CIO Best Practices E-Book

Gary Cokins

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: SAS Institute Inc
• Sprache: Englisch

Seitenzahl: 529

Veröffentlichungsjahr: 2010

Beschreibung

CIO BEST PRACTICES Enabling Strategic Value with Information Technology SECOND EDITION For anyone who wants to achieve better returns on their IT investments, CIO Best Practices, Second Edition presents the leadership skills and competencies required of a CIO addressing comprehensive enterprise strategic frameworks to fully leverage IT resources. Filled with real-world examples of CIO success stories, the Second Edition explores: * CIO leadership responsibilities and opportunities * The business impacts of both business and social networking, as well as ways the CIO can leverage the new reality of human connectivity on the Internet * The increasingly inextricable relationships between customers, employees, and their use of personal information technologies * Emerging cultural expectations and standards outside the workplace * Current CRM best practices in terms of the relationship between customer preferences and shareholder wealth * Enterprise energy utilization and sustainability practices--otherwise known as Green IT--with all the best practices collected here, in one place * Best practices for one of the Internet's newest and most revolutionary technologies: cloud computing and ways it is shaping the new economics of business

Leseprobe

Wiley & SAS Business Series

The Wiley & SAS Business Series presents books that help senior-level managers with their critical management decisions.

Titles in the Wiley and SAS Business Series include:

Activity-Based Management for Financial Institutions: Driving Bottom-Line Results by Brent J. Bahnub

Business Analytics: Taking Business Intelligence beyond Reporting by Gert Laursen and Jesper Thorlund

Business Intelligence Competency Centers: A Team Approach to Maximizing Competitive Advantage by Gloria J. Miller, Dagmar Brautigam, and Stefanie V. Gerlach Business Intelligence Success Factors: Tools for Aligning Your Business in the Global Economy by Olivia Parr Rud

Case Studies in Performance Management: A Guide from the Experts by Tony C. Adkins CIO Best Practices: Enabling Strategic Value with Information Technology by Joe Stenzel Credit Risk Assessment: The New Lending System for Borrowers, Lenders, and Investors by Clark Abrahams and Mingyuan Zhang

Credit Risk Scorecards: Developing and Implementing Intelligent Credit Scoring by Naeem Siddiqi

Customer Data Integration: Reaching a Single Version of the Truth by Jill Dyche and Evan Levy

Demand-Driven Forecasting: A Structured Approach to Forecasting by Charles Chase Enterprise Risk Management: A Methodology for Achieving Strategic Objectives by Gregory Monahan

Fair Lending Compliance: Intelligence and Implications for Credit Risk Management by Clark R. Abrahams and Mingyuan Zhang

Information Revolution: Using the Information Evolution Model to Grow Your Business by Jim Davis, Gloria J. Miller, and Allan Russell

Marketing Automation: Practical Steps to More Effective Direct Marketing by Jeff LeSueur

Mastering Organizational Knowledge Flow: How to Make Knowledge Sharing Work by Frank Leistner

Performance Management: Finding the Missing Pieces (to Close the Intelligence Gap) by Gary Cokins

Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics by Gary Cokins

The Business Forecasting Deal: Exposing Bad Practices and Providing Practical Solutions by Michael Gilliland

The Data Asset: How Smart Companies Govern Their Data for Business Success by Tony Fisher

The New Know: Innovation Powered by Analytics by Thornton May

Visual Six Sigma: Making Data Analysis Lean by Ian Cox, Marie A. Gaudard, Philip J.

Ramsey, Mia L. Stephens, and Leo Wright

For more information on any of the above titles, please visit www.wiley.com.

CIO Best Practice

Second Edition

Enabling Strategic Value with Information Technology

Joe Stenzel

Copyright © 2011 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

CIO best practices : enabling strategic value with information technology / [edited by] Joe Stenzel. – 2nd ed.

p. cm. – (Wiley & SAS business series)

Includes bibliographical references and index.

ISBN 978-0-470-63540-7 (cloth); ISBN 978-0-470-91253-9 (ebk); ISBN 978-0-470-91254-6 (ebk); ISBN 978-0-470-91255-3 (ebk)

1. Chief information officers. 2. Information technology-Management. 3. Information resources management. 4. Management. I. Stenzel, Joe.

HD30.2.C55 2011

658.4'038–dc22

2010019067

Contents

Cover

Contents

Series Page

Title Page

Copyright

Preface

CHAPTER 1 EXECUTIVE SUMMARY

CHAPTER 2 EXECUTIVE SUMMARY

CHAPTER 3 EXECUTIVE SUMMARY

CHAPTER 4 EXECUTIVE SUMMARY

CHAPTER 5 EXECUTIVE SUMMARY

CHAPTER 6 EXECUTIVE SUMMARY

CHAPTER 7 EXECUTIVE SUMMARY

NOTE

About the Contributing Authors

CHAPTER 1: Freedom with Fences: Robert Stephens Discusses CIO Leadership and IT Innovation

THE CIO LEADERSHIP PARADOX

THE FENCES

RULES AND INNOVATIVE AUGMENTATION

THE CIO AND ENTERPRISE CULTURE

RADICAL TRANSPARENCY

PROACTIVE RISK PRACTICES

THE CIO AND THE CUSTOMER

THE IT ORGANIZATION

NOTES

CHAPTER 2: Why Does IT Behave the Way It Does?

MAKING SENSE OF IT BUSINESS MANAGEMENT

PUTTING THE PIECES TOGETHER

CHANGING THE WAY IT BEHAVES

NOTES

CHAPTER 3: Cloud Computing and the New Economics of Business

A COMBINATION OF TECHNOLOGIES CREATE CLOUD COMPUTING

SOME WORKING DEFINITIONS OF CLOUD COMPUTING

CLOUD COMPUTING HAS THREE COMPONENT LAYERS

IMPLICATIONS OF THE TRANSITION TO CLOUD COMPUTING

A BUSINESS STRATEGY BASED ON AGILITY

USING THE CLOUD FOR BUSINESS ADVANTAGE

BUSINESS APPLICATIONS WITH THE GREATEST POTENTIAL

CLOUD RISK CONSIDERATIONS

CLOUD COST CONSIDERATIONS

CASE STUDY: SELLING “DESIGNER CHOCOLATES"

DESIRABLE CHARACTERISTICS OF NEW IT ARCHITECTURE

PUBLIC CLOUDS, PRIVATE CLOUDS, AND HYBRID CLOUDS

ISSUES TO CONSIDER WHEN THINKING ABOUT PRIVATE CLOUDS

THE CLOUD IS A PLATFORM FOR MANAGING BUSINESS PROCESSES

AUTOMATE ROUTINE PROCESSES, FOCUS PEOPLE ON HANDLING EXCEPTIONS

FOUR TECHNOLOGIES ENABLE RESPONSIVE BUSINESS PROCESSES

NOTES

CHAPTER 4: Leading with Green: Expanding the CIO’s Role in Eco-Efficient Information Technology Adoption

WHAT IS GREEN IT?

