This article is the first in a series called The 12 Principles of Agile IT Governance. The series is designed to help board members and senior managers leverage technology excellence as a competitive advantage for their organization. Each article discusses a key principle of agile IT governance and presents tactical measures that allow for deployment of that principle.
Businesses exist to generate shareholder value--and shareholder value can be maximized if stakeholder satisfaction permeates the entire organization. (For the purpose of this article, stakeholders are defined as shareholders, employees and customers.)
The first principle of Agile IT Governance is to focus on stakeholder satisfaction. This can be tactically achieved by taking four steps, which will be discussed in depth below:
Manage shareholder satisfaction with ROI on technology investments.
Improve management's technology quotient.
Ensure that employees feel like they work for a tech-savvy company.
Actively contribute to open source projects and organizing hackathons to improve the company's brand perception in the community.
Step 1: Manage Shareholder Satisfaction with ROI on Technology Investments.
According to Gartner, companies typically spend 3% to 7% of revenue on IT. This allocation is higher for smaller companies (with annual revenue under $250 million) and lower for companies with revenue up to $10 billion.
Most public and private companies tend to have a few large shareholders and then a pool of smaller shareholders. If you agree with the notion that you cannot satisfy what you cannot measure, then it is important to figure out a way to measure shareholder satisfaction with ROI on technology investments. The way to do this is to engage in dialog with your largest shareholders. They have the benefit of breadth in visibility across other companies in which they have invested, so their insight can be priceless. If this dialog shows that you are performing comparatively better, then you are in a better position to deliver shareholder satisfaction.
Measurement tools must be qualitative as well as quantitative. As seasoned board members and executives well know, subjective assessments of performance can often be more powerful than objective measurements. For example, a qualitative survey might yield the insight that shareholders are impressed with your bank's new iPhone app, which, including integration with back-end systems, only cost $1 million to launch. However, shareholders won't even know about the $10 million you spent to migrate a portion of your legacy application infrastructure to the cloud. The ROI on the latter may be significantly greater, but shareholder satisfaction is higher with the former.
Vet quantitative assessment metrics with your largest shareholders and publish them in quarterly or annual reports. Keep the metrics simple and directly tied to a business metric watched closely by investors%mdash;for example, data will be well received if you can articulate how your IT investments impacted EBITDA.
From the Vault: IT Value Metrics: How to Communicate ROI to the Business
Step 2: Improve Management's Technology Quotient.
We live in a world where high IQ is rewarded. When combined with a high Emotional Quotient (EQ), the rewards are significantly greater. But what about TQ--technology quotient? Our world is rapidly evolving to a place where technology will discreetly permeate every aspect of our business and personal lives. In this world, board members and executives with a high TQ will shine.
High TQ managers are cognizant of the impact of Moore's Law on their businesses. They take advantage of technology inflection points to steer their organizations to competitively advantageous positions. For instance, in the near future, GPU computing power on smartphones will let sales reps crunch complex pricing calculations in the middle of a negotiation, and get quick approvals on discounts and deal structures, rather than wait for a multi-day turnaround from the pricing department. Executives who recognize this nascent trend in widely-available GPU computing for business applications will be able to empower their customer-facing employees with tools that will make the competition look extremely dated.
One relatively painless way to improve management's technology quotient is to bring in an expert in one specific area of technology that impacts your business to conduct a monthly brown bag lunch session. The expert can spend 30 minutes talking about the most powerful recent trends in that specific technical area and then ask each executive to provide a two-minute summary of how that technology can potentially solve one of the top three pain points that executive's business unit faces.
The point is not to alleviate pain points at the session itself. Rather, it is to generate ideas by applying the concepts learned and to provide the executive fodder for exploration and education with his technology staff.
Step 3: Make Employees Feel Like They Work For a Tech-Savvy Company.
Forcing traditional BlackBerry use within your company because of its security manageability and workhorse phone status may seem like a good idea--until your competitor releases a custom, internal smartphone app that lets expert staff diagnose and resolve customer issues wherever they are. This means employees can be at their kids' soccer game and solve problems without being the uncool Dad who has to open up a laptop or--worse still--leave the game. This innovation, in turn, impacts customer satisfaction, leading you to find out in Q4 that your competitor has edged you out to win the lion's share of budget for the next fiscal year.
This story often evolves into your competitor extending its lead as a smart adopter of new technologies. This results in a happier workforce and leads to attrition at your company, since your employees are leaving to go work there.
It is therefore critical for board members and senior management to evolve their knowledge of whether employees think their company is tech savvy. Future generations of sophisticated employees are growing up in an untethered work environment where they feel entitled to having all the tools they need to maximize productivity wherever they are, whenever they want. It can be frustrating for them to have tools that they feel constrained their productivity.
Step 4: Contribute to Open-Source Projects and Organize Open Hackathons.
Every company has a list of projects that do not get funded during the annual Capex allocation cycle. Not all of these projects yield a proprietary competitive advantage. Why not crowd-source the business use cases these projects are trying to solve and have friends of the company help solve them? These projects may be a fit for the open source community or, perhaps, an open hackathon with a large financial reward. Given the increasing shortage of qualified programmers, these hackathons could serve as a great way to recruit new talent as well.
In addition to making your business processes more effective and efficient, active participation in the open source community is an inexpensive way to build your company's technical intelligence capabilities--most participants are passionate individuals with extremely advanced programming and teaming capabilities. There is a lot to learn from them. Over time, as your company's contribution impacts various open source projects, your brand will start to garner support from these super-influencers. Soon enough, this support will increase your brand's value in front of the largest audience on earth--the Internet audience.
In conclusion, a sustained focus on stakeholder satisfaction is the foundational principle of agile IT governance. Paying adequate attention to tactical measures to achieve stakeholder satisfaction enables fluid execution. However, it is only the first step. As additional articles in this series will show, you also need to keep those stakeholders motivated, facilitate collaboration among them and give them incentives to achieve success.
Chiranjeev Bordoloi writes about Agile IT Governance for CIO.com and is currently writing a Doctoral Dissertation on the subject. He has served in senior executive roles at both Fortune 500 companies and start-up businesses . Read Bordoloi's blog on AgileITGovernance.com, follow him on Twitter @AgileITGov.
This story, "First key to Agile IT Governance: Stakeholder satisfaction" was originally published by CIO.