Robert Kugel's Analyst Perspectives

With IT Departments, Companies Get What They Deserve

Posted by Robert Kugel on Mar 20, 2011 8:17:12 PM

One of the many interesting findings that came out of Ventana Research’s comprehensive benchmark research on business analytics was partly buried in an analysis of maturity groups. The Maturity Index of our research benchmarks classifies organizations at four maturity levels (from bottom to top, Tactical, Advanced, Strategic and Innovative) in each of four categories: People, Process, Information and Technology. We’ve conducted more than 100 benchmarks during the past seven years, covering thousands of organizations and gauging their maturity in performing important operations. We’ve consistently found an interrelationship among the people, process, information and technology dimensions in every major business issue. That is, companies that fall short in one dimension tend to fall short in others, and usually to the same degree, precisely because corporate pathologies are self-reinforcing.

The maturity framework we use identifies the key conditions and outcomes organizations must have to achieve optimal performance. The Maturity Index model looks at outcome metrics that cover both efficiency and effectiveness: for example, efficiency measured by person-hours to close the books or the time required to produce a sales operations report, and effectiveness measured by customer satisfaction, order fulfillment rates and other criteria. The model also assesses the conditions in a company – again, interrelated people, processes, information and technology – that affect how well it executes. This includes things like data availability or information system fragmentation or the quality or frequency of training – things that have the greatest impact on achieving desired outcomes. The results of the maturity assessments demonstrate what should be obvious conclusions but are usually overlooked: Improving the performance of a company, division or department can best be achieved by identifying the root causes of the gaps in its performance.

In our business analytics research, one of the questions we asked participants was how they plan to implement changes in their analytics. Regardless of their overall level of maturity in using analytics, 55 to 60 percent said they expect to have line-of-business people make the changes, either alone or in concert with their IT department. The notable difference between the most and least mature groups, however, was that the most mature are twice as likely to use their own IT department to do the work and three times less likely to use outside consultants or buy prebuilt analytics. In fact we found a correlation between a company’s overall maturity level in analytics and its willingness to use internal IT resources.

This finding sharpens the ongoing discussion around “why doesn’t IT get a seat at the table?” and points to the self-reinforcing aspects of information technology’s role in business. I believe that corporations get the IT department they deserve. In immature companies, executives and managers are less likely to understand this and more prone to create a disconnect between what they want and what they’re willing to do.

The mutually reinforcing aspects of a company’s IT strategy, usage and investment show up repeatedly in our benchmark research. Companies, especially larger ones, that do not value IT’s contribution highly are unlikely to get the best and brightest CIOs or midlevel IT managers. Of course people want their contributions to be valued. If the culture of the organization is, “we built this business on merchandising; the IT stuff doesn’t matter,” don’t expect to see an overachieving IT department at work – expect the opposite. Along with this attitude will be underinvestment in technology, software and data management, which will produce the inevitable result that IT cannot deliver superior capabilities and therefore continually lacks credibility with senior management and operations (who are likely to complain about its shortcomings). In this situation line-of-business people have low expectations because of poor performance, which is why they prefer to use off-the-shelf packages or consultants. Moreover, this poor performance makes them unwilling to invest in their internal IT infrastructure and more prone to outsource whenever possible. Good IT people who want to drive change leave these companies because at best there is only a lukewarm commitment to implementing change. Breaking out of this vicious circle is not impossible, but it’s really hard, and, once more, it requires a commitment to address issues in people, process, information and technology.

For someone in an IT department who is pretty good at what you do but works for a company that doesn’t value IT, the lesson is it’s time to burnish your résumé, make sure your Linked-In and/or Plaxo listings are positive and up-to-date and move on. This is especially true if you’re the CIO. It may be that the line-of-business people in your company are a bunch of whiners about things that aren’t your fault – but can you blame them?

One major finding in the research was that data is not ready for analytics and our research found that 69 percent of time is spent in data preparation. This includes the specific amounts of 33 percent of time is spent preparing data for analysis, 23 percent reviewing data for quality and consistency and 13 percent waiting for data and information. Maybe IT should examine how automation and improvement with data integration and data quality technology can help business do their tasks of business analytics. 

On the other hand, if you’re an executive looking for ways to improve the performance of your company – especially if you’ve just been handed your current job – consider what a more effective IT capability can contribute. It may involve a higher level of investment in your technology resources. You may need to attract new IT people to manage that portion of the transformation. Yet if you do so, in the end your company will be better able to execute the full range of its core business processes across all departments. The first step is to assess where the gaps are in the people, process, information and technology dimensions of the most important business processes. I’m willing to bet that you’ll find a common set of holes in your IT resources that affect all of them. The next – obvious – step is to do something about them. 


Robert Kugel – SVP Research

Topics: Social Media, Operational Performance Management (OPM), Business Analytics, Business Collaboration, Business Intelligence, Business Mobility, Business Technology, CIO, Cloud Computing, Collaboration, Enterprise Software, Information Technology, Mobility, Operational Intelligence, Business Performance Management (BPM), Customer Performance Management (CPM), Financial Performance Management (FPM), Information Management (IM), IT Performance Management (ITPM), Sales Performance Management (SPM), Supply Chain Performance Management (SCPM), Workforce Performance Management (WPM)

Robert Kugel

Written by Robert Kugel

Rob heads up the CFO and business research focusing on the intersection of information technology with the finance organization and business. The financial performance management (FPM) research agenda includes the application of IT to financial process optimization and collaborative systems; control systems and analytics; and advanced budgeting and planning. Prior to joining Ventana Research he was an equity research analyst at several firms including First Albany Corporation, Morgan Stanley, and Drexel Burnham, and a consultant with McKinsey and Company. Rob was an Institutional Investor All-American Team member and on the Wall Street Journal All-Star list. Rob has experience in aerospace and defense, banking, manufacturing and retail and consumer services. Rob earned his BA in Economics/Finance at Hampshire College, an MBA in Finance/Accounting at Columbia University, and is a CFA charter holder.