IT Project Management and Risk
As discussed in the readings, IT projects have notoriously high failure rates. I would like you to discuss issues of IT project risk. Why do you think IT projects are so subject to failure? Are they really riskier than other projects? What impact does project risk have on organizational IT value?  What can organizations do to manage this risk?March 2014 (13:1) | MIS Quarterly Executive 15

MISQUarterly
Executive

Many IT Projects Still Suffer From Poor Estimation1,2
Despite a great deal of attention in the trade and academic press, IT projects continue to fail

at an alarmingly high rate. One of the most-cited reasons for these failures is poor estimation
practices.

“Unrealistic expectations based on inaccurate estimates are the single largest cause of [IT
project] failure.”3

Estimation is defined as an informed assessment of an uncertain event. For IT project
managers, accurate estimates are the foundation for effective project planning and execution
and, ultimately, project success. Unfortunately, most project managers do a very poor job
of estimating and, as a result, most IT projects are classified as failures—61% in the latest
Standish Group report.4 The Standish Group’s data shows some improvement in the overall
success rate since 2004 (which it partially attributes to the Agile development process and
improved project management expertise). However, its figures show a slight increase in both
time and cost overruns since 2010—signaling that there is still much room for improvement.
According to Standish, 74% of challenged projects experience time overruns and 59%

1 Leslie Willcocks is the accepting senior editor for this article.
2 The authors would like to thank Steve McConnell and Arin Sime for their input throughout this research project. We would
also like to acknowledge the McIntire School of Commerce for providing financial support for this research project, thank research
assistant Meg Raymond and thank the Project Management Institute for posting a link to our survey.
3 Futrell, R. T., Shafer, D. F. and Shafer, L. I. Quality Software Project Management, Prentice Hall, 2002.
4 The Standish Group: Chaos Manifesto 2013, available at http://versionone.com/assets/img/files/ChaosManifesto2013.pdf.

IT Project Estimation: Contemporary
Practices and Management Guidelines
Many IT projects continue to suffer from poor estimation. Indeed, the accuracy of
estimation has hardly changed from that reported in a seminal study carried out over
20 years ago. Based on findings from two recent survey-based studies, which replicated
and then extended the original study, we provide guidelines for improving IT project
estimation, taking account of the greater use today of Agile, rather than traditional
Waterfall, development methods.1,2

R. Ryan Nelson
University of Virginia (U. S.)

Michael G. Morris

16 MIS Quarterly Executive | March 2014 (13:1) misqe.org | © 2014 University of Minnesota

IT Project Estimation

experience cost overruns. Further evidence can
be found in a review of 180 IT projects completed
between 1999-2013,5 64% of which suffered from
poor estimation.

In this article, we examine the practice of IT
project estimation, report the findings from two
studies and provide recommendations to help
project managers improve project estimation.MIS Quarterly Executive Vol. 10 No. 4 / Dec 2011 157© 2011 University of Minnesota

CIO and Business Executive Leadership Approaches to Establishing Company-Wide Information Orientation

CIO and BusIness exeCutIve LeadershIp
apprOaChes tO estaBLIshIng COmpany-wIde
InfOrmatIOn OrIentatIOn1,2

William J. Kettinger
University of Memphis
(U.S.)

Chen Zhang
University of Memphis
(U.S.)

Donald A. Marchand
IMD (Switzerland)

MISQUarterly
Executive

Executive Summary12

In the digital world, business executives have a heightened awareness of the strategic
importance of information and information management to their companies’ value
creation. This presents both leadership opportunities and challenges for CIOs. To
prevent the CIO position from being marginalized and to enhance CIOs’ contribution
to business value creation, they must move beyond being competent IT utility managers
and play an active role in helping their companies build a strong information usage
culture. The purpose of this article is to provide a better understanding of the leadership
approaches that CIOs and business executives can adopt to improve their companies’
information orientation. Based on our findings from four case studies, we have created
a four-quadrant leadership-positioning framework. This framework is constructed from
the CIO’s perspective and indicates that a CIO may act as a leader, a follower or a non-
player in developing the company’s information orientation to achieve its strategic focus.
The article concludes with guidelines that CIOs can use to help position their leadership
challenges in introducing or sustaining their companies’ information orientation
initiatives and recommends specific leadership approaches depending on CIOs’ particular
situations.

