developing it strategy that connects
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Developing IT Strategy that Connects in a “Consumer IT” Environment
James P. MacLennan
AITP Chicago – Chapter Meeting
Rolling Meadows, IL
11 February 2013
Developing IT Strategy that Connects
Requirements
• Define an IT Strategy
• Align with Corporate Objectives
Assumptions
• Cut my Costs
• Deliver Innovation
• Something I Can Understand
3
B I N G O Paradigm
Shift Virtualization HTML5 Big Data Hacktivism
Consumer IT Blog Something-
As-a-Service Innovation
Speed of
Business
BYOD Green IT FREE
SPACE Business
Intelligence Gamification
Globalization SEO NFC Outside the
Box Synergy
Social Media Alignment Web 3.0 Wisdom of
the Crowds
Internet of
Things
Developing IT Strategy that Connects
Requirements
• Define an IT Strategy
• Align with Corporate Objectives
Assumptions
• Cut my Costs
• Deliver Innovation
• Something I Can Understand
5
?
How does IT drive 15/15?
People
ETB Enhance the Business
New capabilities with incremental benefits
Reallocate
RTB Run the Business
Keeping the Trains Running
$$
Variable:
– Data / Telecommunications
– Hardware / Software
Optimize
Fixed:
– Depreciation
IT Budget Mix
Direct Expense Management
• Optimize real $$ costs on variable spend
• Reallocate $$ and people time from RTB
Indirect Services: Projects and Skills / Training
• Enable growth with new capabilities / market access
• Drive savings through visibility and automation
6
What's Driving this Brevity?
• Speed of business?
7
8
9
l l
l
10
What's Driving this Brevity?
• Speed of business?
• Today's current fire?
• Expecting BoD-style?
11
13
A Simple Question
Said
• Define an IT Strategy
• Align with Corporate Objectives
Unsaid
• Cut my Costs
• Deliver Innovation
• Something I Can Understand
14
A Simple Question
Requirements
• Define an IT Strategy
• Align with Corporate Objectives
Assumptions
• Cut my Costs
• Deliver Innovation
• Something I Can Understand
15
Sustainable IT Strategy for the Fast Twitch Set
16
Where to Begin?
– Top Down: Corporate Strategic Objectives
– Bottom Up: IT Operations
– Common Ground: IT Finance
Bridging the Gap
– Making the connection
– Common language
– What the cat said to the dog
Hidden Messages
– Transparency
– IT as a Service
Communicating the Message
– One Time
– Multi-Media
Sustainable IT Strategy for the Fast Twitch Set
17
Where to Begin?
– Top Down: Corporate Strategic Objectives
– Bottom Up: IT Operations
– Common Ground: IT Finance
Bridging the Gap
– Making the connection
– Common language
– What the cat said to the dog
Hidden Messages
– Transparency
– IT as a Service
Communicating the Message
– One Time
– Multi-Media
What are your Corporate Strategic Objectives?
1. More Revenue
2. Less Cost
18
What are your Corporate Strategic Objectives?
1. More Revenue
a. Grow Earnings
2. Less Cost
a. Grow Returns
b. Increase Cash Flow
19
Been There, Done That
20
• $35M Subsidiary of Schindler Elevator (€4B)
• Privately Held
• Light Manufacturing
• Strategic Objectives (ca. 1997) – Mature markets in the US generate cash
to fund international growth at parent
– Revenue growth in the US focused on new product segments and custom manufacturing
Been There, Done That
21
• $4B subsidiary of Monsanto ($9B)
• Publicly Held
• Pharmaceuticals
• Strategic Objectives (ca. 1999) – Drive revenue growth on new product (Celebrex)
– Focus R&D on long-term pipeline in smaller set of markets, funded by reallocation of resources
Been There, Done That
22
• $700M subsidiary of Vivendi ($29B)
• Publicly Held (International)
• Consumer Durables Manufacturing
• Strategic Objectives (ca. 2002) – Balance revenue flow by growing recurring streams
– Streamline back office for company-owned stores by establishing shared services
Been There, Done That
23
• $3.5B subsidiary of Rank Group
• Private Equity
• Foodservice Disposables Manufacturing & Distribution
• High Volume, Low Mix
• Strategic Objectives (ca. 2011) – Mature markets in the US generate cash
to fund acquisitions at parent
– Grow revenue by acquiring new products that will leverage broader distribution network