WHO CARES ABOUT GREEN IT?

GREEN IT: A QUICKLY MATURING MANAGEMENT DISCIPLINE

COMMON CHALLENGES PRESENTED BY GREEN

ROLE OF PUBLIC POLICY

ROLE OF THE CIO

RISKS AND COMMON MISTAKES TO AVOID

SUMMARY

NOTES

CHAPTER 5: Sustainability, Technology, and Economic Pragmatism: A View into the Future

SUSTAINABILITY

GLOBALIZATION, DECENTRALIZATION, AND SUSTAINABILITY

FUTURE OPPORTUNITIES FOR IMPROVING GLOBAL IT SUSTAINABILITY

MOBILITY

UBIQUITY: PERVASIVE COMPUTING, UBIQUITOUS SENSORS, AND AD HOC COMMUNICATIONS

ENERGY: SMART BUILDINGS, RENEWABLES, AND CAMPUS SUSTAINABILITY

PHYSICAL SECURITY AND INFORMATION ASSURANCE

INTEGRATING SUSTAINABILITY INTO STRATEGIC PLANNING

THE FUTURE LIES BEFORE US

NOTES

CHAPTER 6: How to Measure and Manage Customer Value and Customer Profitability

THE RISING NEED TO FOCUS ON CUSTOMERS

A FOUNDATION FOR CUSTOMER PORTFOLIO MANAGEMENT

DISTINGUISHING HIGH FROM LOW ECONOMIC CUSTOMER VALUE

MEASURING CUSTOMER LIFETIME VALUE

BALANCING SHAREHOLDER VALUE WITH CUSTOMER VALUE

THE CFO AND CIO MUST SHIFT EMPHASIS

APPENDIX 6A: ACTIVITY-BASED COSTING IS A COST REASSIGNMENT NETWORK

NOTES

CHAPTER 7: Evolution of Networks into Networking

EVOLUTION OF NETWORKS INTO NETWORKING: COMPUTATIONAL, DATA, BUSINESS, AND PERSONAL

ADVANCES IN COMPUTATIONAL AND DATA NETWORKS

ADVANCES IN STORAGE AND DATA NETWORKS

BUSINESS IMPACTS OF BUSINESS NETWORKING

NETWORKING

VIRTUAL WORLDS: SECOND LIFE

DEMOCRATIZATION AND SOCIALIZATION OF INFORMATION

THE WISDOM OF CROWDS?

THE NEW REALITY

ADAPTING TO THE NEW REALITY

ROLE OF IS/IT IN ADAPTING TO THE NEW REALITY

NOTES

About the Editor

Index

End User License Agreement

List of Illustrations

Chapter 1: Freedom with Fences: Robert Stephens Discusses CIO Leadership and IT Innovation

Exhibit 1.1: The Customer Needs Hierarchy

Chapter 2: Why Does IT Behave the Way It Does?

Exhibit 2.1: Carnegie Mellon Computer Science Curriculum

Exhibit 2.2: Growth of the Web

Exhibit 2.3: IT I&O Maturity

Exhibit 2.4: Enterprise Systems Management Tools for Managing IT Infrastructures

Exhibit 2.5: Data Reporting Tool Accessibility

Exhibit 2.6: Hayes and Churchill on Capacity Management

Exhibit 2.7: IT Financial Management Process

Exhibit 2.8: Project Consolidation for Directors and Capacity Managers

Exhibit 2.9: IT Cost Flow Model

Exhibit 2.10: ABM-Extracted OLAP Cube Posted to Dashboard

Exhibit 2.11: Strategic Integration

Exhibit 2.12: Executive Dashboard PM View

Exhibit 2.13: Marketing Automation Drill-Down

Exhibit 2.14: Standard Service Consumption

Exhibit 2.15: Capacity Management Objectives

Exhibit 2.16: Excess Capacity Visualization with the Financial OLAP Cube

Exhibit 2.17: Shared Services Performance Dashboard

Exhibit 2.18: Excess Capacity

Chapter 3: Cloud Computing and the New Economics of Business

Exhibit 3.1: Three Technology Layers of Cloud Computing

Exhibit 3.2: Case Study: Selling Designer Chocolates

Exhibit 3.3: Designing the Network

Exhibit 3.4: Augmenting System Agility

Exhibit 3.5: Interconnected Enterprises

Chapter 4: Leading with Green: Expanding the CIO’s Role in Eco-Efficient Information Technology Adoption

Exhibit 4.1: 30-Day Forecast for Virtualized Server Demand

Exhibit 4.2: Microsoft’s Interactive Environmental Quality Application

Exhibit 4.3: Emerging CIO Leadership Roles for Enterprise Sustainability Goals

Exhibit 4.4: CIO Resources

Chapter 5: Sustainability, Technology, and Economic Pragmatism: A View into the Future

Exhibit 5.1: Total U.S. Energy Consumption by Segment

Exhibit 5.2: Annual U.S. Data Center Electricity Usage

Exhibit 5.3: The Recursive Nature of Calculating Ecological Footprint

Exhibit 5.4: Consolidation of Server Functions through Virtualization

Exhibit 5.5: Hypervisor Virtualization Model

Exhibit 5.6: Container-Based Virtualization Model

Exhibit 5.7: Storage Virtualization Model

Exhibit 5.8: Network Virtualization Model

Exhibit 5.9: Broadband Usage by Fixed and Mobile Segments

Exhibit 5.10: Projected Growth of Broadband Media Elements

Exhibit 5.11: CFRS L3: Resilient Sustainability for Organizations

Chapter 6: How to Measure and Manage Customer Value and Customer Profitability

Exhibit 6.1: Marketing Metrics Decomposition Tree

Exhibit 6.2: A Foundation for Customer Portfolio Management

Exhibit 6.3: The Customer Value Pyramid

Exhibit 6.4: A Segmentation Matrix

Exhibit 6.5: Current vs. Long-Term Potential Customer Value

Exhibit 6.6: Leveraging Customer Lifecycles

Exhibit 6.7: Determinants of CLV

Exhibit 6.8: CLV Value Creation

Exhibit 6.9: CLV Depends on Predictions

Exhibit 6.10: Customer Equity Involves Math

Exhibit 6.11: Calculation of a CLV Can Be Complex!!

