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The View from the Top: IT and Business Value
Building and Leveraging IT's Assets
Managing Digitized Organizations
Archived Projects
* CISR projects are typically a collaboration of several researchers and often include MIT students.
Achieving Superior Business Value from IT—A Single Framework of What Matters
Leaders: Peter Weill (MIT CISR) and MIT Research Staff
At MIT CISR we are often asked by both IT and non-IT executives, “What are the most important factors to get business value from IT?” In a series of field-based studies, MIT CISR researchers have identified several factors (and associated practices) necessary to achieve superior business value from IT (BVIT), e.g., effective IT governance, strategic IT risk management, IT portfolio management, effective enterprise architecture, the right talent and strong relationships, reusable digitized process and data platforms, and a clearly defined operating model. In this project, we will seek a single framework that brings together these factors, consolidating overlap and identifying the most important points of leverage. We suspect that some management practices are common across multiple factors and offer the opportunity to create a simple, unified model of the necessary conditions for generating BVIT. To identify critical management practices, we will focus on large global firms and ask:
Communicating Effectively about IT Value
Leaders: George Westerman (MIT CISR), Saby Mitra (Georgia Institute of Technology), and Vallabh Sambamurthy (Michigan State University)
CISR research with 253 non-IT executives shows that CIOs who help their business counterparts understand IT unit performance and value are better able to increase the business value they provide. The importance of effectively discussing IT value is even more critical in difficult economic times. While the specific nature of IT value may vary across firms and industries, many successful CIOs have found that quantified metrics can change the nature of the conversation. Yet many firms—both successful and unsuccessful—still rely on “softer” assessments. In this study, we will interview pairs of CIOs and their CxO counterparts in 8-12 industry-leading firms to understand the elements of effective two-way communication about current and potential IT value. We will supplement these interviews with vignettes of six IT turnarounds, in which CIOs successfully helped their units to transition from poor performers to valued enablers of competitive advantage. Research questions include:
Maturing and Globalizing IT Governance
Leaders: Peter Weill (MIT CISR), Christina Soh, and Sia Siew Kien (Nanyang Technical Institute, Singapore)
IT governance is a journey not a destination. New business pressures—global economic downturn, increased globalization, more business agility, new regulations, talent surpluses and shortages, acquisitions—challenge a firm’s IT governance. Effective IT governance is fast, lightweight, global, transparent and integrated with the governance of the other key assets of the firm (e.g., people, relationships, financial). Effective IT governance becomes part of the firm’s DNA and is a source of competitive advantage rather than perceived as a burden and bureaucracy. We will study global IT governance across several levels in the firm: enterprise-wide, region, customer segment, and business unit. For many firms the challenge is to be locally responsive but also capitalize on global scale while ensuring a quality customer experience. These tensions often are played out in the governance processes where competing objectives and incentives must be resolved. Research questions include:
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Managing Business Experiments: Web-based Innovations in Collaboration
Leaders: Wanda Orlikowski and Stephanie L. Woerner (MIT CISR)
In contemporary organizations, work is increasingly performed across geographic, functional, and organizational boundaries. There are a variety of emerging web-based innovations and technologies — including wikis, blogs, social networking sites, visualization tools, and virtual worlds — that can mediate cross-boundary communication and coordination. Recent research suggests that, rather than implementing enterprise-wide web-based collaboration tech-nologies, many organizations are initiating a variety of business experiments to assess the need, use, and value of these emerging technologies. These experiments offer the IT unit the opportunity to gauge the benefits and challenges these technologies may create. Managing business experiments well is critical to the understanding of the costs, benefits, and limitations of emerging web-based technologies. This research project will examine — through interviews and case studies — the nature of various experiments with web-based technologies and focus on how they enable distributed collaboration in practice. Specific research questions include:
Related Publications
Learning from IT Projects: Effective Post-Implementation Reviews
Leaders: George Westerman (MIT CISR) and MIT CISR Staff
For most companies, conducting post implementation reviews (PIRs) is like eating vegetables or exercising regularly. We know they are good for us, but we find it difficult to keep doing them. Research studies consistently show that effective PIRs are the IT unit’s best mechanism for organizational learning about project delivery and harvesting business value. Unfortunately, PIR programs are notoriously difficult to implement or sustain. Previous CISR case studies suggest that effective PIRs require adjustments to many elements of IT management beyond the review process itself, but little is known about specific mechanisms that lead to effectiveness. In this project, we will conduct in-depth case studies of six to eight firms whose are generating significant benefits from their PIR processes, as well as a few firms whose PIR efforts have failed. We will identify elements of successful PIR programs and develop a set of case vignettes that describe the programs in action. Research questions include:
