Risk Management Capabilities

Risk Management Capabilities

Review chapter 10 of the course text.
In your own words, discuss the actions that could lead to the development of effective risk management capabilities.

Review chapter 11 of the course text.
In your own words, discuss the different stages for implementing information management in order to move form general principles to specific applications.

please answer them in APA format and full length description

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this is a special edition of an established title widely used by colleges and universities throughout the world. Pearson published this exclusive edition for the benefit of students outside the United States and Canada. if you purchased this book within the United States or Canada you should be aware that it has been imported without the approval of the Publisher or author.

Pearson Global Edition

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IT STraTegy: ISSueS and PracTIceS

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IT STraTegy: ISSueS and PracTIceS

T h i r d E d i t i o n

G l o b a l E d i t i o n

James D. McKeen Queen’s University

Heather A. Smith Queen’s University

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Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

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Editor in Chief: Stephanie Wall Head of Learning Asset Acquisition, Global Edition: Laura Dent Acquisitions Editor: Nicole Sam Program Manager Team Lead: Ashley Santora Program Manager: Denise Vaughn Editorial Assistant: Kaylee Rotella Assistant Acquisitions Editor, Global Edition: Debapriya Mukherjee Associate Project Editor, Global Edition: Binita Roy Executive Marketing Manager: Anne K. Fahlgren Project Manager Team Lead: Judy Leale Project Manager: Thomas Benfatti Procurement Specialist: Diane Peirano Senior Manufacturing Controller, Production, Global Edition: Trudy Kimber Cover Image: © Toria/Shutterstock Cover Designer: Lumina Datamantics Full Service Project Management: Abinaya Rajendran at Integra Software Services, Pvt. Ltd.

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© Pearson Education Limited 2015

The rights of James D. McKeen and Heather A. Smith to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.

Authorized adaptation from the United States edition, entitled IT Strategy: Issues and Practices, 3rd edition, ISBN 978-0-13-354424-4, by James D. McKeen and Heather A. Smith, published by Pearson Education © 2015.

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ISBN 10: 1-292-08026-4 ISBN 13: 978-1-292-08026-0

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Preface 13

About the Authors 21

Acknowledgments 22

Section I Delivering Value with IT 23

Chapter 1 The IT Value ProPoSITIon 24 Peeling the Onion: Understanding IT Value 25

What Is IT Value? 25

Where Is IT Value? 26

Who Delivers IT Value? 27

When Is IT Value Realized? 27

The Three Components of the IT Value Proposition 28 Identification of Potential Value 29 Effective Conversion 30 Realizing Value 31

Five Principles for Delivering Value 32 Principle 1. Have a Clearly Defined Portfolio Value Management

Process 33

Principle 2. Aim for Chunks of Value 33

Principle 3. Adopt a Holistic Orientation to Technology Value 33

Principle 4. Aim for Joint Ownership of Technology Initiatives 34

Principle 5. Experiment More Often 34 Conclusion 34  •  References 35

Chapter 2 DelIVerIng BuSIneSS Value Through IT STraTegy 37 Business and IT Strategies: Past, Present, and Future 38

Four Critical Success Factors 40

The Many Dimensions of IT Strategy 42

Toward an IT Strategy-Development Process 44

Challenges for CIOs 45 Conclusion 47  •  References 47

Chapter 3 MakIng IT CounT 49 Business Measurement: An Overview 50

Key Business Metrics for IT 52


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6 Contents

Designing Business Metrics for IT 53

Advice to Managers 57 Conclusion 58  •  References 58

Chapter 4 effeCTIVe BuSIneSS–IT relaTIonShIPS 60 The Nature of the Business–IT Relationship 61

The Foundation of a Strong Business–IT Relationship 63

Building Block #1: Competence 64

Building Block #2: Credibility 65

Building Block #3: Interpersonal Interaction 66

Building Block #4: Trust 68 Conclusion 70  •  References 70

Appendix A The Five IT Value Profiles 72

Appendix B Guidelines for Building a Strong Business–IT Relationship 73

Chapter 5 BuSIneSS–IT CoMMunICaTIon 74 Communication in the Business–IT Relationship 75

