Managing IT as a Business: A Survival Guide for CEO's

Overview

"More than a survival guide for CEOs, Managing IT as a Business provides a framework for properly leveraging IT and does so in a concise, well-sourced, and eminently readable format. This book is a must-read for all successful executives!"
?Donard P. Gaynor Former CFO, SVP-HR, CIO, and Reengineering Leader The Seagram Spirits and Wine Group

"Mark Lutchen offers up some important guidance to the CIO on how to bring IT into the mainstream of the business and how the CIO can make the transition from tech guru and ...

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Overview

"More than a survival guide for CEOs, Managing IT as a Business provides a framework for properly leveraging IT and does so in a concise, well-sourced, and eminently readable format. This book is a must-read for all successful executives!"
–Donard P. Gaynor Former CFO, SVP-HR, CIO, and Reengineering Leader The Seagram Spirits and Wine Group

"Mark Lutchen offers up some important guidance to the CIO on how to bring IT into the mainstream of the business and how the CIO can make the transition from tech guru and administrator to a full member of the executive team."
–Marinus N. Henny Vice Chairman and CFO Universal Music Group

"Mark Lutchen thinks like an operating executive. He recognizes that IT costs are a major line item in any corporate budget and that these costs must be viewed as a means to building a business rather than an end. He knows that this happens when CEOs and CIOs communicate effectively. That’s what Managing IT as a Business is all about."
–Kenneth Roman Former Chairman and CEO Ogilvy & Mather Worldwide

"Lutchen’s insights are practical and actionable. In fact, CEOs and other executives traversing the IT minefield will find no more authoritative guide than Managing IT as a Business."
–Paul Turner Executive Vice President and Chief Technology Officer AMS

"Increasingly, CIOs are being asked to join the ranks of top management. In Managing IT as a Business, Mark Lutchen offers CEOs a powerful perspective on how to leverage IT as a strategic tool. For CIOs, he cogently addresses the leadership skills they need to be full and effective members of the business-strategy team."
–Glen Urban Dean Emeritus and Chairman of the Center for eBusiness MIT Sloan School of Management

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Product Details

  • ISBN-13: 9780471471042
  • Publisher: Wiley
  • Publication date: 10/3/2003
  • Edition number: 1
  • Pages: 256
  • Product dimensions: 6.38 (w) x 9.20 (h) x 0.95 (d)

Meet the Author

MARK D. LUTCHEN is the former Global CIO of PricewaterhouseCoopers. In that role he was responsible for reengineering, reconstructing, and integrating the company’s worldwide IT systems during that organization’s massive late ’90s merger. With nearly three decades of operating experience, he has consulted on IT management with numerous Fortune 500 companies and executives. He currently leads PwC’s Business Risk Management Initiative, which provides senior executives with practical strategies to manage IT risks and optimize IT investment and resources.

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Table of Contents

Foreword.

Acknowledgments.

Introduction.

1. Get the CIO on the Executive Team.

2. Link IT Strategy to Corporate Strategy.

3. IT Management Is about Relationship Management.

4. Align the IT Organization Structure with Profitability Drivers.

5. Understand the Real IT Spend.

6. Focus on Outcomes, Not Process.

7. Leveraging Investment Cycles and the Power of Standardization.

8. Talk about Information Technology and Use IT Appropriately so Others Know It Is Important.

9. Information Technology Improvement Never Ends.

Index.

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First Chapter

Managing IT as a Business

A Survival Guide for CEOs
By Mark D. Lutchen

John Wiley & Sons

ISBN: 0-471-47104-6


Chapter One

Get the CIO on the Executive Team

Case Study 1.1

The Chief Information Officer/Executive Reporting Relationship

At a major provider of information and other services, a new executive team had just arrived. The new chief executive officer (CEO) commissioned a complete review of all the company's corporate functions, with an eye toward modernizing and streamlining them to enable and support the customer-service teams in the field more effectively.

The review of the IT function was particularly disturbing to him because it revealed a huge weakness and gap in his ability to propel the company forward along the lines of his strategic plan. Without a chief information officer (CIO), IT was fragmented, unfocused, and uncontrolled.

The new CEO knew he had to appoint a CIO who understood the company's business issues, could build relationships with the key business-unit leaders, and could function as a member of the leadership team. Knowing the personalities of all the company's key executives, he also understood that the new CIO would have to earn his way onto the leadership team. The CEO also struggled with whether to have the new position report directly to himself or to the chief operating officer (COO). He decided he would ask the new CIO, an individual with many years of business experience, about his viewsconcerning the reporting line.

During their discussion, the CEO suggested that he would like to have the CIO report to the COO, to whom the accounting and operations functions also reported. The new CIO raised a number of concerns. He was worried about the perception of this reporting relationship throughout the company and particularly among members of the executive leadership team. How, he wondered, would he get any respect or time from the leadership team if his role, while described as important, was still positioned beneath the leadership team level?

* He was also concerned about whether or not the COO, with whom he had never before worked, shared the CEO's views concerning the importance of IT and of the CIO's role. He would have to work quickly to create a relationship with the COO, and if the COO and the CEO were not on the same page, things could become difficult.