Benchmarks for IT Decision Making
Leaders: Stephanie Woerner (MIT CISR) and MIT CISR Staff
MIT CISR has developed many IT measures based on years of research in firms. These measures describe, among other things, the IT portfolio, enterprise architecture, governance performance, and IT savvy of firms. In an effort to systematically track changes in IT across firms over time, MIT CISR is beginning a project to collect and disseminate data on a variety of these IT measures. Data collection will take place via a survey that will be administered to a large sample of firms—diverse in terms of size, industry, and global location—and results will be shared, initially, with sponsors via research briefings and presentations. We expect to conduct this survey regularly. Questions that we will address include:
Leading the Transition to the Digitized Platform
Leaders: Jeanne W. Ross and Anne Quaadgras (MIT CISR)
Many firms see business process digitization as an opportunity to reduce costs, simplify operations, enhance business agility, and focus their resources on value added activities. A growing number of firms are delivering digitized business processes and platforms globally, introducing shared services, joint ventures, and business process outsourcing (BPO). We will research how firms develop and leverage business process platforms globally and examine the role of process governance both across businesses within the enterprise and between the enterprise and the service provider. We will research the following questions:
Designing and Managing Shared Services
Leaders: Jeanne W. Ross (MIT CISR) and M. Lynne Markus (Bentley University)
In attempting to meet the need for global synergies, many large firms have global shared services organizations. Despite the obvious opportunities for efficiency and best practice, most firms must address legitimate local differences in service requirements, overcome local resistance to global standards, and design roles within the shared services organization to facilitate efficient delivery of interdependent IT products. IT shared services units also force key decisions around sourcing and pricing strategies, and they have significant implications for the development of new IT unit skills. In this research, we will interview IT shared services leaders at twenty-five organizations in four industries. We will address the following research questions:
Managing the Information Explosion
Leaders: Jeanne W. Ross (MIT CISR), Cynthia M. Beath (University of Texas, Austin), and Irma Becerra-Fernandez (Florida International University)
Information technologies are making vast amounts of information more available. On the one hand, firms are acquiring massive amounts of information through enhanced transaction data and rapidly expanding unstructured data (e.g. video, wikis, blogs). The growth of data has outpaced the price/performance improvements that vendors can provide. But the bigger challenges associated with the information explosion are organizational and behavioral. This study examines how firms govern and manage increased information to ensure business value and address new risks. This project is a subset of a larger project run out of the University of California, San Diego, called, “How Much Information?” We will work with that team to address the following questions:
Making Sense of “the Cloud”
Leaders: Sinan Aral (New York University), George Westerman, and Chuck Gibson (MIT CISR)
The internet and a variety of related technologies have served up “cloud” computing and software as a service models. These models offer some promise of software on-demand solutions provided by external experts. To the extent that cloud computing is widely adopted, it offers the potential to fundamentally change how firms invest in IT, how they design their IT units, and, to some extent, how they design their business processes. Early adopters of “the cloud” are primarily small firms or large firms choosing to outsource an isolate and specific application. It is not yet clear if firms should prepare for “cloud” computing as the future of IT service provisioning or if it will retain its more limited role. Better insights into the opportunities and challenges of “cloud” computing may help firms evolve their IT investment and IT staff development practices. MIT CISR, working with researchers at New York University, will begin to examine the promise of “cloud” computing. The questions we will address include:
Managing IT for Efficiency and Growth
Leader: George Westerman
Efficiency and growth are often seen as opposing goals. Methods that enhance one often run counter to achieving the other. However, when asked, IT executives often say their firms need to be able to deliver on both efficiency and growth objectives. Furthermore, complex firms may have units with different goals, and goals can change over time. We have found that four high-level IT capabilities (service delivery, project delivery, IT governance, and CIO-CXO relationships), in different combinations, help firms run the business efficiently, grow the business, or achieve profitable growth. This study will explore critical differences and similarities in how IT leaders actually implement the four IT capabilities for different business objectives. We will also investigate how IT leaders balance these capabilities across complex organizations. Finally, we will investigate how IT capabilities relate to other key organizational processes (capital budgeting, product development, etc.) in firms. We will address the following questions:
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Benchmarking and Building Risk Management Capabilities
Leader: George Westerman
IT risk management has become a top priority for nearly every IT organization. With external threats and regulatory oversight increasing, enterprises need effective risk management capabilities to avoid adverse events, protect their customers' interests and demonstrate their safety to investors. IT leaders need to be able to understand the IT risks facing the enterprise, and communicate these risks effectively to other executives.