What Is “Good” Communication? 76

Obstacles to Effective Communication 78

“T-Level” Communication Skills for IT Staff 80

Improving Business–IT Communication 82 Conclusion 83  •  References 83

Appendix A IT Communication Competencies 85

Chapter 6 effeCTIVe IT leaDerShIP 86 The Changing Role of the IT Leader 87

What Makes a Good IT Leader? 89

How to Build Better IT Leaders 92

Investing in Leadership Development: Articulating the Value Proposition 95

Conclusion 96  •  References 97

MInI CaSeS Delivering Business Value with IT at Hefty Hardware 98

Investing in TUFS 102

IT Planning at ModMeters 104

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Contents 7

Section II IT governance 109

Chapter 7 effeCTIVe IT ShareD SerVICeS 110 IT Shared Services: An Overview 111

IT Shared Services: Pros and Cons 114

IT Shared Services: Key Organizational Success Factors 115

Identifying Candidate Services 116

An Integrated Model of IT Shared Services 117

Recommmendations for Creating Effective IT Shared Services 118

Conclusion 121  •  References 121

Chapter 8 SuCCeSSful IT SourCIng: MaTurITy MoDel, SourCIng oPTIonS, anD DeCISIon CrITerIa 122 A Maturity Model for IT Functions 123

IT Sourcing Options: Theory Versus Practice 127

The “Real” Decision Criteria 131

Decision Criterion #1: Flexibility 131

Decision Criterion #2: Control 131

Decision Criterion #3: Knowledge Enhancement 132

Decision Criterion #4: Business Exigency 132

A Decision Framework for Sourcing IT Functions 133

Identify Your Core IT Functions 133

Create a “Function Sourcing” Profile 133

Evolve Full-Time IT Personnel 135

Encourage Exploration of the Whole Range of Sourcing Options 136

Combine Sourcing Options Strategically 136

A Management Framework for Successful Sourcing 137

Develop a Sourcing Strategy 137

Develop a Risk Mitigation Strategy 137

Develop a Governance Strategy 138

Understand the Cost Structures 138 Conclusion 139  •  References 139

Chapter 9 BuDgeTIng: PlannIng’S eVIl TwIn 140 Key Concepts in IT Budgeting 141

The Importance of Budgets 143

The IT Planning and Budget Process 145

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8 Contents

Corporate Processes 145

IT Processes 147

Assess Actual IT Spending 148

IT Budgeting Practices That Deliver Value 149 Conclusion 150  •  References 151

Chapter 10 rISk ManageMenT In IT 152 A Holistic View of IT-Based Risk 153

Holistic Risk Management: A Portrait 156

Developing a Risk Management Framework 157

Improving Risk Management Capabilities 160

Conclusion 161  •  References 162

Appendix A A Selection of Risk Classification Schemes 163

Chapter 11 InforMaTIon ManageMenT: STageS anD ISSueS 164 Information Management: How Does IT Fit? 165

A Framework For IM 167

Stage One: Develop an IM Policy 167

Stage Two: Articulate the Operational Components 167

Stage Three: Establish Information Stewardship 168

Stage Four: Build Information Standards 169

Issues In IM 170

Culture and Behavior 170

Information Risk Management 171

Information Value 172

Privacy 172

Knowledge Management 173

The Knowing–Doing Gap 173

Getting Started in IM 173 Conclusion 175  •  References 176

Appendix A Elements of IM Operations 177

MInI CaSeS Building Shared Services at RR Communications 178

Enterprise Architecture at Nationstate Insurance 182

IT Investment at North American Financial 187

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Contents 9

Section III IT-enabled Innovation 191

Chapter 12 TeChnology-DrIVen InnoVaTIon 192 The Need for Innovation: An Historical

Perspective 193

The Need for Innovation Now 193

Understanding Innovation 194

The Value of Innovation 196

Innovation Essentials: Motivation, Support, and Direction 197

Challenges for IT leaders 199

Facilitating Innovation 201 Conclusion 202  •  References 203

Chapter 13 when BIg DaTa anD SoCIal CoMPuTIng MeeT 204 The Social Media/Big Data Opportunity 205

Delivering Business Value with Big Data 207

Innovating with Big Data 211

Pulling in Two Different Directions: The Challenge for IT Managers 212

First Steps for IT Leaders 214 Conclusion 215  •  References 216

Chapter 14 effeCTIVe CuSToMer exPerIenCe 217 Customer Experience and Business value 218