* Finally, he was truly concerned about not having easy access on a regular basis to the CEO and to members of the leadership team. He was afraid he was going to be insulated from the real business issues and would, therefore, not be very effective in executing his goals and responsibilities as CIO. He knew that because of his relationship with the CEO, he could probably gain access to him on short notice; but he was concerned that many members of the executive team would consider his doing that to be an "end run." He also felt that for him to be able to turn the CEO's vision for IT into reality, he needed easy access to the rest of the leadership team as well.

The new CIO proposed the following solution: He would officially report to the COO, but he also wanted to be a full-time, equal member of the leadership team and a full participant in all key business strategy and other meetings. This unique arrangement resonated with all parties.

By behaving like a businessman and working out this compromise, the CIO was able to get his "seat at the table" and reasonable access to the CEO and the rest of the executive team. The leadership team quickly came to view him as a management peer, not just a "techie" from IT, regardless of his official reporting relationship.

He quickly built a very good relationship with the COO, who gave him wide berth in terms of restructuring the IT organization. Because of the open, candid, and collegial working relationship between the COO and CIO, the COO was not concerned that the CIO had access to the CEO and did not fear that the CIO would use that access to go over his head. By focusing on creating ways to work together as business people, the CIO was able to carry out many of the changes that the CEO and senior leadership wanted to implement within the IT organization.

Strong market forces, globalization, and ever-increasing customer demands are causing the world's largest corporations to realize that technology plays an integral, mission-critical role in helping executives to meet key business objectives and, ultimately, to achieve their companies' visions. However, investing in technology that is not used to its fullest potential is wasteful and irresponsible and often indicates a fundamental breakdown in the basic management controls within the organization.

Such investing often occurs when a CIO is not considered to be an influential participant in strategic discussions and when the IT organization is not considered to be integral to the business strategy. The CIOs who are most effective at mapping technology to business goals are those who have the ear and the trust of business-unit leaders and the corporate leadership team. The IT organization needs to be inextricably tied to the business and, to provide true value, it must have the support of corporate and business-unit leadership, from the CEO and board of directors chairperson on down. This is not a simple issue of alignment or linkage; it is more akin to being "joined at the hip."

The CIO's role is becoming ever more complex. In the 1970s and 1980s, the CIO was, essentially, the head of corporate data processing. Today's CIO heads up a business unit that is responsible, in many cases, for maintaining technology infrastructure and communication networks; for upgrading, installing, and training users regarding ever-more-powerful business decision support application software; and for overseeing a program for annually leasing or purchasing hundreds or thousands of new pieces of computing or communication hardware and devices. The CIO's budget for people, maintenance, procurement, new projects, and consulting or outsourcing may run into the hundreds of millions of dollars.

In light of this changing role, what skills should the CIO possess? What are the CIO's primary responsibilities? Where does the CIO sit in relation to other organizational leaders? And finally, what must the CEO do to help develop and nurture the CIO?

* Ideally, company leadership should view the CIO as a valued member of the executive team who advises and demonstrates how technology could be used to achieve the corporation's vision and business objectives. But the CEO's job is to justify how implementing that technology can have a positive impact on realizing the company's vision.

* The CIO should have a front-row seat at all strategic business-planning sessions and advise on the role of technology. But the CIO should not make the final decisions about which technology investments make the most business sense.

* With the CEO, corporate business leaders, and business-unit leaders, the CIO decides which technology options map to the business vision and are good business investments. But the ultimate responsibility for making the business case rests with the various functional and business-unit leaders.

* Involvement of senior business management is critical to the development of an effective technology infrastructure. To achieve this kind of business advantage with technology, the CIO and business leaders must have a comfortable, open, and candid peer-to-peer working relationship, regardless of the reporting structure in place.

WHAT IS THE ROLE OF THE NEW CIO?

In 1999, the executive search firm Korn/Ferry International conducted a survey of 340 CIOs in the United States, United Kingdom, Germany, and France. One of the key trends articulated in this study was that CIOs felt they were-or should be-on the verge of transitioning from a tactical role, where they are involved in the short-term technical planning and implementation of hardware and software, to a strategic role, where they are more involved in corporate planning.

The feeling of many of these CIOs (a feeling I sensed among many of my clients in the late 1990s) was that participation in technology planning for year 2000 (Y2K) systems issues, for the transition to a single European currency, and for the implementation of massive enterprise resource planning (ERP) systems represented the last hurrah of the tactical CIO.

During the late 1990s, much new technology entered the marketplace. The "grocery shopping" method of acquisition-going down all of the aisles and buying one of every product category-hitherto embraced by CIOs became unfeasible. It became clear that CIOs were going to have to begin more rigorously to map technology opportunities to business drivers and corporate goals and that one technology solution could not fit all business profitability drivers.

