Why IT leaders should adopt a venture capitalist approach

When it comes to risky ventures, CIOs should take inspiration from their high-flying cousins in the world of venture capitalism

IT leaders play a key role in, and indeed are often those to instigate, major transformational initiatives for their companies.

However, transformation often spells risky new software implementations and the testing of new processes and operating models. If the execution is lacking, this can mean delays, overspends and frustrated business stakeholders. The question for CIOs is how to implement the vision behind transformational efforts effectively.

In many cases, the seemingly natural progression is to turn the strategy into a programme comprising multiple projects that combine to implement the full picture. Creating these superstructures often makes a lot of sense. Where the inputs and expected outcomes are well understood and likely to remain stable, then creating a programme can be the only sensible way to proceed.

Let’s take the Olympics as an example. Stakeholders had a clear idea of what success looked like. People knew where it would be, when it would happen, what sports would have to be hosted. None of these factors were ever going to change. Furthermore, even with our recent economic difficulties, the government was never likely to suddenly cut budgets. Creating a centralised management and governance structure to simplify communications and to drive out efficiencies of scale made a lot of sense.

By contrast, in terms of their parameters, enterprise transformations must navigate far choppier waters. At any point, budgets are liable to be cut in favour of other ventures. What "good" looks like for the programme may wax and wane with changing corporate priorities. The inputs may also shift – the software that everyone believes is the hot ticket today may be out of favour in 18 months; or the feisty operations director, keen on process change, may have moved on before you’ve finished your Visio diagrams. With change so prevalent in modern organisations, moving quickly from a transformation strategy to the initiation of a large programme may be like trying to build a house on sand.

There are other dangers with creating large programmes. Big programmes inevitably mean lots of consultants. There are many threats here. The first is the risk of upsetting your internal staff. "Once again the sexy stuff has gone to the hired help," they cry. The consultants may also try to manage their risk by tying down scope and plans as tightly as possible, while vigorously resisting change. Again, while resisting change may be virtuous in stable environments, this can risk failure in endeavours as innately amorphous as attempting to transform an evolving organisation.

So what’s the alternative? When it comes to risky ventures CIOs should take inspiration from their high-flying cousins in the world of venture capitalism.

Could a better way to turn transformational visions into reality be to place a few bets? Backing several high-risk smaller projects may be more sensible than concentrating all the risk into a single programme.

The advantages of this suck-it-and-see approach are manifold.

First, from a motivation standpoint, you’re more likely to keep your most talented internal staff engaged and motivated. Some of them will get to keep their projects rolling, instead of being subsumed in the larger programme.

Second, by demanding these mini-projects adopt agile practices, providing early demonstrations of alpha-tested solutions, you can clearly see the ideas that are really working and what really matters to users. This is a much more reliable source of management information than that gleaned from workshops asking users what they think they might need.

Third, staff performance becomes more transparent. It’s easy to see which teams and individuals are delivering - unlike in a large programme, underperformers have nowhere to hide. Killing one failing "start-up project" is a lot easier than trying to weed out the chaff in a larger programme.

Finally, this suck-it-and-see, multiple-runners approach is much more resilient to the shifting tides of the evolving enterprise. If budgets get squeezed or priorities change, the CIO can focus on the projects that are best aligned to the new corporate strategy. Shifting the course of a large existing programme can be much trickier.

Does this "venturist" approach mean throwing out the consultants, the project managers or professional programme managers? No.

It does however mean thinking hard about when and how to bring in expert external supervision. When a project has truly proven itself in the internal marketplace, when its needs and likely outcomes have become more predictable, bringing in a professional programme manager might be the right answer.

Equally, consultants can act as excellent catalysts when deployed sparingly across multiple projects in the way directors at a venture capital firm might mentor several start-ups. This principle of expediency holds for project management reporting and auditing. While tracking project finances is imperative, lean regimes that focus on demonstrations of working solutions trump those seeking manicured project plans and exhaustive documentation.

So a venturist approach comes with a new set of responsibilities, a new set of values for managing risk and less regard for hierarchy. When it comes to transformation and innovation, CIOs need to embrace the ideals of venture capitalists, where flat structures, loose reins and the start-up ethos of letting the "teenagers in the garage" run the show get results.

Richard Atherton (pictured) is an associate at Sovento Consulting.

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