In the first of this four-part series “Maturity Models for the Evolving Economy – Part 1”, the benefits of using models to simulate current and desired states were discussed (please see CIO Canada, December 2000). IDC has developed specific Maturity Models addressing the most compelling corporate priorities. The models depict the typical states an organization can expect to reach in its journey towards adopting best known practices in support of key success drivers. The models (and the stages and practices they encompass) are intended to be continuously refined based on ongoing research and casework. Each Maturity Model consists of the elements shown in the diagram on page 34.
The Forces of IT Change
Because the business environment continues to undergo dramatic, constant and rapid change, IDC frequently reviews the assumptions on which it bases market forecasts and helps clients to “analyse the future”. A recent review was designed to identify the assumptions with the highest propensity for impact on the IT market. In addition to the assumptions included in the accompanying table, there is of course the possibility of one or more “wild cards” that could affect global or regional economies, but by definition they are difficult to predict.
Because of the key role that they play in shaping the economy, and therefore the significant impact they might have on overall business performance, the ten most important assumptions are key considerations when contemplating what “best known practices” might be. A good understanding of the major underlying assumptions behind IDC’s forecasts contributes to an organization’s ability to recognize and respond to unforeseen circumstances as they occur.
Compelling Business Issues
Few dispute the notion that advances in technology and increasing globalization will continue to have a profound effect on the way business is conducted, on what business is conducted, and on where it is conducted. The degree of uncertainty associated with this tidal wave of change is almost infinite. Already there are numerous open-ended questions begging to be answered and seemingly endless complex problems clamouring to be resolved.
By definition, the evolving economy presents an ever-changing set of business issues that need to be addressed in order for an organization to survive the challenges of the day. In the face of this, decisions must be made and business must go on. Maintaining the status quo is not an option. If business environments are to be appropriately shaped, it is of extreme importance that organizations become aware of key business issues and that they understand and apply current best thinking about their resolution.
IDC’s ongoing research identifies business issues as they emerge and examines them in light of the prevailing business environment. The Maturity Models provide insight into the most critical of these issues and a summary of leading thought about how any organization might best leverage best known practices, maximizing the pace and benefit of change while minimizing potential risk and accelerating progress.
Key Success Drivers
Success in a business sense is directly related to the ability of an organization to sustain a steady increase in its value – i.e., market capitalization in the case of a commercial organization, and provision of higher-value services at reduced cost in the case of a public-sector organization. Enhancing the value of an organization is the result of doing new things or doing old things better. Accrued corporate knowledge (know-how and experience) provides the foundation; learning from this and from lessons learned by others is a key factor in achieving sustained improvement.
In every organization there are combinations of people, processes and technologies that represent the key contributors to value, and achieving positive or high yield results from them is fundamental to success. The IDC Maturity Models provide a framework for examining whether these Key Success Drivers are in a state that will allow them to thrive and grow given evolving economic conditions.
For the purposes of clarity, IDC’s Maturity Models organize these Key Success Drivers (KSDs) into six categories considered to be critical contributors to the success of any organization:
• Human Resource Management and Organization
• ROI Strategy and Management
• Operational Excellence
• Business and IT Architectures
• Business/IT Partnership
• Innovation and Renewal Strategy
Because it is likely to be unique to each organization, no attempt has been made to weigh the value of each category. The model defines four stages of maturity in each of the categories, based on a series of six to ten Key Success Factors within each category.
Key Performance Indicators (KPIs)
Managing today’s business while building for the future requires an organization to leverage its current strengths while developing capabilities for the future, capitalizing on technological changes, new markets, new products, etc. Understanding and evaluating how much (and how quickly) progress is being made is important because it provides valuable input to effectively planning and managing the change process.
“You cannot measure what is not defined. You also cannot tell whether you have improved something if you have not measured its performance.” 1 Performance is represented by the achievement of progress towards the desired (improved) state. Because each step is a composite of many contributing factors, the result cannot be assessed by a single measure. Piecing together the many types and levels of information is similar to assembling a jigsaw puzzle; all of the pieces need to be on the table, and then assembled in the correct pattern.
The four phases of development or growth suggested in the Maturity Models consider multiple contributing factors and therefore provide a useful point of reference against which an organization’s progress can be gauged. To a trained eye, even partially completed pictures can tell a great deal about performance. 2
It is unlikely that an organization will simultaneously reach the fourth generation of maturity in every area of performance. Immaturity in one area can affect success in another area (even though the latter is potentially at a higher maturity level.) In order to understand fully the cause and effect of change, it is best that an organization be able to gauge where it is situated on the maturity scale for all of its core processes.
The Key Performance Indicators take into consideration the balance between efficiency and effectiveness as well as the tension between cost and quality. It is expected that they will change over time, particularly as economic conditions change. As change occurs, the Maturity Models will be revised, allowing an organization to continue to map itself against a world-class model.
