Modeling is Key for the Next Generation CIO

In June, 2009, I posted an article on the HP The Next Big Thing blog entitled “The Next Generation CIO.”  The transition is under way.  In an interview entitled “The Evolving CIO Role: What One Headhunter Says CIOs Need to Know,” Shawn Banerji, managing director of an executive search firm says the CIO role “really is for a business leader, someone with very strong commercial skills and vision who also is a superlative business operator.”  This business leader has enterprise-wide responsibility for optimization and agility of the design and operation of the business systems.  This responsibility cannot be fulfilled without a computer-based modeling capability.

The traditional role of information systems management was application of information technology for automation and integration of human tasks.  This was a bottom-up transformation of the business to exploit information technology, and the business benefits and system requirements were within the scope of the affected business function managers.

This evolution of systems essentially transformed the technology of the business systems, but the basic structure of the business became embedded in computer programs.  As the scope of automation and integration increased, the systems became more complex with interdependencies that crossed organizational boundaries.  At the same time, the pace of change in products and services continued to increase.  Businesses now face global competition, and customers expect access to information and services 24 hours a day, every day of the year.  Not only must the business systems adapt to improve operations, but they must continually adapt to changing business challenges and opportunities.

The enterprise as a whole must be managed as a system that integrates with systems of suppliers and customers.  At the same time the enterprise system must be structured so that it can adapt to change without major overhaul.  This cannot be managed through the traditional budgeting and delegation approach to management of system changes. That narrow perspective results in sub-optimization of both the technology and business operations.  Effective management requires an enterprise optimization perspective on both the business systems and the supporting information technology infrastructure..

In my book, Building the Agile Enterprise with SOA, BPM and MBM, I describe the design of business systems from a business perspective.  Technology is a necessary part, but the focus is on designing the operation of the business to leverage technology.  Modeling is essential to managing the scope and complexity of the business systems of an enterprise.  The CIO should provide the executive leadership to develop and manage the models, support analysis for optimal systems design and investment, and optimize the application and management of technology.

The Object Management Group, an international standards organization, is developing specifications for computer-based, business modeling tools.  A key segment of this effort is development of a "value delivery modeling" capability that builds on value chain modeling that was introduced by Michael Porter in his 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance.  This technology will enable the CIO to provide a model of the capabilities of the enterprise and how they contribute to the development of customer value in the enterprise products or services. It also helps identify and manage shared capabilities for agility and economies of scale. The basic concepts of this modeling approach and related business models and design concepts are discussed in my book.

In subsequent posts, I will discuss value delivery modeling and the development of business modeling standards in more detail.