Many Dimensions of Customer Experience 219

The Role of Technology in Customer Experience 221

Customer Experience Essentials for IT 222

First Steps to Improving Customer Experience 225 Conclusion 226  •  References 226

Chapter 15 BuSIneSS InTellIgenCe: an oVerVIew 228 Understanding Business Intelligence 229

The Need for Business Intelligence 230

The Challenge of Business Intelligence 231

The Role of IT in Business Intelligence 233

Improving Business Intelligence 235 Conclusion 238  •  References 238

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10 Contents

Chapter 16 TeChnology-enaBleD CollaBoraTIon 240 Why Collaborate? 241

Characteristics of Collaboration 244

Components of Successful Collaboration 247

The Role of IT in Collaboration 249

First Steps for Facilitating Effective Collaboration 251 Conclusion 253  •  References 254

MInI CaSeS Innovation at International Foods 256

Consumerization of Technology at IFG 261

CRM at Minitrex 265

Customer Service at Datatronics 268

Section IV IT Portfolio Development and Management 273

Chapter 17 ManagIng The aPPlICaTIon PorTfolIo 274 The Applications Quagmire 275

The Benefits of a Portfolio Perspective 276

Making APM Happen 278

Capability 1: Strategy and Governance 280

Capability 2: Inventory Management 284

Capability 3: Reporting and Rationalization 285

Key Lessons Learned 286 Conclusion 287  •  References 287

Appendix A Application Information 288

Chapter 18 IT DeManD ManageMenT: SuPPly ManageMenT IS noT enough 292 Understanding IT Demand 293

The Economics of Demand Management 295

Three Tools for Demand management 295

Key Organizational Enablers for Effective Demand Management 296

Strategic Initiative Management 297

Application Portfolio Management 298

Enterprise Architecture 298

Business–IT Partnership 299

Governance and Transparency 301 Conclusion 303  •  References 303

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Contents 11

Chapter 19 TeChnology roaDMaP: BenefITS, eleMenTS, anD PraCTICal STePS 305 What is a Technology Roadmap? 306

The Benefits of a Technology Roadmap 307

External Benefits (Effectiveness) 307

Internal Benefits (Efficiency) 308

Elements of the Technology Roadmap 308

Activity #1: Guiding Principles 309

Activity #2: Assess Current Technology 310

Activity #3: Analyze Gaps 311

Activity #4: Evaluate Technology Landscape 312

Activity #5: Describe Future Technology 313

Activity #6: Outline Migration Strategy 314

Activity #7: Establish Governance 314

Practical Steps for Developing a Technology Roadmap 316

Conclusion 317  •  References 317

Appendix A Principles to Guide a Migration Strategy 318

Chapter 20 eMergIng DeVeloPMenT PraCTICeS 319 The Problem with System Development 320

Trends in System Development 321

Obstacles to Improving System Development Productivity 324

Improving System Development Productivity: What we know that Works 326

Next Steps to Improving System Development Productivity 328

Conclusion 330  •  References 330

Chapter 21 InforMaTIon DelIVery: PaST, PreSenT, anD fuTure 332 Information and IT: Why Now? 333

Delivering Value Through Information 334

Effective Information Delivery 338

New Information Skills 338 New Information Roles 339

New Information Practices 339

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12 Contents

New Information Strategies 340

The Future of Information Delivery 341 Conclusion 343  •  References 344

MInI CaSeS Project Management at MM 346

Working Smarter at Continental Furniture International 350

Managing Technology at Genex Fuels 355 Index 358

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Today, with information technology (IT) driving constant business transformation, overwhelming organizations with information, enabling 24/7 global operations, and undermining traditional business models, the challenge for business leaders is not simply to manage IT, it is to use IT to deliver business value. Whereas until fairly recently, decisions about IT could be safely delegated to technology specialists after a business strategy had been developed, IT is now so closely integrated with business that, as one CIO explained to us, “We can no longer deliver business solutions in our company without using technology so IT and business strategy must constantly interact with each other.”

What’s New in This Third Edition?

• Six new chapters focusing on current critical issues in IT management, including IT shared services; big data and social computing; business intelligence; manag- ing IT demand; improving the customer experience; and enhancing development productivity.

• Two significantly revised chapters: on delivering IT functions through different resourcing options; and innovating with IT.

• Two new mini cases based on real companies and real IT management situations: Working Smarter at Continental Furniture and Enterprise Architecture at Nationstate Insurance.