Exhibit 6.12: Is CLV Math Really That Difficult?

Exhibit 6.13: Combining Customer Value with Loyalty

Exhibit 6.14: Value and Loyalty Trade-Off Analysis to Optimize Spending

Exhibit 6.15: Use Customer Profitability as a Proxy for CLV?

Exhibit 6A.1: ABC/M Cost Assignment Network

Chapter 7: Evolution of Networks into Networking

Exhibit 7.1: Internet Backbone Bandwidth

Exhibit 7.2: The Technology Ecosystem: Leveraging COTS

Exhibit 7.3: Moore's Law

Exhibit 7.4: IBM 350 Disk Storage Unit

Exhibit 7.5: Magnetic Data Storage Bits per FY 2000 Dollars

Exhibit 7.6: Storage Industry Waves of Change

Exhibit 7.7: Full History Disk Areal Density

Exhibit 7.8: 3.5” Form Factor Hard Disk Drive Performance and Capacity Trends

Exhibit 7.9: Relationship between Social Networking Interaction and Guidance

Exhibit 7.10: Social Media Landscape

Exhibit 7.11: CIOs on Social Network Sites Access at Work

Guide

Cover

Contents

Start Reading

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Preface

Anyone working in information technology today feels the opportunities for creating and enabling lasting value, and the CIO helps define those opportunities and turn them into realities. That's what this book is about. Humanity has discovered an evolutionary tool that allows us to realize our true potential—intellectually, artistically, socially, and above all, creatively. But we must be circumspect as we explore the uses of this new tool that works as an extension of our own minds. Living as we do, on the very edge of an evolutionary horizon that once seemed far away, we must learn to respect the two native forces that have pulled human creativity in opposite directions since the beginning: (1) the drive to understand more about ourselves and our world, and (2) the desire for safety and security. Some part of us craves the entirely new; another part longs to be safe and is uncomfortable with change.

No senior executive feels the disjointed pull of these two forces more than the Chief Information Officer,1 who seeks to create new frontiers of strategic information technology value for the enterprise, while working in an environment of service and stewardship for other people's interests. New strategic frontiers demand that the CIO take bold, decisive risks as new technologies offer competitive opportunities. Service and stewardship responsibilities demand that the CIO also take care of the day-to-day needs of people that depend on more basic information technology resources to perform what the enterprise requires of them.

Other forces distinguish the world of the CIO from executive team peers. More than any other member of the enterprise, the information technology professional works with products and services built according to designs that represent the most current understanding of the ways our world is organized. While people from other functional areas of the enterprise work within organizational structures marginally evolved from the beginning of the industrial age, IT organizations embody the principles that underlie information technology products and services—self-referencing, chaotic, morphogenic systems. The CIO must work to reconcile IT' s more mature, inclusive perspective on the enterprise with the traditional views of peers that prefer the illusory safety and security of departmental silos that use command and control management policies.

Then there' s the matter of the emerging role of the CIO, with its many facets in terms of the myriad expectations of the many people throughout the enterprise, which often boils down to a simple three-word question of focus. Business or technology? This book acknowledges and addresses these factors by incorporating a few basic premises in each chapter.

Premise 1: The business of the IT organization is technology, and the business of the CIO is the business of the enterprise. As such, the best practice CIO works and makes decisions in a realm of strategy, customer value creation, cost and performance management, and outsourcing partnerships while building and maintaining an IT organization that can develop and manage enterprise technology that enables strategy.

Premise 2: As a new executive role with an evolving set of responsibilities and expectations, CIOs cannot prepare themselves to learn what they need to know about the business of the enterprise without the help of non- IT experts. In addition to the chapters written by experienced, practicing CIOs acknowledged for their excellence, this book includes chapters written by performance management, accounting, and customer relationship management experts familiar with leveraging IT value.

Premise 3: The CIO is an investor of enterprise resources accountable for realizing a return on those investments. This premise acknowledges that the rest of the executive team depends on the CIO's specialized understanding and insights of information technology value opportunities. All the chapters discuss how the CIO can realize a return on IT investments—including the investment of IT' s many intangible resources.

Premise 4: All enterprises are unique, and their IT organizations must align to the specific needs of the enterprise. Each chapter includes considerations for small, medium, and large enterprises across all sectors. Inherent in this premise is the understanding that all enterprises have one thing in common: Success depends on the articulation and implementation of a clear business vision and strategy. As such, the IT organization must be aligned with the enterprise vision and strategy so that it can align its products and services to realize strategic objectives. Each chapter discusses ways that the best practice CIO works to align IT products and services to fit enterprise vision and strategy.

Premise 5: All CIOs live and work in a competitive world, and customer relationship management excellence has become one of the most important competitive advantages in all sectors. The chapters in this book consistently address the importance of the IT organization' s internal and external customers, and the book includes an entire chapter on customer relationship management best practices.