A new role for the CIO quickly emerged, a role that would require the CIO to:

* Establish, implement, and communicate the strategic IT vision and plan, wedded to the overall business strategy

* Ensure that IT is used effectively to achieve overall business goals related to revenue growth, profitability, and cost effectiveness

* Build and continue to evolve relevant IT skills, capabilities, and teamwork across the enterprise

* Leverage technical expertise and minimize duplication of effort across the enterprise

* Coordinate and drive, where appropriate, IT policy, strategy, standards, common approaches, shared services, and sourcing arrangements throughout the corporation

* Serve as the point person (internally and externally), that is, as the company's single voice for technology.

As Michael Doane, vice president, Professional Services Strategies for META Group, Inc., puts it, "Over-acquisition of applications software from 1995-2001, combined with a slow economy, has led clients into an era of management and consolidation. CIOs are increasingly in search of measurable business value from what is spent on IT. Organizations across the board are not yet doing a very good job of balancing the needs of business and of IT."

Developing and Communicating the Strategic IT Vision and Plan

The strategic IT vision must be crisp, clear, and simple enough for every member of the company to understand without much explanation. It must be easy for executives, managers, IT people, and users throughout the company to remember it and repeat it. However, if it is to resonate with executive management, this vision must be firmly based on a good understanding of the company's underlying business strategies.

Size and volume do not matter with regard to the vision. A good clear vision can be presented on a single sheet of paper or presentation slide. The plan derived from this vision must have depth and substance and must be developed at the right level of detail so that it can be monitored effectively in terms of actions and measurable results.

Finally, both the vision and the plan must be communicated appropriately. The CIO must "walk the talk" with regard to IT, but so, too, must the CEO and other executives. Executives need to be able to articulate the vision to anyone who asks about it and must understand the plan just enough to know that they can trust the CIO to explain the plan in more detail to those who wish or need to know more.

If the CIO is the only person who can articulate the vision, he or she has not done a good job. Conversely, if the executive leaders understand the vision and do not articulate it, they are falling down on their job of providing the CIO with the necessary executive support needed to turn the vision into reality. In many companies that I have worked with, I have seen the creation of outstanding strategic IT visions and plans, but implementation and execution of these has fallen far short because of a failure to communicate them effectively and to achieve ownership across the organization.

Ensuring that IT Is Used Effectively

One of the biggest responsibilities of a corporate CIO is to keep the CEO from allowing inappropriate and sometimes wrong decisions to be made regarding IT spending. Buying technology just for the sake of acquiring the latest and greatest IT toys, or following the fad du jour (FDJ) is not a wise way to spend IT resources.

Often, much of this spending is driven by operating functions or business-unit leaders and their senior marketing or production staff or by semiknowledgeable IT "hobbyists," who hold themselves out as the business unit's technology aficionados. But the CIO must be able to stand up to such people and say, "I have the authority within this company to tell you that this is not an effective use of IT resources. If you feel strongly about this, you need to put it in your budget, and then I'll provide the necessary support for it. But I will not allow this to be dropped in my lap without my peers at the executive level signing off on it."

IT must be appropriate and adequate for the task at hand. Elephant guns should not be used to shoot flies or fly swatters to herd elephants. The right tools for the job may not be what everyone-or even what anyone-is using today or what anyone wants.

Therefore, IT needs must be clearly and carefully defined. Users do not always know what they need or even what they really want. The process of getting users to define their needs clearly is an evolving business analysis issue. IT people need to understand what business objectives users are trying to accomplish and then help them to understand what they are asking for and whether or not there are cost-effective solutions.

Most people date before they marry and test drive a car before they buy one. The same should apply to new IT. Both users and IT professionals should test new IT systems before they are turned on, going slowly and engaging in open communications about expectations and about the realities of the IT being implemented. A good and lasting "marriage" between IT and the business units evolves through a number of stages in a flexible and productive manner.

Building IT Skills and Capabilities

The skills needed in today's IT organization are as varied as those needed in any business unit in the company. All types of skills are necessary, not just technical skills. For IT people to advance, they need to develop capabilities related to project management, financial management, performance measurement, one-on-one and group communications as well as written communications, organizational and people development, and relationship management.

People and the skills they possess are the most important assets of an IT organization. Because of the rapid pace of change in technology, the technical and business analysis skills of each person working in the IT organization must be continually renewed and upgraded.

Continues...


Excerpted from Managing IT as a Business by Mark D. Lutchen Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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  • Anonymous

    Posted June 2, 2004

    Insightful!

    In the fall of 2003, the Harvard Business Review published an article advancing the proposition that 'IT doesn't matter.' The article's author suggested that because IT was now a commodity, and everyone had it, it no longer conveyed any distinctive competitive advantage and therefore, strategically, did not matter. In fact, at many companies, IT doesn't matter as much as it should ¿ not because it is a commodity that other companies also use, but because most companies don't get every potential benefit from their IT. To advance your business agenda effectively, make IT a real part of the business. Author Mark D. Lutchen shows managers, particularly CEOs and CIOs, why IT is not fully a part of business at the moment, and what it will take to turn IT into a competitive, strategic asset. We recommend this useful, well-written, clearly organized book to anyone whose job involves decisions on IT budgets, organization, investments or strategy.

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