IT Governance is Killing Innovation

Recent CEB research shows that work has become much more interdependent — employees increasingly need to tap a broader array of internal and external colleagues and partners to be successful in their jobs. The emergence of this new work environment has significant implications for how IT should enable business growth and, more specifically, for the kinds of investments IT should be making to support employees.

Unfortunately, when it comes to IT's ability to allocate investments in response to the new work environment, traditional governance processes prove grossly outdated. Some of the key challenges:

• Companies don't identify the very best ideas for investment because most capital allocation processes start with business partners' existing ideas about projects to fund. As we've noted in our previous blog, senior business partners might not be that knowledgeable about what actually drives productivity on the front lines.


• Companies allocate capital to the wrong investments because our traditional emphasis on ROI-based business cases undermines IT's ability to invest in high-return-but-hard-to-measure areas like improving knowledge worker productivity.


• Companies tend to spread their capital allocation bets too thinly across business groups or functions, often for political reasons. This practice helps 'keep the peace' but means that often the most transformational opportunities get short-changed.

Across our year of research into this problem, we have identified a select group of companies that are rethinking their governance and investment processes to circumvent the problems outlined above. 

 

Expand First, Filter Second
Most CIOs will tell you that they have no shortage of ideas to invest in — the hard part is whittling down to the right ones. Push that a bit further and what most CIOs say is that those ideas are in the form of project requests from business partners. The problem is that these "bottom-up" project requests often miss the big picture as too many are incremental or uninspiring. Yes, while most of these requests are vetted for alignment with corporate strategy, what's often missing is how these requests fit within a broader context of how the business overall generates value. Furthermore, this lack of context prevents organizations from identifying other investment ideas that have high potential but haven't bubbled up organically through project requests.

To address this challenge, a global transportation company we spoke with is using a strategic lens to expand the list of project ideas to find the ones with the highest potential corporate value, before filtering them. They start with a map of the company's critical business capabilities — those concrete business activities that are vital to meeting a strategic goal (e.g. rapid new product roll-out). Then, they look at the health of the information available to business leaders who manage those capabilities. They find this leads them into all sorts of overlooked opportunities and provides them with a good proxy for where IT investment can have significant business impact, which can better inform prioritization decisions. 

Prioritize Capabilities, not Projects
The currency of most IT project prioritization meetings is the ROI-based business case. As mentioned above, this measure works very well for comparing projects that deliver hard benefits, but undermine the ability to invest in critical capabilities that have a long-term payoff horizon or highly innovative capabilities where the payoff is uncertain.

A global high-tech equipment provider is taking a different approach. Similar to the transportation company mentioned earlier, they start with a top down view of critical business capabilities and pillars required to support long-term business strategy. Then, using customer preference measurement methodologies like conjoint analysis, they survey senior business leaders to determine the relative criticality of each of these pillars. Based on this — and before any projects are even discussed — they are able to map out the relative level of IT investment each capability should receive. So, if the business leadership agrees that capability A is twice as important to realizing their goals as capability B, capability A is targeted for twice as much investment. Projects can then be assessed on contribution to the needs of that pillar, rather than purely on financial metrics like ROI.

CIOs are being asked to arm employees with the capabilities required for success in a new, much more integrated and interdependent work environment. But to do that requires more than capital: it requires a different approach to making decisions and, specifically, rethinking traditional IT project-centric approaches to identifying and funding capital investment opportunities. 

Andrew Horne and Brian Foster

Andrew Horne, a Managing Director at CEB, works with the CEB’s membership network of Chief Information Officers, and leads global research teams in producing best practice case studies, benchmarks, implementation tools, and executive education. Brian Foster, a Managing Director in CEB’s IT Practice, oversees a global team that provides advice and consultation to a network of more than 2,500 IT leaders, including CIOs, enterprise architects, applications, infrastructure, security, and PMO executives.

Most of Canada's Fastest-growing Tech Companies are Business-to-Business. Here's Why

Posted by Jacob Serebrin
 
Most of Canada’s fastest growing tech companies have something in common: they’re selling to businesses rather than consumers.

Out of the over 125 software, IT and web-focused firms on Profit Magazine’s list of the 500 fastest-growing companies in Canada, released in early June, only nine are consumer-facing.

Only two of those managed to crack the top 30—Electronic Box, a Longueuil Que. based Internet service provider, at number 28, and Ashley Madison, the online dating service for people who are already in relationships, at number 29.

While the Profit 500 is self-reported, and not comprehensive, the data does line-up with other, similar, reports. And Deloitte’s Technology Fast 50, an annual list of the 50 fastest-growing tech companies in Canada, released in November, was made up almost exclusively of companies in a business-to-business market.

“It’s part of the Canadian landscape,” says John Muffolini, Technology, Media and Telecommunications industry practice leader for Deloitte. “We have fewer companies selling directly to consumers.

Part of this, according to Muffolini, is because of the higher cost of marketing in the consumer marketplace.