Premise 6: There can be no comprehensive treatment of the CIO 's role as leader of the IT organization at this point in the development of this executive office. At the same time, building on Premise 4, there are common elements to CIO best practices that apply to enabling strategic value from IT in any enterprise:

Aligning information technology with evolving business needs, and devising IT strategies that mesh with enterprise strategy

Designing and maintaining an enterprise architecture that reflects and enables enterprise strategy

Organizing, motivating, and managing the IT organization to focus on agile strategy execution and deliver consistently outstanding performance

Strategic cost management practices for IT Finance that transparently reveal the operational costs of IT services to the CIO and IT customers

Strategic performance management practices that align the work of the IT organization with enterprise strategy

Customer relationship management practices that reflect enterprise strategy as the build value for internal and external IT customers

Carefully selected outsourcing relationships managed according to enterprise strategy

Calculating and managing for continuous improvement for the return on investments of tangible and intangible IT resources

CHAPTER 1 EXECUTIVE SUMMARY

Freedom with Fences: Robert Stephens Discusses CIO Leadership and IT Innovation

More often than not, the best practice CIO addresses day-to-day responsibilities with improvisational and extemporaneous solutions. Entrepreneurial innovation and creativity depend on these nontradi-tional, spontaneous executive capacities, but these leadership freedoms must be grounded in the general standards of professional discipline informed by each unique enterprise strategy. Product and service innovation have become increasingly dependent on the ways that information technology gives enterprise decision-makers new ways to develop an ongoing, interactive dialogue with customers through enterprise customer-facing employees. Chapter 1 addresses CIO leadership responsibilities and opportunities that promote ways the IT organization can creatively enable this dialogue between customers and enterprise decision makers while safeguarding brand integrity, assuring information security, and creating competitive advantage.

This chapter explores the CIO 's challenges to promote and lead innovation for the enterprise from within the IT organization in a highly improvisational style—an unrehearsed interview format—with subsequent, relevant, fact-checked examples added to support the extemporaneous insights. In the end, Chapter 1 demonstrates the ways that best practice CIOs work from a grounded set of personal guidelines for self-discipline and inspiration.

CHAPTER 2 EXECUTIVE SUMMARY

Why Does IT Behave the Way it Does? by Bill Flemming

Chapter 2 explores IT performance management practices that align the IT organization and its resources with enterprise strategy. This chapter blends the essential elements of core business management best practices with the cutting-edge technology acumen, and discusses how the best practice CIO integrates these two skill sets. In its current form, performance management is a control mechanism that exerts its influence by aligning employees at all levels of the enterprise through a balanced set of financial and nonfinancial objectives with timely data that tracks progress and promotes better decision making to achieve those objectives. Performance management addresses group behaviors, and this chapter focuses on the ways that informed performance management practices optimize behaviors in the IT organization.

The IT organization is a business within a business for enterprises of any size or industry. Best practice CIOs recognize the ways that the enterprise IT business differs from other functional areas and departments, and they design their performance management systems accordingly. Similarly, within any IT organization, the CIO is responsible for optimizing the performance of a few basic essentials: capacity, service, IT finances, and alignment of IT business resources with enterprise strategy. This discussion examines current IT performance management challenges in the context of historical precedent by articulating the ways that the evolution from mainframe to distributed systems redefines CIO responsibilities for the ways that the IT organization behaves.

CHAPTER 3 EXECUTIVE SUMMARY

Cloud Computing and the New Economics of Business by Michael Hugos

Cloud computing represents one of the Internet 's most revolutionary technologies, with transformative, disruptive influences on the ways that CIOs and their C-suite peers understand enterprise information technology. While best practices are nascent, CIOs who expect to keep their jobs can ' t stand back and wait for the competition to discover and master the competitive opportunities of cloud computing. Chapter 3 is a thorough, deliberate examination of all elements of cloud computing that any CIO must understand to inform and guide the enterprise executive team.

Using a balanced assessment of opportunity and risk, this chapter discusses cloud computing technology, transition considerations, performance and security concerns, and a matrix of cloud computing configurations from which enterprises can choose to optimize their strategic objectives by means of this enabling information technology. While presenting all the technology options, this discussion considers each element of cloud computing practice options in terms of how each makes good business sense in the context of specific IT settings across enterprises of different sizes and industries.

CHAPTER 4 EXECUTIVE SUMMARY

Leading with Green: Expanding the CIO's Role in Eco-Efficient Information Technology Adoption by Randy Betancourt and Alyssa Farrell

Sitting at the center of this book is a discussion of one of the most hotly debated, but potentially significant influence on global IT best practices: enterprise energy utilization and sustainability practices, otherwise known as Green IT. This chapter draws on a 12-member panel of expert contributors that provide the widest possible perspective on IT-related sustainability management, and as in the previous chapters, the presentation focuses on the business case for Green IT. There are as many different perspectives on Green IT best practices as there are regulatory environments, but the best practices are out there, and this chapter collects them into one basket.

With a focus on the business proposition, the discussion begins with examples of Green IT practices as a rapidly maturing and increasingly accepted management discipline. This chapter extends the presentation of IT performance management best practices from Chapter 2 to include essential Green IT metrics. The author and contributing experts also explore emerging Green IT innovations, opportunities and risks, the important role of public policy, and the ways that the best practice CIO and the CIO professional community must proactively engage and shape this emerging IT management discipline, with tremendous regulatory implications, for the enterprise bottom line.

CHAPTER 5 EXECUTIVE SUMMARY

Sustainability, Technology, and Economic Pragmatism: A View into the Future by Jonathan Hujsak

Building on the business case for Green IT presented in Chapter 4, Chapter 5 extends that foundation into a comprehensive discussion of enterprise IT with greater emphasis on the technology and best practice technology management. The CIO and CFO share many similarities in their responsibility profiles as service providers to virtually all enterprise stakeholders. This chapter addresses Green IT in terms of the many hard, measurable facts about the intersection of IT resources with energy and environmental concerns that CIOs must be able to readily access and understand, to develop and articulate the best Green IT practice strategies for their enterprises. Peer executives (especially CFOs), utility providers, vendors, employees, shareholder activists, and other major enterprise stakeholders already have access to these facts, and they increasingly use this information to challenge the executive team strategy.

With a focus on broad, well-developed sustainability best practices deployed by Fortune 500 enterprises around the world, this chapter explores essential definitions, terminology, technologies, employment and telecommunication trends, and security issues that CIOs can use to inform peer decision makers at any stage during the development of enterprise sustainability management practices. Integrating this detailed information, Chapter 5 presents a performance management and strategic mapping model customized for managing the sustainable enterprise.

CHAPTER 6 EXECUTIVE SUMMARY

How to Measure and Manage Customer Value and Customer Profitability by Gary Cokins

In the first edition of CIO Best Practices, CRM was a new competitive advantage. CRM practices have continued to evolve and be refined by the expert use of new information technologies. Three years later, CRM has become a core management practice for the C-suite. In the latest wave of social networking and ubiquitous connectivity, customers are handing CIOs information about their preferences and other sometimes-unsavory behaviors, on a silver platter. All customer behaviors add insight because not all customers are worth the time and effort it takes to please them.