• A revised structure based on reader feedback with six chapters and two mini cases from the second edition being moved to the Web site.

All too often, in our efforts to prepare future executives to deal effectively with the issues of IT strategy and management, we lead them into a foreign country where they encounter a different language, different culture, and different customs. Acronyms (e.g., SOA, FTP/IP, SDLC, ITIL, ERP), buzzwords (e.g., asymmetric encryption, proxy servers, agile, enterprise service bus), and the widely adopted practice of abstraction (e.g., Is a software monitor a person, place, or thing?) present formidable “barriers to entry” to the technologically uninitiated, but more important, they obscure the impor- tance of teaching students how to make business decisions about a key organizational resource. By taking a critical issues perspective, IT Strategy: Issues and Practices treats IT as a tool to be leveraged to save and/or make money or transform an organization—not as a study by itself.

As in the first two editions of this book, this third edition combines the experi- ences and insights of many senior IT managers from leading-edge organizations with thorough academic research to bring important issues in IT management to life and demonstrate how IT strategy is put into action in contemporary businesses. This new edition has been designed around an enhanced set of critical real-world issues in IT management today, such as innovating with IT, working with big data and social media,


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14 Preface

enhancing customer experience, and designing for business intelligence and introduces students to the challenges of making IT decisions that will have significant impacts on how businesses function and deliver value to stakeholders.

IT Strategy: Issues and Practices focuses on how IT is changing and will continue to change organizations as we now know them. However, rather than learning concepts “free of context,” students are introduced to the complex decisions facing real organi- zations by means of a number of mini cases. These provide an opportunity to apply the models/theories/frameworks presented and help students integrate and assimilate this material. By the end of the book, students will have the confidence and ability to tackle the tough issues regarding IT management and strategy and a clear understand- ing of their importance in delivering business value.

Key Features of This Book

• A focus on IT management issues as opposed to technology issues • Critical IT issues explored within their organizational contexts • Readily applicable models and frameworks for implementing IT strategies • Mini cases to animate issues and focus classroom discussions on real-world deci-

sions, enabling problem-based learning • Proven strategies and best practices from leading-edge organizations • Useful and practical advice and guidelines for delivering value with IT • Extensive teaching notes for all mini cases

A Different ApproAch to teAching it StrAtegy

The real world of IT is one of issues—critical issues—such as the following:

• How do we know if we are getting value from our IT investment? • How can we innovate with IT? • What specific IT functions should we seek from external providers? • How do we build an IT leadership team that is a trusted partner with the business? • How do we enhance IT capabilities? • What is IT’s role in creating an intelligent business? • How can we best take advantage of new technologies, such as big data and social

media, in our business? • How can we manage IT risk?

However, the majority of management information systems (MIS) textbooks are orga- nized by system category (e.g., supply chain, customer relationship management, enterprise resource planning), by system component (e.g., hardware, software, networks), by system function (e.g., marketing, financial, human resources), by system type (e.g.,  transactional, decisional, strategic), or by a combination of these. Unfortunately, such an organization does not promote an understanding of IT management in practice.

IT Strategy: Issues and Practices tackles the real-world challenges of IT manage- ment. First, it explores a set of the most important issues facing IT managers today, and second, it provides a series of mini cases that present these critical IT issues within the context of real organizations. By focusing the text as well as the mini cases on today’s critical issues, the book naturally reinforces problem-based learning.

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Preface 15

IT Strategy: Issues and Practices includes thirteen mini cases—each based on a real company presented anonymously.1 Mini cases are not simply abbreviated versions of standard, full-length business cases. They differ in two significant ways:

1. A horizontal perspective. Unlike standard cases that develop a single issue within an organizational setting (i.e., a “vertical” slice of organizational life), mini cases take a “horizontal” slice through a number of coexistent issues. Rather than looking for a solution to a specific problem, as in a standard case, students analyzing a mini case must first identify and prioritize the issues embedded within the case. This mim- ics real life in organizations where the challenge lies in “knowing where to start” as opposed to “solving a predefined problem.”

2. Highly relevant information. Mini cases are densely written. Unlike standard cases, which intermix irrelevant information, in a mini case, each sentence exists for a reason and reflects relevant information. As a result, students must analyze each case very carefully so as not to miss critical aspects of the situation.