In this project, we gathered surveys and case studies with more than 150 organizations to understand drivers of effective IT risk management. We identified the four key enterprise-level IT risks: availability, access, accuracy, and agility. These risks form an important hierarchy that guides how firms approach risk management. We identified three core disciplines of an effective risk management capability.
IT leaders who build an effective capability for IT risk management change the nature of conversations with their business colleagues. Their organizations have lower levels of IT risk, better confidence in their firms' ability to manage risk and better relationships between IT and business units. And, they have more agility to take on challenges other firms would consider too risky. We continue to gather information and publish concepts that help managers understand, communicate, and effectively manage IT risks in their enterprises.
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Business Models
Leader: Peter Weill
As industry boundaries blur, we believe that the concept of business model—what a firm does and how it makes money—is replacing industry as a foundation for business strategy research. A study at MIT, funded in part by the National Science Foundation, classified the business models of the largest 1,000 US firms over the last five years. The study identified four fundamental business models that can be subdivided into 16 more detailed models depending on the asset rights sold by the business. Interestingly, some business models or combinations of models (e.g., IBM and GE have multiple synergistic models) are more successful than others.
The analysis now includes the top 10,000 firms in the US economy over 20 years. In addition we are collecting IT investment and practices data from several firms annually. We continue to address the following questions:
Original work on this project was funded by NSF Grant #IIS-0085725.
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Building Innovative Capabilities through IT
Leaders: George Westerman
CIOs are increasingly being asked to improve the innovativeness of their units and firms. Although many CIOs feel they are not well-positioned to make innovations happen in their enterprises, others are starting to deliver on the challenge. Companies achieving a stream of IT-enabled innovations have embedded processes for identifying potentially useful ideas, proving the worth of these ideas by linking business problems to innovative solutions, and then implementing them effectively. Effective IT innovators build a portfolio of four processes to investigate innovations. They also use a set of tools and roles, such as idea management systems, collaboration tools, and innovation champions, to stimulate more and better innovation. In this research, we propose to extend our previous research by investigating how IT leaders build critical innovation management capabilities and create a culture of innovation. We will identify those efforts that optimize the outcomes of innovation initiatives. Research questions will include:
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Building a Platform for Agility
Leader: Jeanne Ross
We define business agility as the use of existing IT, people, and process capabilities to generate new business value while limiting cost and risk. Earlier research at MIT CISR found that enterprise architecture maturity could enhance organizational agility. This research made the argument that the role of IT in creating business agility was to build a reusable foundation of IT-enabled business processes. The reusable foundation gives a firm the agility to launch new products, introduce business model changes, engage in continuous improvement, and acquire and divest businesses.
In the current research study we will explore how companies are leveraging their digitized process platforms to empower decision making throughout the organization. Agility typically demands rapid decision making, but IT and business leaders have found that accumulating valuable decision making information, making it accessible, and then using it effectively is an enormous organizational challenge. In this study we will explore how companies build the process and information platforms needed to enhance agility. We will address the following questions:
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Enterprise Architecture as Strategy
Leader: Jeanne Ross
We define enterprise architecture as the organizing logic for a firm’s core business processes and IT capabilities to achieve the business standardization and integration requirements of the firm’s operating model. CISR research has observed differing requirements for business process standardization and business process integration depending on how the firm wants to prosper and grow. To achieve those standardization and integration requirements, firms must “mature” their enterprise architectures. CISR has completed 40 case studies and analyzed over 100 surveys from CIOs and senior architects to design frameworks defining four stages of architecture maturity: business silos, standardized technology, process optimization, and business modularity. Firms derive value from each stage by acquiring important learning about how to manage and benefit from IT. This learning is captured in formal IT management and governance processes, allowing a firm to generate increasingly strategic benefits from IT. We continue to tweak the frameworks and analyze surveys to provide insights on how firms reflect their strategic visions in their enterprise architecture and then build out their architectures to achieve their visions.
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IT-Enabled Business Change
Leader: Chuck Gibson
Getting business value from IT has always depended on more than building and deploying technology. It requires behavior change, which in turn requires change in people, process, organization and incentives, and the culture. IT-related change management is the design and execution of changes in these organizational and business factors in concert with new IT systems. Research results to date suggest that a successful change process is highly contingent on local conditions. The same behavioral result of improved sales efficiency may be the goal in two different companies, using the same customer relationship management package, but the management technique, sequence, pace, and investment can vary immensely. Approaches for change leadership may be a top-down or big-bang change to evolutionary change to experimental discovery. For large, multi-year programs of major business transformation, each of these approaches may be needed under different conditions at different times. That is, the approach is contingent on the conditions. Key independent variables predicting the best approach include urgency, such as whether or not there is a the crises, the nature of the program and formal elements of the proposed change in relation to its potential impact on the culture and on the political forces in the organization, and the experience and capability of the change leaders for the change task at hand. Most of this research has been case-based. It has also included a survey testing the contingency approach as applied to changing IT organizational structure.