The CIO 's strategic partnership with the CFO has become increasingly essential for enterprise information technology to capture, organize, and leverage investments in the customer. This means that the best practice CIO needs to understand how the CFO and other senior executives translate a wide range of information about customer preferences for their financial resource allocation decisions.

Chapter 6 breaks down CRM into six sections. Parts 1 and 2 address current CRM best practices in terms of the relationship between customer preferences and shareholder wealth as a foundation for understanding customer value and profitability drivers as they relate to focused, targeted marketing delivery systems. Parts 3 and 4 move from customer analytics to deliberations about customer value determinations with a focus on customer costs and measuring lifetime customer value, such that the best practice CIO manages IT and enterprise resources as investments in the customer. Parts 5 and 6 address an increasingly outdated and incorrect senior management perception about the competing interests between shareholder value and customer value. The discussion presents metrics for assessing both customer value and loyalty, and inevitably, the ways that the CIO and CFO must work to provide comprehensive CRM information for the enterprise CMO and Sales Director.

CHAPTER 7 EXECUTIVE SUMMARY

Evolution of Networks into Networking by Karl Schubert

Chapter 7 moves full circle to pick up and more deeply explore a critical new IT development discussed in Chapter 1: The risks and competitive advantages of social networking. Like cloud computing, social networking was born of the Internet, and like so many other facets of information technology, exponential development seems to be the order of the day in terms of the body of information the CIO must digest to responsibly guide the management of this new phenomenon.

This discussion carefully explores the increasingly inextricable relationships between customers, employees, their use of personal information technologies, emerging cultural expectations and standards outside the workplace, and the ways that these factors pose opportunities and risks for the enterprise. With a focus on the business case for participation in social networking forums on both the individual employee and enterprise levels, Chapter 7 explores the business impacts of both business and social networking, the virtual world, the democratization and socialization of information, and ways that the CIO, IT organization, and enterprise can leverage the new reality of human connectivity on the Internet.

NOTE

1. This book uses the term “Chief Information Officer” (CIO) to stand for any title the enterprise might use to designate the leader of its information technology organization, such as Chief Technology Officer, and acknowledges that a person may serve more than one executive role in some enterprises.

About the Contributing Authors

Randy Betancourt (Chapter 4) has more than 25 years of experience with both program development and product management. He currently works as a client support resource for SAS IT Intelligence Group, responsible for the technical and business development of its Green IT initiative. This initiative is a project to refine the instrumentation and data collection techniques used to analyze IT asset utilization.

Randy's previous product management experiences include the expansion of capacity planning and analysis solutions for UNIX environments and network infrastructures. He holds a BA in Political Science and an MA in Public Policy with an emphasis on quantitative analysis from North Carolina State University. He can be contacted at [email protected].

Gary Cokins (Chapter 6) is an internationally recognized expert, speaker, and author in advanced cost management and performance management systems. He is a manager in performance management solutions with SAS Institute (headquartered in Cary, North Carolina), the leader in business analytics software and services, and the largest independent vendor in the business intelligence market (www.sas.com/businessanalytics/index.html). Gary received a BS in Industrial Engineering/Operations Research from Cornell University in 1971 and an MBA from Northwestern University's Kellogg School of Management in 1974. Gary began his career as a financial controller and operations manager for FMC Corporation, and he has been a management consultant with Deloitte, KPMG Peat Marwick, and Electronic Data Systems (EDS).

Gary was the lead author of the acclaimed An ABC Manager's Primer, sponsored by the Institute of Management Accountants (IMA). Gary's second book, Activity-Based Cost Management: Making It Work,was judged by the Harvard Business School Press as "read this book first.” Gary ' s third book, Activity-Based Cost Management: An Executive's Guide, has ranked number one in sales volume of 151 similar books on BarnesandNoble.com. Gary has also written Activity-Based Cost Management in Government and Performance Management: Finding the Missing Pieces to Close the Intelligence Gap. Gary's latest book is Performance Management: Integrating Strategy, Execution, Methodologies, Risk, and Analytics. Gary can be reached at [email protected].

Alyssa Farrell (Chapter 4) supports SAS Sustainability Solutions and works with SAS customers around the world to understand best practices and solutions for managing their business with environmental responsibility in mind (www.sas.com/solutions/sustainability/index.html). She participates in the Corporate Consultative Group of the World Resources Institute and the Green Tech Council of the North Carolina Technology Association, and supports the SAS Executive Sustainability Council—the leadership team that governs the SAS sustainable business practices (www.sas.com/corporate/corpgovernance/csr-report.pdf).

Alyssa regularly speaks with trade associations, analysts, and the press about the opportunities organizations have to effectively manage a sustainable strategy and drive healthy economic growth. Prior to joining SAS, she was a senior consultant in the Deloitte Public Sector practice. In this capacity, she was a project manager for statewide and countywide systems implementations, and was responsible for user acceptance testing, change management and training, and middleware technology selection.

She is a graduate of the Eller College of Management at the University of Arizona, where she earned an MBA with a concentration in Management Information Systems. Alyssa also holds a BA from Duke University, and can be reached at [email protected].

Bill Flemming (Chapter 2) works in a thought leadership position for the SAS Global IT Intelligence practice. As a thought leader in IT management, Bill was a pioneer in applying Activity-Based Management to IT financial management, strategic performance management to IT maturity, and reconciling system management maturity, and IT business alignment. Bill has more than 25 years of experience with both hands-on IT projects and product thought leadership. His current projects include IT Intelligent Scorecarding and IT financial management. He has published and broadcasted extensively about each subject. As a thought leader in IT business management, he embraces the opportunity to effectively manage IT. Bill currently resides in Florissant, Colorado, at 9,000 feet. In his spare time, he extensively mountain bikes and climbs “14ers.”

Michael Hugos (Chapter 3), principal at Center for Systems Innovation [C4SI], mentors teams of business and technical people in practices of business agility and agile systems development, and delivers seminars and management briefings. He previously spent six years as CIO of an $8 billion distribution co-operative, where he developed the suite of supply chain and e-business systems that transformed the company's operations and revenue model. He is a recognized expert in agility and supply chain management. He won the CIO 100 Award in 2003 and 2005, the InformationWeek 500 Award in 2005, and in 2006 he was selected for the Computerworld Premier 100 Award for career achievement.

