Operational Excellence In Information Technology Management Yields Competitive Advantage

August 2009 Vol. 236 No. 8

James C. Hamilton, JCHamilton Consulting LLC, Houston

Despite all the marketing “buzz words” from computer vendors, the true and lasting competitive advantage from information technology (IT) does not result from implementing the latest “gee whiz” technology or a “better mousetrap.”

Instead, experience demonstrates that it is achieved by a disciplined commitment to operational excellence in IT management throughout the company.

By applying a strict management discipline and following proven best practices, the IT function can be transformed from a difficult-to-manage cost center into a value-added service to the corporation. This approach has been proven to be a winning strategy throughout the highs and lows of business cycles and is an even more important discipline for companies weathering the storms of a severe recession.
The disciplined approach to IT applies across all industries since IT management challenges are largely generic and common to all sectors, regardless of the particular applications that might be installed. Having said that, it is also worth noting that the author’s practical experience is based on the application of the principles of operational excellence within a major integrated oil and gas corporation, where information technology services are an integral part of operations in exploration, production, distribution, pipelines, refining and marketing.

After many years of leading and managing virtually all aspects of IT in the corporate world, I have witnessed an enormous amount of change, both in the rapidly evolving technology itself, but also in the approach to effective management of these very necessary but complex systems. The good news is that IT has been a huge enabler of productivity and, with the powerful networks, computing platforms and sophisticated application environments available today, enterprises can do so much more (and do it much more rapidly and economically) than ever before.

With the advent of the personal computer, the Internet and other portable and wireless personal devices, businesses and consumers can employ an impressive array of capabilities such as information access, information sharing, knowledge acquisition, decision making, automation and market development that were not possible even just a few years ago. However, while much has changed, many of the challenges experienced by business leaders – as they try to make sense of the complexities, opportunities, risks and costs associated with information technology – remain the same.

Moreover, many companies, as they struggle with these challenges, are missing out on opportunities that go well beyond the immediate internal efficiencies that directly result from an operationally excellent IT. Information technology is critical to any business and while some business leaders may still consider it to be non-core or non-strategic, most CEOs do recognize that their businesses cannot survive and prosper without a well-functioning information technology service underpinning and supporting every transaction and activity throughout the enterprise.

The average company today spends between 4-5% of revenue on information technology and the figure can be 10% or more in industries highly dependent on IT, such as the financial and telecommunications sectors. Information technology is an integral and vital element of any organization, and a smooth-running IT operation will not only directly impact the bottom line, but it will also project a quality, professional image of the company externally.

From a business leader’s perspective, the world of IT can be an intimidating maze of terminology and hype with an insatiable appetite for ongoing and new project funding. Business leaders struggle with questions on how much to spend on IT, how to be sure benefits will accrue from the very significant investments, and how to effectively organize and manage IT when it is not the main mission of the enterprise or the core competence of the senior business leaders. Even within IT management circles, the complexities can be overwhelming in the absence of a disciplined approach to managing IT services.

As a consequence, there is ample coverage today in trade journals and the popular press about IT management failures, and many published surveys show a low level of satisfaction with the performance of internal IT departments. Across all industries there is a widespread need to demystify IT from a business perspective and to provide a blueprint for managing IT services in the corporation. There are no silver bullets and no magic answers, but by learning from what has worked well (and sometimes not so well) over many years, a clear picture emerges on what a company needs to be very good at. Success is the result of meticulous preparation, following sound, proven processes and a great deal of hard work.
Excellence in IT operations results from a habitual and relentless commitment to executing quality IT processes that are tightly coupled with the business processes they serve, a strong focus on managing the details, and a pervasive culture of continuous improvement. It starts with the engagement and commitment of the CEO and the senior executive team and implementing mechanisms to ensure that all of the IT activities are fully aligned with business priorities and that they continue to be aligned.
Important concepts such as developing and adhering to an IT architecture and key strategic principles, organizing and delivering services (as opposed to products or applications), measuring and stewarding performance and implementing a culture of continuous improvement are all critical to the success of the enterprise.
Excellence in managing the IT processes and consistently executing best practices is the key to success. Yes, there is a need to stay abreast of emerging technologies and to capitalize on these at the right time in the product cycle, and companies do need to monitor the marketplace and quickly identify new trends that can offer an advantage. From time to time, individual companies will realize significant advantages from implementing new technologies, but these will tend to be short-lived as competitors follow suit and catch up. It is also very true that, depending on the industry, there will be specialized areas of technology that companies need to stay on top of in order to be industry leaders, but the enduring competitive edge will be achieved through operational excellence in managing the IT services.

Those companies that master the discipline of operational excellence in managing their IT services will see benefits in a number of critical areas, including 1.) flawless execution; 2.) robust, reliable operations; 3.) lower costs; 4.) effective change management; and 5.) a “great deal” for the customer.

A new book on this topic, Unlocking the Power of Information Technology, describes how IT services should be aligned with business goals, what critical capabilities need to be established and how to organize and manage IT services across the company.

The description of an operationally excellent IT function is organized in the book into seven key focus areas, with chapters devoted to each: 1.) Business Alignment, Strategic Planning and IT Governance; 2.) The IT Architecture; 3.) Manage IT Systems as Services; 4.) Project Management Discipline; 5.) The IT Organizational Model; 6.) Develop and Nurture the IT Staff; and 7.) Use of Contracted Services, Outsourcing and Offshoring. A summary of the key points is included at the end of the chapter dealing with each of these critical areas, and these summaries can serve as an excellent starting point for a meaningful dialogue between business executives and IT managers on how their IT services measure up, and what to do about dramatically improving these services.

Author’s note

This article is an excerpt from the book, Unlocking the Power of Information Technology, which can be purchased at www.createspace.com/3363849, or at www.amazon.com. The 208-page book sells for US$19.95, and has an ISBN-13 code of 9781441400420.

James C. Hamilton is the principal consultant at JCHamilton Consulting LLC. He is an experienced IT manager with a broad background in managing all aspects of IT for large corporations. He has held a variety of executive and senior IT management positions within ExxonMobil, Exxon Chemical Company and Imperial Oil Limited. He earned a B.Sc. in Chemical Engineering at Edinburgh University and an M.Sc. in Chemical Engineering at the University of Alberta, where he specialized in computer control of chemical plant processes. He is a life member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta and became a designated Information Systems Professional in the Canadian Information Processing Society in 1992.E-mail: info@jchamiltonconsulting.com, www.jchamiltonconsulting.com.