IDC’s Maturity Models enable an organization to fully appreciate what “best known practice” is in a number of specific areas and also how each of these “best known practices” relates to the oothers. Secondly, the organization is able to recognize where its strengths and weaknesses are and understand the action needed to embrace the full suite of “best known practices”. This provides a rich base of knowledge from which to initiate or carry on with change.
Maturity Level Indicators (MLIs)
In order to make progress in the journey to the desired fourth generation or “best known practice”, an organization must undergo significant change. The Maturity Level Indicators (MLIs) provide a snapshot in time of the result(s) that can be expected at each significant stage along the way.
The MLIs’ represent a structured framework for implementing change. Each progressive stage is designed to provide an insight into what is needed in order to adjust and adapt during the transformational process. The MLIs reflect the stages of maturity within the Key Performance Indicators that define success within the six Key Success Drivers.
Because the model has multiple dimensions it is possible to view progress from many angles. The standard model of four generations applied to all of IDC’s Maturity Models enables an organization to consider its progress across all of the Key Success Drivers associated with a particular compelling business issue, providing a rich insight into the cause and effect of the change process.
As the competitive and economic environment changes, the MLIs will also change. IDC’s Maturity Models are under constant review to ensure that they reflect the best thinking of the day.
The structure of the Maturity Model provides a logical framework for understanding where an organization is positioned on the road to adopting “best known practices”. The characteristics of the various elements (Compelling Business Issues, Key Success Factors, Key Performance Indicators) provide insight into their contribution to the modelling process. In “Maturity Models for the Evolving Economy – Part 3”, the six Key Success Drivers and the rationale behind their selection will be discussed in detail.
1 Paul A. Strassman, “The Information Payoff”, Collier Macmillan Canada, Inc., 1985, pg. 100.
2 Derek F. Abell, “Managing with Dual Strategies”, Maxwell Macmillan Canada, Inc., 1993, pg. 175.
Jan Duffy is Group Vice-President, Solutions Research, for IDC Canada, and is the author of the recently published “Harvesting Experience – Reaping the Benefits of Knowledge”. She can be contacted at [email protected]
Key IT Market Assumptions
In 2004, the Internet will have 730 million users, and 60 per cent of U.S. households and 85 per cent of white-collar workes worldwide will be on-line.
New Business Models
The Internet enables disintermediation and reintermediation in all major industries. A good proxy is the percentage of business-to-business commerce to be conducted in e-marketplaces: from 0 per cent in 1999 to 56 per cent in 2004.
Wireless technology, particularly wireless access protocol (WAP) phones, will change the character of Internet access. By 2004, over 25 per cent of devices in the United States with two-way Internet capabilities will be mobile phones; the percentage will be higher in Europe and Japan. Over half of Internet users will have mobile access.
For the next five years, all major regions will continue deregulating their telecommunications industries at the same pace as the previous five years.
Consumers will continue to adopt key IT technologies (e.g. PCs, the Internet, printers, MP3 players, PDAs). In 1999, 72 per cent of Internet users accessed it from home (many also from work); that percentage will rise to 76 per cent in 2004, when almost 65 per cent of U.S. households will have PCs and almost 70 per cent will have Internet access.
General economic growth will remain brisk worldwide, with no recession or depression in any major region. GDP growth will average 3.5 per cent to 4.0 per cent per year over the next four years. Also, IT spending will correlate only with positive GDP growth.
Shortage of IT Professionals
The current shortage of IT professionals will not only continue but also get worse. Supply will remain at 85 per cent of demand for IT professionals in business; during the forecast period (2000-2004), demand for e-business professionals will grow from 6.9 million to 18.9 million worldwide, creating a shortfall of some 5 million.
There will be no unusual constraints in enabling or foundation technologies (e.g. LCD, power supplies, and microprocessors). Nor will there be spot shortages worse than that caused by the earthquake in Taiwan. Component costs will continue to drop at their current rate. Build-to-order and just-in-time inventories will create more vulnerability to shortages, but this will be balanced by much better forecasting and visibility into component needs.
Condition of the Stock Market
Corrections, but no major crashes or wild booms will take place. At a minimum, there will be a slight upward trend from 2000 to 2004. There will be no sustained downward trend of more than 10 per cent for the Dow Jones industrial average and of 15 per cent for the NASDAQ. Regional markets may drop up to 20 per cent. The IPO market will go up and down but will remain a viable method of migrating from private to public financing. Venture capital markets outside the United States will gain rapidly in funding.
The Breakup of Microsoft
Whether or not Microsoft is forced to split up, between 2000 and 2004 there will be little impact on the IT market, which is more tied to Microsoft’s product cycles than to whether or not those products emanate from one or more companies.