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Monthly Archives: September 2013

IT should embrace performance measures

This is the third in a series of four posts on bringing transparency into the IT/Business leader discussion.

Performance grades are a strange thing. We get graded regularly from the time we enter kindergarten until we earn our college and graduate school degrees. Yet once we enter the workforce, grading pretty much disappears.

Or, the idea of “grading” in the workplace takes the form of the often-dreaded annual performance review. But annual performance reviews don’t help an organization address how a department is doing. And “how IT is doing” can be a significant source of friction between IT and business leaders.

The earlier posts in this series (“ending the reign of the C-I-No“ and “fixing the divide between IT and business executives“) introduced research by George Westerman, Research Scientist at the MIT Center for Digital Business, on the importance of transparency in the relationship between IT and business. In these posts, we detailed two of the four key value areas to this transparency: risk management and prioritization. The third value area is IT cost and performance. This touches upon the importance of measuring outcomes and how when both sides understand the reality of the performance of the IT department.

The discussion between IT cost and performance usually results in IT claiming they are doing really well, considering the level of investment in IT. The business side often disagrees, and feels IT costs too much and doesn’t deliver the level of service required. But without any measurement, the conversation is really just about emotions and “gut feelings.” And while IT may initially reject the idea of measuring performance, the outcome can be very positive for both parties (or both sides).

Take the case of Intel Corporation. The short version of the story is that the IT department had a very bad reputation—so much so that it was the butt of a 1998 company-wide April Fool’s joke. (The full story is detailed in Chapter One of The Real Business of IT: How CIOs Create and Communicate Value” by Westerman and Richard Hunter.) This embarrassment led to a series of initiatives that changed not only how Intel’s IT department delivered services, but also how it communicated with business leaders.

Fast forward to 2003. As Westerman writes in his book, “Satisfaction with IT’s performance had improved dramatically, with more than 80 percent of Intel employees surveyed rating the IT function as a strategic business partner.”

In the end, isn’t that what every organization wants—business leaders and employees valuing IT’s contribution? Measuring IT’s performance is vital to bringing transparency into the relationship between IT and business. And transparency makes for a much happier organization.

Check back soon for our final post in this series on transparency between IT and business leaders.

George Westerman is Faculty Director for MIT Sloan Executive Education’s Essential IT for Non-IT Executives program and author of two award-winning books on IT management. He was the featured speaker for the webinar, “IT is from Venus, Non-IT is From Mars: Bridging the IT and Business Leader Divide to Improve the Value of IT.”

 

Are consumers or lawmakers better at regulating energy efficiency standards?

A recent energy goal set by President Obama has MIT Sloan Professor Christopher Knittel and some colleagues questioning how best to track and control the public’s use of energy efficiency programs to make that goal a reality. The President’s goal aims to cut in half the energy wasted by our homes and businesses over the next 20 years.

However, Knittel, who is the William Barton Rogers Professor of Energy Economics at MIT Sloan and Co-Director of the Center for Energy and Environmental Policy Research (CEEPR) at MIT, says before we buy into more stringent energy efficiency goals, we need to analyze the current situation more rigorously.

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Your company’s key innovators are, most likely, your consumers

The wave of technological innovation we are currently riding has brought us wearable computing and 3D printing, with products like Google Glass and Nike Fuelband becoming the stars of recent tech conferences, including May’s All Things D. Continually fueled by the question “what’s next?,” product innovators leave no stone unturned in their quest to produce the next big thing. According to the latest research, however, it’s consumers not the product innovators who should be viewed as the new experts. A new school of innovation thinking says that product innovators who work for manufacturers have received far too much credit for product innovation, while product users have received far too little.

In an MIT Sloan Management Review interview with Eric von Hippel, founder of the Entrepreneurship Program at MIT, the MIT Sloan Professor paints a new picture of the shifting paradigm of innovation from producer to user and how it is effecting change in the global economy.

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Three ways to profit from business complexity

Business complexity is usually seen as an obstacle to increased profit margins. A publication of The Global Simplicity Index revealed that complexity is costing 200 of the biggest companies in the world 10.2% of their annual profits—which, collectively, totals over $237 billion. But other recent studies show there is a profitable flipside to business complexity—a relatively unexplored area of opportunity hiding in plain site. For some companies, managing business complexity can be a unique opportunity to grow their market share.

Not All Complexity in Business is Value Destroying

According to Martin Mocker, Research Scientist at MIT’s Sloan Center for Information Systems Research (CISR), not all complexity in business is value destroying. In fact, in some instances business complexity can be value-adding, offering companies an opportunity to grow their market share. The key, says Mocker, is to focus on complexity that delivers “variety seeking, one-stop-shopping, customization, or seamless integration.” Finding balance, “keeping the complexity of their processes and systems—both internal and customer-facing—under control,” is the way to manage business complexity toward a profitable advantage.

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Happier employees sell more fries

The signs held by recent striking fast food employees say, “We are worth more.” They are, in fact, right. Retail employees are worth more, and paying them more can result in higher profits.

Those retailers who doubt this should take a close look at Costco, Trader Joe’s, and QuikTrip Corporation (a convenience store chain). Those firms, according to Zeynep Ton, Adjunct Associate Professor of Operations Management at MIT’s Sloan School of Management, pay their employees well—and it shows in the firms’ profits.

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