Been There, Done That
24
• $2B, Diversified Engineered Products
• Publicly Held
• Industrial Manufacturing
• Low Volume, High Mix
• Strategic Objectives “15/15”
– 15% Annual Earnings Growth
– 15% ROIC (Return on Invested Capital)
Top Line is Better
15% Annual Earnings Growth
• Aggressively Acquisitive, ~$100-200M per year
• Organic is a Focus in 2013
• We prefer revenue growth over cost-cutting – IDEX businesses typically enjoy strong margins
– Contribution Margin has faster / stronger impact than cost-cutting
15% Return on Invested Capital (ROIC)
• ROIC measures how well a company generates cash flow relative to the capital it has invested
• Working Capital, Lean, & Productivity fall under this topic
25
IT Operation: How I Spend My Days
Admin Meetings, Training/Development, Vacations/Holidays
Operations Recurring maintenance, Patches – Keeping things running
Break/Fix Bug fixes, Remedy tickets – “… it used to work but now it doesn’t …”
Improvement Process documentation, user assistance, small development efforts
Opportunity Opportunity Phase of New Projects – prepping for Concept Tollgate
Projects Grouped by business, and moving through the PM stage gates
26
… define subcomponents / categories …
For the two major components of People Time … RTB
ETB
Admin
Operations
Break/Fix
Improvement
Opportunity
Projects
Project Management is Easy, Right?
• Communicate
• Plan the Work
• Manage Resources
• Create Deliverables
• Checkpoint / Tollgate
27
Build Install Design Review Concept Run Idea
IT + Finance Language: Common Ground
28
The IT Budget “Mix”
• Fixed / Committed
• ($$$) Depreciation
• (Time) RTB
• Variable / Opportunity
• ($$$) Telecom, Software,
Hardware, Services
• (Time) ETB
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
Sustainable IT Strategy for the Fast Twitch Set
29
Where to Begin?
– Top Down: Corporate Strategic Objectives
– Bottom Up: IT Operations
– Common Ground: IT Finance
Bridging the Gap
– Making the connection
– Common language
– What the cat said to the dog
Hidden Messages
– Transparency
– IT as a Service
Communicating the Message
– One Time
– Multi-Media
IT + Finance Language: Common Ground
30
The IT Budget “Mix”
• Fixed / Committed
• ($$$) Depreciation
• (Time) RTB
• Variable / Opportunity
• ($$$) Telecom, Software,
Hardware, Services
• (Time) ETB
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
How does IT drive 15/15 (ROIC) ?
31
Optimize RTB
• Complexity Reduction
• Standardization
• Automation
Optimize Expense
• Complexity Reduction
• Standardization
• Leveraged Spend
Direct: Expense Management
(Cost Savings)
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
How does IT drive 15/15 (Growth)?
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
“Innovation Margin”
Reallocate Resources
• ($$$) from IT to (other)
• ($$$) from RTB to ETB
• (Time) from RTB to ETB
Indirect: Services
• Projects and Skills / Training
• Enabling BU Growth / Savings
How does IT drive 15/15 (Growth)?
33
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
“Innovation Margin”
Reallocate Resources
• ($$$) from IT to (other)
• ($$$) from RTB to ETB
• (Time) from RTB to ETB
Indirect: Services
• Projects and Skills / Training
• Enabling BU Growth / Savings
l l l
l
l
How does IT drive 15/15 (Growth)?
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
“Innovation Margin”
Reallocate Resources
• ($$$) from IT to (other)
• ($$$) from RTB to ETB
• (Time) from RTB to ETB
Indirect: Services
• Projects and Skills / Training
• Enabling BU Growth / Savings
How does IT drive 15/15?
People
ETB Enhance the Business
New capabilities with incremental benefits
Reallocate
RTB Run the Business
Keeping the Trains Running
$$
Variable:
– Data / Telecommunications
– Hardware / Software
Optimize
Fixed:
– Depreciation
IT Budget Mix
Direct Expense Management
• Optimize real $$ costs on variable spend
• Reallocate $$ and people time from RTB
Indirect Services: Projects and Skills / Training
• Enable growth with new capabilities / market access
• Drive savings through visibility and automation
35
How does IT drive 15/15?
