Competency one leading strategy and performance may 2015

Enterprise Technology Governance

Leading strategy & performance Meeting fiduciary responsibility Directing value creation

Governing risk & compliance

Competency One Lead and govern technology strategy and performance

EGC

Enterprise Governance Consulting

EGC

Enterprise Governance Consulting

Leading and governing technology enabled strategy There are three areas of competency that boards need to provide Enterprise Technology Governance (ETG). This discovery was thoroughly researched as part of Elizabeth Valentine’s doctoral research (Valentine, 2015) at Queensland University of Technology. In the current technology-saturated environment boards of directors (those with the ultimate legal accountability for governing private, public and government organizations) need to include ETG competence amongst their ranks. The board’s collective capability is based on the individual board member’s competence in three areas. Each of the three ETG competencies areas is first and foremost focused on the board’s role and the board’s overall duty of care. The competency set covers their strategic leadership and value creation role and their oversight of technology-related risk. EGC is pleased to provide detailed, practical information for boards to use, starting with competency area one. We provide an organisation capability statement and suggest board related questions associated with each competency descriptor. Competency paper one also provides practical examples for boards to use. This first paper covers the board’s competency to strategically govern technology for competitive advantage and business performance.

Background Technology is a major factor in the competitive, strategic, security, risk and investment decisions they should now be leading and directing as part of their board accountability. ETG is part of a board’s fiduciary duty of care whether they realize it or not.

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Competency One Leading Strategy and Performance

Competency One Definition Directors with competency one are able to demonstrate the following skills, knowledge and experience: • Direct and govern strategy development, technology alignment, organizational planning and investment • Maximize the advantageous use of technology to enhance performance at all levels of the organization.

Competency One Organisation Capability Statement As leaders, these boards expect data and information to underpin strategy development, investment prioritisation, performance planning, monitoring and board reporting, and to drive quality decisionmaking at all organisational levels. This organisation understands how technology is used to support the achievement of enterprise advantage and operational effectiveness and the organization is led and governed accordingly. The board and management jointly understand the organization’s level of technology maturity and its technology capability at all levels. Current and future technology impacts i.e., digital intensity, and the size and scale of organization change required to maximize returns i.e. transformation intensity and risks are comprehensively understood. Business and technology planning are part of a dynamic, interlocking system of strategy development, performance planning, monitoring and measurement. Enterprise technology governance policies and mechanisms are in place and measured for their effectiveness. The organization values information use and maximizes returns on and value created from technology investments.

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EGC

Enterprise Governance Consulting

Key areas of enterprise technology governance to consider. This section presents each of the nine descriptors from competency one, asks a key question and provides a little more information.

Descriptor 1 Skilled in business, environmental and competitive analysis including how industry sector and competitors are using new and emerging technologies. This competency helps the board understand the organization’s level of IT maturity in relation to the external technology environment (e.g., Luftman et al., 2012; Nolan & McFarlan, 2005): how others are using technology, and how this might benefit the organization.

Question How does technology relate to this organization, its competitive environment and the industry or industries we operate within? Directors and senior executives need to have a good knowledge of: • New and emerging technology developments and the implications of these for their specific industry sector/s • How suppliers, alliance partners, competitors or similar sized organizations are using new and emerging technologies.

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Competency One Leading Strategy and Performance

Descriptor 2 Knowledgeable about current and emerging business technologies and their potential to add competitive, customer and stakeholder value. This competency is about understanding new and emerging technologies and increasing business value in product offerings, customer service and support, staff wellbeing and financial.

Question How might current and emerging technology create business value? Here directors and senior executives need to have a good knowledge of new and emerging technology such as the value creating opportunities of using mobile, social media, the cloud or the internet to: • support the decision-making, learning and business activities of management and staff • drive business efficiencies or reduce costs • provide new products or service • connect with existing customers in ways that they value • identify and engage with new customers.

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Enterprise Governance Consulting

Descriptor 3 Knowledgeable about and skilled in evaluating the level of technology dependency the organization has now, and may need in the future. This competency is about analysis of the internal operating environment. It requires an understanding of technology maturity (e.g., Luftman et al., 2012; Nolan & McFarlan, 2005) throughout the whole organization and its various divisions. It brings clarity to what technology exists, it’s effectiveness in helping achieve strategy and adding value, and what these findings mean for the future in terms of strategy, capability, change and investment priority (Turel & Bart, 2014).

Question How technologically mature is each part of our business (in terms of the need for technology reliability as well as the need for new technologies), and what does this mean for the future? Directors and senior executives need to have a good knowledge of: • The technology issues the organization currently faces in relation to remaining competitive, exploring new channels and markets, delivering business strategy and achieving performance • Whether there are any differences in maturity or needs within or between divisions • The implications of any such division or organization-wide analysis for current or future investment priority • The implications of any such division or organization-wide analysis for current or future business risk.

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Competency One Leading Strategy and Performance

Descriptor 4 Knowledgeable about how to incorporate current and future technologies into the organisation’s business strategy, business plan development and organisational performance measures (e.g., Key Performance Indicators). This competency helps boards act on any analysis of the external and internal environment. It enables the board to not only ask questions of management or advisors, but to critically review board reports and proposals, consultant reports and technology-related discussions held in the board room (Valentine, 2014).