Michael earned his MBA from Northwestern University' s Kellogg School of Management, and holds an undergraduate degree in Urban Planning and Design from University of Cincinnati. He writes a blog for CIO Magazine titled "Doing Business in Real Time,” and he has authored several books including Business Agility: Sustainable Prosperity in a Relentlessly Competitive World, and the popular Essentials of Supply Chain Management. He can be reached through his Web site at: www.michaelhugos.com.

Jonathan Hujsak (Chapter 5) is head of operations research and a senior principal architect at Balance Energy, a new corporate initiative at BAE Systems North America. Mr. Hujsak has over 30 years of experience in advanced information technology organizations and initiatives at Fortune 500 companies, high-tech startups, nonprofits, universities, and research institutes. He has worked with a wide spectrum of advanced technologies, including distributed data systems, federated search engines, artificial intelligence systems, geospatial information systems, GRID computing, virtualization, cloud computing, telecommunications, e-commerce, transportation systems, space systems, logistics, and factory automation in a spectrum of domains spanning commercial, government, defense, and energy. Mr. Hujsak is currently an architect for next-generation sustainable systems, smart grids, and large-scale demand response and trading systems for the global energy industry. He holds a BS in Electrical Engineering, and attended the PhD program in Applied Physics at the University of California San Diego. Readers who wish to network for further information on topics covered in this chapter are invited to join the LinkedIn networking group titled Sustainable Community Network (www.linkedin.com), or the author can be reached at [email protected].

Dr. Karl Schubert (Chapter 7) is Principal of TechNova Consulting, LLC, providing innovative ideas for technology and management development. He has served as corporate CTO and vice president for Xiotech Corporation, vice president and general manager of Daticon (a Xiotech Company), and chairman of Xiotech India, Ltd. He has a proven track record of developing leading-edge hardware, software, and combined product families and delivering them to existing and new market areas.

Prior to joining Xiotech, Karl served as a technology consultant to start-up companies associated with Austin Ventures, New Enterprise Associates, and Sierra Ventures. As CTO, COO, and Senior VP of Engineering for Zambeel Inc., he was responsible for driving technology, engineering, and operations teams to produce the first enterprise-class, 4D-scalable, NAS subsystem. As VP and CTO of Dell Inc., he architected Dell' s entry into the storage business, and was responsible for guiding the storage practice through its first several billion dollars of revenue. Prior to Dell, Karl spent 14 years with IBM, when he created the company' s OEM open storage subsystems unit.

Karl has been awarded a number of patents for leading-edge technological innovation in storage systems architecture, storage area networks, and other technology areas. He obtained a PhD in Engineering from the University of Arkansas, an MS in Chemical Engineering from the University of Kentucky, and a BS in Chemical Engineering from the University of Arkansas. His most recent book, The CIO Survival Guide, was published by John Wiley & Sons, and he is a guest speaker at professional conferences and a regular panelist in the areas of technology, innovation, and distributed international development. He can be reached at [email protected].

CHAPTER 1Freedom with Fences: Robert Stephens Discusses CIO Leadership and IT Innovation

Founder and Chief Inspector of Geek Squad and Vice President for Best Buy, Robert Stephens is an articulate information technology leader and innovator who feels most comfortable and direct when sharing his insights and experiences by speaking rather than writing. This chapter transcribes a dialogue based on several recorded sessions with the editor. Section headings were subsequently assigned by the editor to indicate changes in the themes of the discussion.

THE CIO LEADERSHIP PARADOX

Joe Stenzel: As an innovative IT entrepreneur with experience in both the arts and engineering sciences, you’re schooled to appreciate the vital balance between the creative dimensions and professional disciplinary standards of CIO leadership expectations and responsibilities. Describe how this apparent paradox plays out in the current information environment.

Robert Stephens: The nature of the game has changed from the perspective of the CIO, especially in the last five years. Some of the rules for IT architecture and design are partially less formal, moving back in the direction of the mainframe, server client, and dumb terminal, but rapid prototyping is the area where innovative playfulness will soon be codified. With the development of mobile applications, smaller screens, and fewer buttons, it will be increasingly important for the CIO to avoid becoming too formal. CIOs will increasingly promote a cultural layer of playfulness within the enterprise and IT organization—a virtual sandbox if you will—as a part of the CIO’s arsenal, point of view, and leadership attitude.

Balance is everything. We have freedom to innovate in play, but it has to be a freedom with fences. There’s always a tendency to equate playfulness with the ignorant or the rule breakers. What about HIPAA? What about Sarbanes-Oxley? Critics will tell us that we can’t playfully innovate while protecting our enterprises. They’re simply wrong. CIOs get paid to help innovate and stretch. IT has become even more central to business success than ever, because the lines between an internal enterprise IT system and a customer-facing experience are diminishing all the time.

We need a balance between the formal discipline and playful innovation that characterizes the CIO, and the metaphor is really the human brain. The more we learn about the brain through functional MRI and PET scans, the more we learn that everybody is creative, everybody is methodical, everybody has varying degrees and kinds of intelligence by which we express our unique gifts—cognitive, emotional, social, ecological, artistic. Much of this is inherited, and the rest is fostered by the environment. The CIO facilitates creation of an innovative environment within the IT organization and the greater enterprise by setting the tone as a disciplined, but innovative, chief executive.

Innovation is art. Balancing is an art. As an inherently playful activity, art shows us the way to creativity and innovation. CIOs have to get things done, but business pressures place the CIO in a position of constant paradox: innovate, but keep the enterprise safe and secure. Business is how we live, and art is why we live. Back and forth, back and forth.

I’m only now coming up with the words to articulate this human intellectual dynamic. Art and playfulness are essential in life, and strategically essential in business. Art is that abstract, shapeless playground from which new ideas spring, and that’s why it’s so relevant to business strategy: processes very quickly become commoditized, copied, and stolen. As Picasso said, “Bad artists copy. Good artists steal.” The CIO has to find a way to help enterprise employees find access to that artistic space where they develop newer, brighter, faster, cheaper forms of products and services. That’s why every art historian should take an engineering class and every engineer should have that art history class—CIOs included.

This suggests that balanced leadership is characterized by highly personal frameworks for understanding disciplined creativity.

