoft Corporation Oliver Wyman, Inc. Tata Consultancy Services MIT CISR’s Mission  Founded in 1974, MIT CISR delivers practical, research-based insights on how digitization enables enterprises to thrive in a fast-changing global economy.  MIT CISR engages its community through research, electronic research briefings, working papers, meetings, and executive education. 2012 MIT CISR Research Projects Doing Business Digitally  Strengthening Your Digital Business Model  Building Digitized Platforms Can Be Slow: What Are the Alternatives?  Digital Innovation: Designing Customer-centric Products and Services Redesigning Organizations for the Digital Economy  The Next-generation Enterprise: Designing for an Increasingly Digital Ecosystem  Case Studies in Social Media Innovations  BYOD: Radical Changes to Managing Technology and the People and Processes Relying on It  Working Smarter: Seizing the Opportunities Created by Ubiquitous Data Rethinking the Role of the IT Unit  Managing Your Firm’s Total Digitization: The Next Frontier  Business Complexity: Shifting IT from Problem to Solution  Managing IT Supply and Demand: How to Build a World-Class Service Organization 5 Cambridge Center NE25–7th Floor Cambridge, MA 02142 Ph. 617-253-2348 Fax 617-253-4424 cisr@mit.edu http://cisr.mit.edu © 2012 MIT Sloan CISR 27 September 2012
  • 4. 3 Solutions Digitized Platform As the IT unit’s focus shifts from solutions to platforms… Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross
  • 5. 4 … the current value proposition of the IT unit becomes insufficient = ENABLE Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross
  • 6. 5 The new value proposition emphasizes innovation and business value  Building and leveraging platforms involves a value cycle rather than the traditional value chain – Build: delivering new technology, process, and information-based capabilities – Run: ensuring reliable support of these capabilities – Exploit: generating ongoing business value from capabilities – Commit: allocating resources to ensure innovations address strategic priorities More Concentrated in IT More Distributed Business Value Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross
  • 7. 6 IT Units are better at Run and Build than Commit and Exploit Source: Survey of 75 MIT CISR sponsors, November 3, 2011Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross 2,3 3,7 Exploit 4,0 Commit Build Run Label 5,0 2,9 But Run and Build are going away (to partners) 1 Ad hoc, locally driven processes 2 3 Some Enterprise-wide Repeatable processes 4 5 Consistently Executed Enterprise-wide processes
  • 8. 7 There are many opportunities to exploit a platform Digital Innovation Exploit Business Process Optimization Business Intelligence • Automating tasks machines do better than people • Facilitating collaboration among knowledge workers • Making products and services available electronically • Data warehousing and analytics • Empowering front-line workers with information • Facilitating meaningful access to unstructured data • Design of digital products and services • Value-added information based services • Enabling “sense and respond” experiments Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross
  • 9. 8 Taking charge of the IT value cycle: Commit  Commit involves articulating a company’s strategic vision and then allocating business and IT resources to enact that vision.  Commit requires that management articulate a vision in operational terms  Most firms aren’t very good at commit – Only 39% of CIOs rate their senior executives as effective in making prioritization decisions1  Commit requires very different thinking about business strategy 1Source: MIT CISR/BCG survey of 82 CIOs in Fall 2009. Business Value Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross
  • 10. 9 Committing on one of four operating models Source: Adapted from Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006. BusinessProcessIntegration HighLow Low High Business Process Standardization Diversification  Independent business units with different customers and expertise  Key IT capability: provide economies of scale without limiting independence Coordination  Unique business units with a need to know each other’s transactions  Key IT capability: access to shared data, through integrated interfaces Unification  Single business with global process standards and global data access  Key IT capability: enterprise systems reinforcing standard processes and providing global data access Replication  Independent but similar business units sharing best practice  Key IT capability: provide standard infrastructure and application components for global efficiencies Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross
  • 11. 10 Where IT is in the org chart does NOT matter – What IT “does” does Source: J. Ross and C. Beath, “USAA: Organizing for Innovation and Superior Customer Service,” MIT CISR Working Paper No. 382, December 2010. President and CEO 4 Additional Shared Services: People, Finance, Legal, Communications Enterprise Strategy & Planning 3 Lines of Business: P&C, FASG, Bank Member Experience Chief Admin Officer IT Enterprise Strategy Enterprise Transformation Business Solutions Innovation Architecture Project Delivery Enterprise Business Services Business Applications Support IT Operations Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross
  • 12. 11 Some practices that help reposition the IT unit for Exploit and Commit  Start debates on your enterprise’s most important operational capabilities  Focus the IT unit on delivering and exposing business value  Help IT people learn to say “no” regularly (albeit diplomatically)  Seed business functions with IT expertise; seed IT with business expertise  Prepare for consumerization and The Cloud—they accelerate the opportunities for using IT strategically Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Ross
  • 13. 12 Predicting the future… Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window. -- Peter F. Drucker The best way to predict the future is to create it. -- Abraham Lincoln Center for Information Systems Research (CISR) © 2012 MIT Sloan CISR - Mocker