Question How does / should technology enable our organization to achieve strategy and measure performance? Directors and senior executives need to have a good knowledge of: • The extent to which business and IT planning are integrated and aligned • How or when technology-related discussion is incorporated into the strategic planning and business planning processes of the organization • How and when external and internal technology-related analysis is conducted, and the means by which this informs board papers and risk reporting • What, if any, IT governance frameworks exist and how these provide a conduit for reporting to the board • Whether current technology governance mechanisms exist and whether these support strategy and performance achievement and reporting.

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EGC

Enterprise Governance Consulting

Descriptor 5 Knowledgeable about the business processes that underpin peak performance. With the proliferation of business software and applications, this competency is about understanding the relationship between key business processes throughout the organization and whether they are integrated into an efficient and effective working business / IT system. This competency helps boards understand whether and how automation of business processes is serving to add (or erode) customer, stakeholder and management / staff value (Valentine & Stewart, 2013b).

Question How does technology assist in supporting the effective and efficient delivery of product, service and administrative performance? Directors and senior executives need to have a basic knowledge of: • What business processes are key to performance success and how effective current processes are • Whether automation of key business processes would help or hinder value creation and performance achievement • How new and emerging technologies (eg mobile applications or cloud-based applications or services) might improve business process performance or reduce operating costs.

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Competency One Leading Strategy and Performance

Descriptor 6 Knowledgeable about enterprise technology architecture in relation to infrastructure investment to achieve the business goals of the enterprise. Understanding how to oversee the critical examination of external and internal business and technology-related analyses and oversee their translation into technology architecture (overall IT system design) and investment, to achieve strategy and support business performance and value creation (e.g., Amrit & Benn, 2010).

Question Do the type and sources of technology solutions provide a cohesive design (architecture) to best support strategy achievement, business performance and value creation? Directors and senior executives need to have a good knowledge of: • Whether there is as cohesive yet flexible enterprise level IT plan • The ways in which the current or future enterprise IT design (architecture) supports or hinders strategy achievement, business performance and conformance • Whether there is any aspect of IT risk (eg infrastructure, business continuity, information security or project risk with the current or proposed enterprise IT design (architecture).

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EGC

Enterprise Governance Consulting

Descriptor 7 Experienced in selecting, implementing and monitoring enterprise technology governance mechanism effectiveness Understanding how any or all technology governance mechanisms at an operational as well as board (enterprise) level work together to support performance and conformance.

Question Do existing technology governance mechanisms form part of the overall organizational performance planning and reporting system right up to board level, and to what extent are these mechanisms effective? This helps directors and senior executives to understand how seamlessly or effectively any current operational (management) or enterprise (board) technology governance mechanisms support performance reporting and risk identification. Directors need to have a basic knowledge of: • The features and benefits of common operational governance frameworks (such as TOGAF, ITIL, COBIT5 etc.) • How any IT governance mechanisms inform board reporting • Whether governing enterprise technology by exception (ie via board reporting and any associated board committees) is effective for all types of IT risk (eg infrastructure, business continuity, information and data security or project risk and if not , • What needs to be done to minimise exposure to these types of risk?

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Competency One Leading Strategy and Performance

Descriptor 8 Able to oversee IT acquisition, implementation, maintenance and disposal to meet the board’s fiduciary, regulatory, compliance, ethical, contractual and legal obligations. This competency is about understanding the changing role of the board in relation to the ethical and legal requirements (e.g., Bayles, 1989; Martyn, 2013; Trope, 2005) of being a board director, chairman or their equivalent.

Question When it comes to enterprise business technology governance, is our board meeting all of its fiduciary obligations? Directors and senior executives need to have a good knowledge of: • The changing role of directors, especially in relation to technology security and risk • Technology-related regulatory and compliance requirements for their organization/ industry/ country in relation to identifying and governing technology-related competition and risk.

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EGC

Enterprise Governance Consulting

Descriptor 9 Understands the design and use of business technology performance scorecards. Knows what to measure and monitor and how interpret performance data against plans and policies to derive expected benefits, and ensure strategic intent is achieved. Akin to Kaplan and Norton’s (1998) well known balanced scorecard, this competency is about understanding what (in relation to technology projects, use, investment returns and value creation) is being measured and reported on to ensure strategy achievement and to manage risk and returns. This compliments descriptor 7 relating to governance mechanisms.

Question How is the effectiveness of technology investment, use and risk monitored, measured and reported on? Directors and senior executives need to have a good knowledge of: • Whether the IT department and its effectiveness is measured against a technology scorecard • Whether and how any such technology performance scorecard informs board level ETG reporting • Whether consideration for the currency of any such scorecard is given during strategic and business planning.

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Competency One Leading Strategy and Performance

Discussion Because technology pervades almost every aspect of modern business, its design, delivery and measurement, ETG considerations should become integral to overall, regular business decisionmaking and governance- not something separate. To be effective in overseeing an enterpriseâ&#x20AC;&#x2122;s use of IT, boards donâ&#x20AC;&#x2122;t need to understand the detail of technology as much as they need to better understand business technology governance and how management should be dealing with and reporting on technology investment, risk and value creation. ETG-focused boards can ask the right questions, challenge responses in relation to the businesses they govern and are much more likely to ensure that technology- related strategic and risk information makes it onto the board agenda. They understand that there is risk in delegating ETG as well as their wider governance responsibilities down to management.

Competency two The next competency looks at governing risk and compliance.

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