I share the conclusions drawn in Richard Florida’s Rise of the Creative Class1 and Daniel Pink’s A Whole New Mind2 about the importance of developing the right-brain, but the message I want CIOs to understand is that everybody has artistic capacity to some degree, especially our employees. I learned two important things in my two short years of art school. Maggie Phillips was a member of one of the first graduating classes from the Institute in the 1920s, a classmate of Georgia O’Keeffe, and my 2-D drawing instructor at the Art Institute of Chicago. She’d walk around us as we were drawing—like a football coach on the sidelines—and she would train us by saying:

Don’t look at your hands. Don’t look at what you’re drawing on the paper, look at what you’re drawing—the real object. Your mind will draw and express the object only as well as it has come to know that object. There is no perfect line except the one you draw without editing, without that parental frontal cortex telling you the “rules.” Ignore that voice.

This is really the job of the artist, and it’s a creative, innovative intuition that I continue to remember as I work to balance the importance of creative freedoms and the inevitable leadership/disciplinary fences inherent in my work with Best Buy and Geek Squad employees and our customers. In technology, there are knowable quantities and things I can control; but in art, where new ideas arise, there are no rules—no forms codifying creativity. I can see how some people would struggle with this notion, but the key for the CIO is to understand how fences and freedoms relate to each other as a leadership function—the form and the formless. From my personal perspective as an artist, I can see how so many people struggle with the question of the relevance of art itself.3 In art and in technology, there are no movements like the Dadaists or Surrealists anymore. All executives can be their own Institutes of Art, and this is certainly true in the world of “Executive-Interpretive Information Technology.” There are no movements anymore. So what new insight am I going to meaningfully contribute to the art world/business world/CIO world?

The balance of freedom with fences includes a very personal element of self-awareness for every CIO. I now see my innovative and creative endeavors as an exercise of self-discovery. What is my style? What kind of employee do I want? What kind of system do I want to build?

The leadership relationship between art, play, innovation, and business world disciplines for the CIO is to unlock the potential of each individual in the enterprise. Some people simply aren’t cut out for management, but make good technical leaders. Many CIOs are not aware of their real gifts in terms of how they can facilitate the enterprise and the IT organization through teaching. In each case, and with each person, a good IT leader recognizes these gifts and places each employee into the roles in which that person can succeed, according to his or her gifts.

This is the quest that preoccupies me now. One of my favorite quotes is from Andy Warhol, whose words released me from my guilt when I dropped out of art school to go back to work at Verlo Mattress Factory in Chicago, where I could make really good money writing software, solving business problems, and seeing results. Andy Warhol said, “Making money is art, and working is art, and good business is the best art.” I learned that I didn’t get the same kind of satisfaction in the art world as I did in business. There is nothing that is ever “done” in art, but in business I know when I’ve made a profit and I know when I haven’t.

I think Warhol was referring to the two faces of creativity—even artists must produce materials, pay the rent, come up with money for paint. He was very overt about the notion that we have to sell ourselves. The more I study Warhol, the more I am amazed at his genius. He seems to fold massive intelligence into what we might mistake for “Pop Art,” but miss incredible, practical insights. His phrase eased my guilt. I realized that I didn’t abandon the true principles of creativity because I wasn’t willing to “suffer” for my art. I’m not selling out; I’m following my bliss. This is part of what helps me reconcile the paradox inherent in freedom with fences, where rules promote creativity and innovation.

THE FENCES

Traditional executive stereotypes often emphasize disciplinary responsibilities, which seems like a good place to begin. Characterize some of the essential ways that the CIO uses information technology to discipline enterprise employees and safeguard enterprise assets.

There are always going to be paradoxes at the intersection of the CIO’s disciplinary and creativity leadership responsibilities, and these paradoxes intensify as search engine technologies evolve. Unlimited information is like limitless imagination. At some point, not only is it frivolous, it becomes counterproductive.

This is a very specific pattern I see in individual employees who say, “I’m having trouble understanding how I will use any of this, and I’m feeling overwhelmed.” They haven’t yet learned that the same degrees of disciplinary power that can be applied to information filtering can be applied to creative, innovative information gathering. This is my challenge. Applying meaningful borders to information allows an employee to consume more content, where more actually means better—on the employee’s own personal terms—and without a sense of being overwhelmed.

Enterprises and their CIOs are learning how to filter information to promote strategically aligned, individual employee decision-making and creativity through a process of natural selection. Examples from our everyday lives are informative here. When you have to get to a meeting, you have to keep track of time, traffic, weather conditions, the status of your car, and so many other factors. All the while, some important element can easily be forgotten as we work to trim all the margins and cut things close. Filtering is simply a set of rules and alternatives, predicted ahead of time, to be managed with information technology. The calendar, clock, and GPS in our mobile phones can talk to Google about road conditions and to our cars about fuel status. Instead of simply beeping at 10:15 to remind me to leave for my meeting, it uses available information to tell me to leave at 10:05 because I need gas, and locates the best station to get the fuel on the way to save me time. That’s filtering. In my experience, most people ask if such an example is even possible, but when you think about it, the pieces are already there.

The next decade of IT will be about anticipating and connecting more and more of these pieces to organize and present filtered, meaningful information. These simple examples show how so much of our personal and work lives are based on if-then statements as the basis for unconscious rules that govern our efficiencies. The work of the CIO in this context is to identify and establish efficiency-and quality-based rules to filter and present relevant information on a real-time basis as employees and customers need it to make informed decisions. Imagine the opportunities for the CIO who sees the ways that IT can connect these relevant pieces. Another simple example: I want to receive a message when FedEx has delivered my package whether or not I sign for it; I want to be notified any time my flight schedule changes. I want these rules and filters as a part of my personal and work life.

Companies also provide these rules and filters to keep their customers. I shop at Menards instead of Home Depot because I know where I can find everything at Menards. The store layout is an enterprise rule for customers; the rule filters and organizes the information I need to find what I want at any Menards location. More and more enterprises use these simple information filters, but the CIO should understand that over time, this filtering power is shifting from the enterprise to the consumer.

Customers increasingly maintain a set of personal, portable information-filtering rules—all their likes and dislikes. Ritz-Carlton knows what kind of newspaper I like, and of course, they have it waiting for me upon my arrival. I’m paying for that now, but when I maintain my own set of rules and I permit companies to read my rules set relevant to my interaction with them (or others), they will automatically want to apply my rules to keep my business. Instead of the rules residing with Ritz-Carlton or Northwest Airlines, they’re going to reside and be managed by me in my account, and I’m going to release them only under another set of relevant rules, not unlike releasing medical records. The filtering system operates on a rule hierarchy, a level of complexity I’m still struggling to solve, but I’m not going to wait for my competition to beat me to it.