Teaching with mini cases is, thus, very different than teaching with standard cases. With mini cases, students must determine what is really going on within the organiza- tion. What first appears as a straightforward “technology” problem may in fact be a political problem or one of five other “technology” problems. Detective work is, there- fore, required. The problem identification and prioritization skills needed are essential skills for future managers to learn for the simple reason that it is not possible for organi- zations to tackle all of their problems concurrently. Mini cases help teach these skills to students and can balance the problem-solving skills learned in other classes. Best of all, detective work is fun and promotes lively classroom discussion.

To assist instructors, extensive teaching notes are available for all mini cases. Developed by the authors and based on “tried and true” in-class experience, these notes include case summaries, identify the key issues within each case, present ancillary information about the company/industry represented in the case, and offer guidelines for organizing the class- room discussion. Because of the structure of these mini cases and their embedded issues, it is common for teaching notes to exceed the length of the actual mini case!

This book is most appropriate for MIS courses where the goal is to understand how IT delivers organizational value. These courses are frequently labeled “IT Strategy” or “IT Management” and are offered within undergraduate as well as MBA programs. For undergraduate juniors and seniors in business and commerce programs, this is usually the “capstone” MIS course. For MBA students, this course may be the compulsory core course in MIS, or it may be an elective course.

Each chapter and mini case in this book has been thoroughly tested in a variety of undergraduate, graduate, and executive programs at Queen’s School of Business.2

1 We are unable to identify these leading-edge companies by agreements established as part of our overall research program (described later). 2 Queen’s School of Business is one of the world’s premier business schools, with a faculty team renowned for its business experience and academic credentials. The School has earned international recognition for its innovative approaches to team-based and experiential learning. In addition to its highly acclaimed MBA programs, Queen’s School of Business is also home to Canada’s most prestigious undergraduate business program and several outstanding graduate programs. As well, the School is one of the world’s largest and most respected providers of executive education.

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16 Preface

These materials have proven highly successful within all programs because we adapt how the material is presented according to the level of the students. Whereas under- graduate students “learn” about critical business issues from the book and mini cases for the first time, graduate students are able to “relate” to these same critical issues based on their previous business experience. As a result, graduate students are able to introduce personal experiences into the discussion of these critical IT issues.

orgAnizAtion of thiS Book

One of the advantages of an issues-focused structure is that chapters can be approached in any order because they do not build on one another. Chapter order is immaterial; that is, one does not need to read the first three chapters to understand the fourth. This pro- vides an instructor with maximum flexibility to organize a course as he or she sees fit. Thus, within different courses/programs, the order of topics can be changed to focus on different IT concepts.

Furthermore, because each mini case includes multiple issues, they, too, can be used to serve different purposes. For example, the mini case “Building Shared Services at RR Communications” can be used to focus on issues of governance, organizational structure, and/or change management just as easily as shared services. The result is a rich set of instructional materials that lends itself well to a variety of pedagogical appli- cations, particularly problem-based learning, and that clearly illustrates the reality of IT strategy in action.

The book is organized into four sections, each emphasizing a key component of developing and delivering effective IT strategy:

• Section I: Delivering Value with IT is designed to examine the complex ways that IT and business value are related. Over the past twenty years, researchers and prac- titioners have come to understand that “business value” can mean many different things when applied to IT. Chapter 1 (The IT Value Proposition) explores these con- cepts in depth. Unlike the simplistic value propositions often used when imple- menting IT in organizations, this chapter presents “value” as a multilayered busi- ness construct that must be effectively managed at several levels if technology is to achieve the benefits expected. Chapter 2 (Delivering Business Value through IT Strategy) examines the dynamic interrelationship between business and IT strat- egy and looks at the processes and critical success factors used by organizations to ensure that both are well aligned. Chapter 3 (Making IT Count) discusses new ways of measuring IT’s effectiveness that promote closer business–IT alignment and help drive greater business value. Chapter 4 (Effective Business–IT Relationships) exam- ines the nature of the business–IT relationship and the characteristics of an effec- tive relationship that delivers real value to the enterprise. Chapter 5 (Business–IT Communication) explores the business and interpersonal competencies that IT staff will need in order to do their jobs effectively over the next five to seven years and what companies should be doing to develop them. Finally, Chapter 6 (Effective IT Leadership) tackles the increasing need for improved leadership skills in all IT staff and examines the expectations of the business for strategic and innovative guid- ance from IT.

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