“When you’re marketing to consumers, you may have the best technology but it’s hard to remove the Samsungs and the Apples,” he told Techvibes. “Businesses tend to go for the best technology, the best value, if there’s a value-ad.”

With less marketing dollars available, Canadian tech companies are playing to their strengths and going after low-hanging fruit, Muffolini says. This isn’t a new trend; both Profit and Deloitte’s past surveys suggest that the business-to-business side has been growing faster for some time.

“If you look at the past 10 years, there’s only a hand of Canadian companies that have been big in the consumer market,” says Muffolini.

In fact, on Profit’s 2012 list, no consumer-facing tech companies even made the top 40.
Muffolini says he’s optimistic about the future of customer-facing tech companies in Canada, and says he sees growing pockets in the app and gaming sectors. And when it comes to gaming, the lack of fast growth doesn’t mean it’s not big business.

“There are a lot of large companies with Canadian operations, using Canadian talent,” says Muffolini. “But they’re not Canadian companies.”

Despite the fact that most of the fast-growing companies in the Canadian tech industry are in the business-to-business market, they’re still rather diverse, with companies providing cloud services, network security, e-commerce platforms, analytics and custom solutions all posting strong growth.

And it’s not just established firms that are continuing to scale-up, who are making these lists, “there are quite a few that are emerging that have ramped-up pretty quickly,” says Muffolini.

Leaning In: The 10 Fastest-Growing Women-Owned Businesses

BY Jenna Goudreau

Image credit: Shutterstock

 

In the midst of Sheryl Sandberg's popular initiative to empower women in business, it appears more of them are indeed leaning in to grow their businesses. In the U.S., an estimated 8.6 million women-owned businesses contribute $1.3 trillion to the economy and employ 7.7 million Americans, according to an April report commissioned by American Express OPEN, the credit card giant's small business division. What's more, the number of women-owned firms with $10 million or more in annual sales has increased 57 percent over the past decade.

To spotlight some of the major companies owned by women, nonprofit membership group Women Presidents' Organization (WPO) today released its sixth annual list of the 50 fastest-growing women-owned or led businesses in North America. The companies that made the list generated a combined $3.2 billion in 2012 revenues and employ an average of 641 employees each.

"Women are growing very substantial businesses, and not in the traditional areas that you'd expect women to be in," says Marsha Firestone, president and founder of WPO, citing a concentration of manufacturing, staffing and consulting businesses on the list. "Women don't just bake cookies and make crafts. They're starting businesses that can be scaled."


To be considered, the privately held businesses had to have either a female founder with a majority stake or a female leader with some ownership, who runs the company on a day-to-day basis. The companies supplied their revenue figures for the years 2008, 2010 and 2012, and were ranked by revenue growth over that period.

Here's a snapshot of the top 10 fastest-growing businesses and their leaders from the list:
No. 1: Shazi Visram, Happy Family in New York, N.Y.
Launched in 2006, Happy Family makes packaged organic meals and snacks for all age groups. It reported gross revenues of $63 million last year. 

No. 2: Kathy Mills, Strategic Communications in Louisville, Ky.
Strategic Communications provides communication and IT services to business and government clients. Between 2010 and 2012, its gross revenues grew 80 percent to $42 million. 

No. 3: Shelly Sun, BrightStar Franchising LLC in Gurnee, Ill.
The health-care staffing franchisor was founded in 2002 and now counts over 250 locations across the U.S. and $212 million in gross revenues. 

No. 4: Tiffany Crenshaw, Intellect Resources in Greensboro, N.C.
Intellect Resources provides consulting, recruiting and hiring solutions for businesses in the health-care IT market. Its gross revenues climbed from $1.5 million in 2010 to $30 million last year. 

No. 5: June Ressler, Cenergy International Services LLC in Houston, Texas
Founded by Ressler in 1996, Cenergy provides workforce solutions such as consulting and logistics management to clients in the oil and gas industry. It reported nearly $250 million in gross revenues in 2012. 

No. 6: Sue Bhatia, Rose International Inc. in Chesterfield, Mo.
Rose International, an IT professional services and consulting firm, was founded in 1993. Between 2010 and 2012, its gross revenues grew more than 50 percent to $360 million. 

No. 7: Anita Emoff, Boost Technologies in Dayton, Ohio
Specializing in employee wellness, recognition and awards, Boost Technologies reported $17 million in gross revenues last year, up from less than $1 million in 2008.

No. 8: Kathleen Croddick, Suite K of South Brunswick, N.J.
Founded and run by Croddick, Suite K Value Added Services LLC manufactures beauty products such as fragrances, creams and lotions. Its gross revenues grew more than 150 percent between 2010 and 2012 to $13 million.

No. 9: Lani Hay, Lanmark Technology in Vienna, Va.
Lanmark Technology provides professional services such as IT and administrative support to clients in the government and commercial sectors. It reported gross revenues of $35 million in 2012.

No. 10: Ranjini Poddar, Artech Information Systems LLC in Cedar Knolls, N.J.
With gross revenues of nearly $350 million, Artech is the largest women-owned IT staffing company in the U.S., according to WPO.