People
ETB Enhance the Business
New capabilities with incremental benefits
Reallocate
RTB Run the Business
Keeping the Trains Running
$$
Variable:
– Data / Telecommunications
– Hardware / Software
Optimize
Fixed:
– Depreciation
IT Budget Mix
Direct Expense Management
• Optimize real $$ costs on variable spend
• Reallocate $$ and people time from RTB
Indirect Services: Projects and Skills / Training
• Enable growth with new capabilities / market access
• Drive savings through visibility and automation
36
This is reactive, not proactive
When can IT become a strategic differentiator?
“Earn our voice” with Execution Excellence
Update Strat Plan process to proactively include IT
Exit 2013 as an active participant
in growth planning and initiatives
Sustainable IT Strategy for the Fast Twitch Set
37
Where to Begin?
– Top Down: Corporate Strategic Objectives
– Bottom Up: IT Operations
– Common Ground: IT Finance
Bridging the Gap
– Making the connection
– Common language
– What the cat said to the dog
Hidden Messages
– Transparency
– IT as a Service
Communicating the Message
– One Time
– Multi-Media
Consumption-based Bill-backs
Telecomm / Data / Network 5.0$ 10%
Software (Buy + Maintenance)
People / Talent
Staff - ETB (New capabilities) 15.0 30%
Staff - RTB (Keep the trains running)
Staff - Travel / Training
Professional Services
Technology / Assets
Hardware (Lease/Buy + Maintenance) 23.0 46%
Software (Buy + Maintenance)
Telecomm / Data / Network
Other
Depreciation 7.0 14%
50.0$
2013 Corporate IT Budget: Components
$M All $ shown are estimates;
please – no wagering
90% - Allocated (PB)
10% - Consumption
Consumption-based Bill-backs
Telecomm / Data / Network 10.0$ 20%
Software (Buy + Maintenance)
Consumption-based Allocations
Hardware (Lease/Buy + Maintenance)
Software (Buy + Maintenance)
Professional Services
People / Talent
Staff - ETB (New capabilities) 14.0 28%
Staff - RTB (Keep the trains running)
Staff - Travel / Training
Professional Services
Technology / Assets
Hardware (Lease/Buy + Maintenance) 19.0 38%
Software (Buy + Maintenance)
Telecomm / Data / Network
Other
Depreciation 7.0 14%
50.0$
2013 Corporate IT Budget: Components
$M All $ shown are estimates;
please – no wagering
80% - Allocated (PB)
20% - Consumption
IT-as-a-Service
1. Bill-backs – Consumption-based costs as they are incurred
2. Direct allocations – Committed costs, pre-allocated based on consumption
3. General allocations – Committed, shared costs, pre-allocated based on % of revenue
– Exception for New Acquisitions: No general allocation during first full year at IDEX
IT-as-a-Service
1. Bill-backs – Consumption-based costs as they are incurred
2. Direct allocations – Committed costs, pre-allocated based on consumption
3. General allocations – Committed, shared costs, pre-allocated based on % of revenue
– Exception for New Acquisitions: No general allocation during first full year at IDEX
l l l l
l
l
Sustainable IT Strategy for the Fast Twitch Set
43
Where to Begin?
– Top Down: Corporate Strategic Objectives
– Bottom Up: IT Operations
– Common Ground: IT Finance
Bridging the Gap
– Making the connection
– Common language
– What the cat said to the dog
Hidden Messages
– Transparency
– IT as a Service
Communicating the Message
– One Time
– Multi-Media
Mode
• In Person / One-in-One
• Written
• Presentation
Media
• Paper
• Blog
• PowerPoint
• Browser
Milieu
• Team meetings
• Global meetings
• SuccessFactors
See IT, Read IT, Hear IT
44
Mode
• In Person / One-on-One
• Written
• Presentation
Media
• Paper
• Blog
• PowerPoint
• Browser
Milieu
• Team meetings
• Global meetings
• SuccessFactors
See IT, Read IT, Hear IT
45
Mode
• In Person / One-on-One
• Written
• Presentation
Media
• Paper
• Blog
• PowerPoint
• Browser
Milieu
• Team meetings
• Global meetings
• SuccessFactors
See IT, Read IT, Hear IT
46
Mode
• In Person / One-in-One
• Written
• Presentation
Media
• Paper
• Blog
• PowerPoint
• Browser
Milieu
• Team meetings
• Global meetings
• SuccessFactors
See IT, Read IT, Hear IT
47
Mode
• In Person / One-in-One
• Written
• Presentation
Media
• Paper
• Blog
• PowerPoint
• Browser
Milieu
• Team meetings
• Global meetings
• SuccessFactors
See IT, Read IT, Hear IT
48
One page method
How does IT drive 15/15?
