SNw 006 Information Technology - The Harshest Judge of Governance?? Created by James on 6/13/2013 2:23:58 PM
This issue detours from the discussion of strategy to highlight a critical factor that requires attention -- I.T. and Governance
Recap
In the last few issues I have outlined the concept of strategy and discussed some factors relating to the determination of strategy. This is a subject that I consider to warrant further attention, however, in the light of some statements at the recent I.T. Governance and Strategy Summit, I thought I would take a detour in this issue to discuss the relationship betwen I.T. investment under performance and corporate governance.
Governance is Care
In the last issue I mentioned that information technology that is not strategically aligned can damage or destroy a business. At the recent I.T. Governance and Strategy Summit a number of presentations were made that both reinforced this view and presented an interesting perspective on corporate and I.T. governance that I found particularly valuable and would like to share with you.
Professor Mervyn King SC, former High Court Judge and author of the King reports on Corporate Governance, was the keynote speaker at the conference and spoke about I.T. Governance and made a number of statements that bear repeating.
Professor King defined governance as being "care", an interesting perspective of governance that ties in closely with my own definition of executive custody being a "parental sense of ownership as in custody in a divorce matter".
Professor King stated that governance includes concern for what can destroy the business and included ultimate responsibility for business success.
He also stated that the Board is responsible for I.T. Systems and posed the question as to whether the Board has effective control of I.T. as "part and parcel" of a strategic view.
From this it is apparent that there is a much greater onus for executives to effectively manage information technology than is frequently recognized. This correlates closely with my own view, expressed in my book "The Critical Factors for Information Technology Investment Success", that executive custody (effective governance) is 25% of what is required for successful I.T. outcomes, whether in terms of daily management or in terms of major projects.
The reference to strategy also ties in closely with my own finding that effective strategic architecture (18%) and effective strategic alignment (16%) are vital requirements for successful I.T. outcomes.
I.T. Failures Will Result in "Enron Like" Corporate Failures
Another speaker at the Summit, Professor Rossouw von Solms from Nelson Mandela University, quoted Richard Nolan of Harvard Business School, writing in Harvard Business Review as saying amongst other things that:
-- "This [I.T.] is an area where boards of directors will be named in stockholder suits"
-- "Senior management is not engaged enough in strategic information technology decisions and situations that could put the company at risk."
-- "Information systems could cause the next outbreak of Enron-like corporate scandals."
-- "I.T. is the next corporate disaster waiting to happen"
I have been suggesting for some years that I.T. failures would, in time, result in Enron like corporate failures and that executive and I.T. professional accountability would ultimately become a statutory matter. These statements confirm this view.
It is only a matter of time before a major I.T. investment failure results in a damages claim of millions if not tens or even hundreds of millions of Rands against a major I.T. service provider or software house.
Interestingly, I recently came across a successful E.R.P. system implementation where the client organization included an attorney on their project team and had the vendor sign off on about "400" documents with the express objective of being able to sue for damages in the event of failure -- the project came in on time and UNDER BUDGET, an exceptional outcome for projects of this nature, but then again, the business invested a year in developing the business case.
I.T. Failure Is At Epidemic Proportions
Those of you who have heard me speak or have read my book will know that I report that 70% of all I.T. investments fail outright. Professor von Solms reported at the Summit a number of failures in high profile international corporations running to over one hundred million dollars each!
The Financial Mail reported some years ago that "19 out of 20 E.R.P. implementations do not deliver what was promised".
Gartner was reported last year as stating that despite substantial investments in Business Intelligence software, "Most organisations are not making better decisions than they did five years go."
I.T. investment failure or non-delivery is clearly at epidemic proportions.
Why?
As presented in my book, the three most significant factors in I.T. investment failure are "I.T. mythology" (30%), lack of executive custody (20%) and lack of strategic alignment (16%).
I.T. mythology is the tendency of people who do not understand computers, and even those who do, to ascribe human like or even supernatural attributes to computers. One of the most serious aspects of I.T. mythology is the tendency of people to expect computers to solve people problems or control people in ways that will mysteriously benefit the business.
Frequently, this expectation represents a serious abdication of authority and responsibility by executives, in other words, poor governance.
Computers Are Dumb Adding Machines
In considering the statements made above, it is vital to recognize that a computer is only a binary adding machine -- even the most powerful and sophisticated computer is very simple and very stupid -- its power comes from its ability to add or switch binary code (0's and 1's) very rapidly and to execute instructions that activate complex electronic components and processes very rapidly.
However, computers only do what human beings tell them to do.
The "magic" of computers lies not in the technology but in the ingenuity and sometimes genius of the human beings who devise the software and software tools that are used on these electronic abacusses. However most of the technology is the consequence of the more mundane efforts of groups of human beings who are fundamentally just as creative as those in any other field of human endeavour.
A complex computer based solution today comprises layer upon layer of human intellect and ingenuity engaged to create solutions that, when viewed in ignorance, seem magical or super human yet which are infinitely inferior to human ability in many respects.
Computers Only Do What They Are Told
Computers only do what they are told -- what some human being identified as possible and so, if human beings use the tool (computer) inappropriately, that can damage or destroy the organization.
Effective strategic capability (analysis, design and execution) coupled with effective strategic corporate governance are essential to creating effective business solutions using information technology.
The Harshest Judge of Governance
Since computers are so reliably and dependably insistent on doing ONLY what they are told to do, they are the harshest possible judge of corporate governance under-performance or failure.
Inadequate corporate governance will frequently result in inadequate corporate I.T. outcomes and point to the need for executives to become more directly involved in the effective use of information technology.
Executives do not need to understand the complexities of the software that runs on the technology, they DO need to constantly keep in mind the limitations of that technology and recognize that it is human beings using the technology NOT the technology that create value.
A pragmatic view of information technology, excellent governance and solid strategic capability (the ability to conceptualize, specify and execute strategic change) are the cornerstones of outstanding information technology outcomes.
Conclusion -- I.T. The Judge of Governance
I hope that the above discussion will assist you to effectively position information technology in your organization.
There is no doubt that there are amazing things that can be done using information technology, yet it requires the business genius of the people who have built the organization to effectively define the role that information technology should play in the organization and then to use the people in the organization to unlock the potential.
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