The CIO’s role in establishing workplace filtering appropriate to employee needs is essential here. To do otherwise is to assume the irresponsible leadership persona of the maverick who gets all the credit for breaking the rules. Enterprises will increasingly celebrate CIOs who keep more and more productive rules in place. I tell my people several things in this regard. Number one: If you’re innovating and you’re not frustrated, then you’re not innovating hard enough. Frustration is a sign of actual progress, not an indication of problems. Rules, like concrete highway-barriers, take a lot of energy and effort to put in place so that they really work on an enterprise level. I have respect for effective rules because I understand that they do not emerge naturally, but from a great deal of insight and a lot of hard work. These kinds of rules are unnatural; the natural universe does not generate rules without a reason; it doesn’t waste energy, and neither do smart people or enterprises. People tend to take the path of least resistance; good rules conform accordingly. The energy and effort demanded by sustainable rules applies to both setup and maintenance.

What formal management rules might any CIO use to promote employee efficiencies, if not creativity?

There are a few cogent principles about rule management here for CIOs to balance their innovative impulses with disciplinary prudence. Rule One: Understand the origin of each enterprise IT rule and codify the rule’s original purpose. Rules exist, in part, to help us avoid unintended consequences, because individuals so often focus on the linear achievement of a personal goal that may not encompass broader enterprise agendas. CIOs should formally outline rule purposes and their safeguards.

Rule Two: Put an expiration date on every rule. All human rules are temporary by nature, not permanent. Rules are formulated in a specific temporal environment that will change over time, and most rules will eventually need to be updated, replaced, or dismantled. These rule term limits are a check-and-balance system that forces leadership to go back to the polls and review the enterprise IT rules for relevance. Why is this rule here? Why do we still need it? Rules tend to fester unless they are periodically reviewed and refreshed. Before long, they actually promote their own unintended form of culture that insidiously takes on a life of its own and becomes institutionalized. When a rule becomes institutionalized, it ceases to serve its originally healthy regulatory purpose and becomes more like a cancer cell—genetically reprogrammed to grow and dominate healthy systems. Expiration dates are inherently healthy and empowering. They give IT and other employees the chance to keep the CIO honest.

Rule Three: The CIO must be a reluctant rule-maker who strives for brevity and design simplicity. This is probably the most creative of the three rules. Look at Google’s start page compared to the visual noisiness of Yahoo and AOL. You might say that Google is the unorthodox one, and you’d be right; but Google maintains a different orthodoxy, where less is more. They’ve violently resisted any changes to that page, and we now see it as a harbinger of clean design. Following this third rule, CIOs should select new rules according to high standards such as federal privacy laws, where conditions are explicit.

When the enterprise can meet these conditions, subject to thorough review, a best practice CIO will favor breaking rules while obeying them. This means that employees can only break a rule by meeting strict criteria, and the CIO should carefully encourage this practice. There’s also an extension of the second rule inherent in Rule Three, when one considers IT or enterprise policy as a rule-based system. If Twitter has taught us anything, it’s taught us to keep it simple, because policy-creep is so prevalent. Constraints become the key to creativity. Twitter’s 140-character limit is the source of its power. It hasn’t constrained Twitter at all, and the worst thing that could happen would be for them to eliminate that constraint. We’d be left with another form of email. Google’s start page emerged because Sergey Brin didn’t know html. He put the search box up there in the early days and never bothered to change it because he was focused on search algorithms. I think there’s a lesson here for the CIO with important implications for rule and policy management.

The collaborative CIO keeps rules refreshed and enforced by sharing the reasons that the rules were built, how the rules were built, and how to improve them. In a sense, these three rules allow the CIO to in-source enforcement and innovation to enterprise employees. “Hey, here are my restrictions and why the restrictions are in place. What solutions can you come up with based on these restrictions?” For example, the CIO cannot allow credit card information to be stored in the system, but the enterprise is trying to make it easy for the customers so that they have one less step, one fewer click. So the CIO can focus on permissible freedoms, “Here is the problem, here are my constraints. If not a single person in our smart, playful, super-connected workforce can find a solution, I’ll be forced to come up with another rule.”

The CIO almost plays the role of a parent when it comes to balancing employee disciplines and freedoms.

Permitting employee freedoms is a fundamental leadership style not unlike a parenting style. A parent might put up nothing but fences, but at some point a child’s healthy development must include a skinned knee while learning to ride a bike, poison ivy while exploring the forest, a burned finger while playing with matches. Mistakes are our most effective teachers. I worry that enterprise leadership allows one percent of the possibilities to drive one hundred percent of the policy, and innovation suffers accordingly.

The alternative, balanced rule to the heavy-handed leadership tendency to stifle invention should be, trust but verify. Weigh the liability cost openly while making it easy for people to get things done. This openness actually trains the enterprise to understand why a rule is in place, why the rule makes good business sense, why the rule is important for the customer. This makes people able to challenge, follow, and enforce enterprise rules, because they own the rules. This promotes a culture of sharing responsibility for rule maintenance and enforcement where the CIO is no longer solely responsible, and where employees become more participatory and more compliant. CIOs who understand the freedom with fences paradox trust their employees to do the right thing under these balanced conditions for the simple reason that it costs far more energy to enforce than it does to trust.

At the same time, no CIO has the luxury of being an entrepreneurial maverick. I use different information categories to help me decide how I want to experiment and innovate. For example, one category is knowledge about my products, which is not confidential in terms of customer-facing support. Let’s look at a support forum. All the interactions inherent with this information category are very different from credit card or financial transaction information, which needs to be guarded and protected. So I would start to play and experiment with new methods in an area like support forum information, where the company doesn’t need to maintain such high security. The CIO can simply be more playful and experimental with tech-support data, using Facebook and Twitter in ways that are safe. Then, after learning from experiments in safer information categories, the CIO can pick and choose practice successes that apply to more sensitive areas.

Instead of saying, “How do we work within the sharp confines of this highly restrictive information category with many fences and gates?” the CIO might suggest to executive peers, “Let’s learn how