People
ETB Enhance the Business
New capabilities with incremental benefits
Reallocate
RTB Run the Business
Keeping the Trains Running
$$
Variable:
– Data / Telecommunications
– Hardware / Software
Optimize
Fixed:
– Depreciation
IT Budget Mix
Direct Expense Management
• Optimize real $$ costs on variable spend
• Reallocate $$ and people time from RTB
Indirect Services: Projects and Skills / Training
• Enable growth with new capabilities / market access
• Drive savings through visibility and automation
50
Multi-page method
IT + Finance Language: Common Ground
52
The IT Budget “Mix”
• Fixed / Committed
• ($$$) Depreciation
• (Time) RTB
• Variable / Opportunity
• ($$$) Telecom, Software,
Hardware, Services
• (Time) ETB
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
How does IT drive 15/15 (ROIC) ?
53
Optimize RTB
• Complexity Reduction
• Standardization
• Automation
Optimize Expense
• Complexity Reduction
• Standardization
• Leveraged Spend
Direct: Expense Management
(Cost Savings)
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
How does IT drive 15/15 (Growth)?
People
ETB Enhance the Business
New capabilities with incremental benefits
RTB Run the Business
Keeping the Trains Running
$$$
Variable:
– Data / Telecommunications
– Hardware / Software
Fixed:
– Depreciation
“Innovation Margin”
Reallocate Resources
• ($$$) from IT to (other)
• ($$$) from RTB to ETB
• (Time) from RTB to ETB
Indirect: Services
• Projects and Skills / Training
• Enabling BU Growth / Savings
How does IT drive 15/15?
People
ETB Enhance the Business
New capabilities with incremental benefits
Reallocate
RTB Run the Business
Keeping the Trains Running
$$
Variable:
– Data / Telecommunications
– Hardware / Software
Optimize
Fixed:
– Depreciation
IT Budget Mix
Direct Expense Management
• Optimize real $$ costs on variable spend
• Reallocate $$ and people time from RTB
Indirect Services: Projects and Skills / Training
• Enable growth with new capabilities / market access
• Drive savings through visibility and automation
55
Intranet method
57
58
59
How does IT drive 15/15?
People
ETB Enhance the Business
New capabilities with incremental benefits
Reallocate
RTB Run the Business
Keeping the Trains Running
$$
Variable:
– Data / Telecommunications
– Hardware / Software
Optimize
Fixed:
– Depreciation
IT Budget Mix
Direct Expense Management
• Optimize real $$ costs on variable spend
• Reallocate $$ and people time from RTB
Indirect Services: Projects and Skills / Training
• Enable growth with new capabilities / market access
• Drive savings through visibility and automation
60
This is reactive, not proactive
When can IT become a strategic differentiator?
“Earn our voice” with Execution Excellence
Update Strat Plan process to proactively include IT
Exit 2013 as an active participant
in growth planning and initiatives
61
Everything will be all right in the end...
if it's not all right, then it's not yet the end
62
Developing IT Strategy that Connects
Requirements
• Define an IT Strategy
• Align with Corporate Objectives
Assumptions
• Cut my Costs
• Deliver Innovation
• Something I Can Understand
63
Developing IT Strategy that Connects
Requirements
• Define an IT Strategy
• Align with Corporate Objectives
Assumptions
• Cut my Costs
• Deliver Innovation
• Something I Can Understand
64
l l l l l
l
l
l
Developing IT Strategy that Connects in a “Consumer IT” Environment
This presentation is licensed under the Attribution-NonCommercial-NoDerivs 3.0 United States license, available at http://creativecommons.org/licenses/by-nc-sa/3.0/
James P. MacLennan Chief Information Officer
IEX Corporation
1925 West Field Court
Lake Forest, IL 60045
(847) 664 4775
jmaclennan@idexcorp.com
An electronic version of these slides is available online
www.cazh1.com
AITP Chicago – Chapter Meeting
Rolling Meadows, IL
11 February 2013
20130211 AITP CIO Dinner.pptx Image Credits: Next Page
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