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Redefining the CIO; Introducing the SEO
Leader: Jeanne Ross & Peter Weill
Prior MIT CISR research has explored the emerging demands on IT organizations and identified models for the IT organization of the future. Our research found that there is not a single vision for IT units going forward. Some IT leaders emphasize the role of IT in cutting total business costs while others emphasize the need for IT to lead business innovation. Some IT units will deliver value by enhancing their technical expertise; others will focus on developing business process expertise. Increased responsibility for enterprisewide processes has led to expanded and more complex CIO roles. In particular, a number of CIOs have taken on a role we dubbed the Strategy Execution Officer (SEO). The SEO provides a single point of accountability for successful implementation of enterprise initiatives. But not all CIOs are poised to become SEOs and not all SEOs have the same job description.
In this continuing project we will analyze different CIO roles and how different CIOs do and should allocate their time. We will contrast CIO and other IT leaders’ priorities with how senior non-IT executives think their CIOs should spend their time. We will also analyze how effective CIOs design their organizations, assign responsibilities to their direct reports, and recruit and train IT and related staff. The objective is to understand alternative designs for the CIO role and IT organization design in the next 3-5 years.
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Enhancing Engagement
Leader: Nils O. Fonstad
Orchestrating synergies across business units requires clearly defined decision rights and accountabilities involving IT and non-IT stakeholder groups from corporate, business unit, and project team levels. A firm's engagement model defines the set of inter-related mechanisms linking individual project outcomes to enterprise goals. An engagement model consists of four groups of mechanisms: company-wide IT governance, project management, internal linking mechanisms, and joint client-vendor governance. Prior MIT CISR research has identified a firm's engagement model as a critical success factor for achieving alignment and coordination across key stakeholder groups within the organization as well as outside of it (e.g., sourcing providers). To keep the set of mechanisms simple, it is important to know when to engage different stakeholders. How does a firm ensure the most appropriate decision makers are linked with each other and are making the right types of decisions?
This year, we will continue to collect and analyze survey and case study data to identify how organizations use mechanisms to achieve a variety of business and IT outcomes. We will address the following questions:
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IT Portfolio Investment Benchmarks, IT Savvy, and Links to Firm Performance
Leader: Peter Weill
Firms have portfolios of information technology (IT) investments, just as investors have portfolios of financial investments. The investment portfolio is a strong business oriented lens familiar to most executives. CISR research found that firms invest in IT to achieve four different management objectives: strategic (to gain competitive advantage), informational (to provide management information), transactional (to process transactions and cut costs) and infrastructural (to provide shared services and integration). Investments in these different objectives behave as different asset classes and have very different risk-return profiles. Just like any other investment portfolio, the IT portfolio must be balanced to achieve alignment with the business strategy and the desired combination of short and long term pay off. Portfolios must also be reweighed when economic conditions or strategies change. We have identified the average and top performing firms’ IT portfolios in several industries and the statistical relationships between IT investment patterns and a wide range of firm performance measures including growth, profit and asset utilization. We continue to collect new IT portfolio data yearly and refine our understanding of the impacts of each asset class on firm performance.
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Strategic Outsourcing
Leader: Jeanne Ross
Strategic sourcing involves allocating responsibility for IT and business processes among both internal and external resources. Firms’ sourcing strategies attempt to leverage resources in a way that simultaneously realizes immediate business objectives and develops internal capabilities critical to future growth. Firms can choose from almost limitless options for locating service delivery, establishing the scope of service requirements, and defining relationships. Early CISR research examined different outsourcing models, based on a firm’s relative interest in business stability versus business flexibility from outsourcing initiatives. We found that firms differ in what activities they outsource and what approach to relationship management they apply depending on the firm’s architecture maturity stages. Later work noted that architecture maturity influences both what types of outsourcing arrangements are most valuable and what value a firm can generate from outsourcing.
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Peter Weill, CISR Chairman, co-authored “Which Business Models are Valued More by Investors, ” CISR Research Briefing, Vol.
VII, No. 2D.
Access the briefing >> (PDF)
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