THE GROWING IMPORTANCE OF INFORMATION AS A
BUSINESS RESOURCE
In today’s digital world, enabled by social media, cloud computing, sensor networks,
online service offerings and big data applications, the volume, velocity and variety
of data are growing at unprecedented rates as individuals are constantly producing,
gathering and sharing information. Consumers, including the growing number
of digital “natives,” demand information competence in their network-based
communication. From a business perspective, IT and information are increasingly
embedded in products, services and business processes, leading companies to
collecting and managing ever greater amounts of data. Transforming the vast amount
of data both inside and outside companies into relevant information offering business
insights and helping companies improve efficiencies, seize opportunities and compete
is a critical challenge in the dynamic digital business environment.

Today’s leading CEOs, CFOs and COOs understand this. They recognize that
improving information management and leveraging the power of information and
digitization throughout all aspects of their business is critical to the execution of their
business MIS Quarterly Executive Vol. 7 No. 2 / Jun 2008 57© 2008 University of Minnesota

CIO Leadership Profiles: Implications of Matching CIO Authority and Leadership Capability on IT Impact

CIO LeadershIp prOfILes: ImpLICatIOns Of
matChIng CIO authOrIty and LeadershIp
CapabILIty On It ImpaCt1

David S. Preston
Texas Christian
University

Dorothy E. Leidner
Baylor University

Daniel Chen
Texas Christian
University

MISQUarterly
Executive

Executive Summary

Ultimately, organizations invest in information technology (IT) initiatives to improve
their level of performance. However, there have been mixed results from the payoff of IT
investments. This article presents evidence that the variation in benefits derived from IT
is in part due to the organization’s CIO leadership profile. This profile is determined by
whether the CIO’s level of strategic decision-making authority is high or low, and whether
his or her strategic leadership capability is high or low. We label the resulting four
CIO leadership profiles: (1) IT Orchestrator, (2) IT Laggard, (3) IT Advisor and (4) IT
Mechanic, and have identified the typical characteristics of CIOs that match each of these
profiles.

Based on empirical data collected from a field study,2 we show that the level of IT
contribution to a firm’s performance varies according to the leadership profile of its
CIO. We show how organizations can assess their current CIO leadership profile and
provide recommendations for CIOs who need to change their CIO profile to best fit their
organization’s goals. Over time, there will be a shift to IT Orchestrators, and CIOs lacking
the necessary characteristics should plan to acquire them.

THE IMPORTANCE OF CIO LEADERSHIP TO THE
MODERN ORGANIZATION
Over the past several decades, information technology (IT) has become essential
for organizations to increase operational efficiency and to obtain strategic success.3
However, many organizations have experienced the “productivity paradox”—
they have not been able to observe business value that is directly linked with their
investments in IT. Savvy organizations have realized that they cannot derive business
value by simply pouring vast sums of money into IT; rather, the strategic leadership of
IT is the key to maximizing its potential benefits.

The chief information officer (CIO) plays a critical role in the ability of an
organization to derive business value from IT. Organizations that view the CIO as a
strategic asset are more likely to create business value through IT and thereby achieve
superior business performance.4

However, not all firms need to include IT as an integral part of their business strategy.
We argue that the impact of IT within an organization depends on the fit between the
CIO and the strategic context of the organization. This article describes four distinct
profiles of CIO leadership. We examine the influence of these four profiles on IT’s

1 Jeanne Ross is the accepting Senior Editor BETTER
DECISION RIGHTS

F
or better or worse, the IT
spending boom has ground
to a halt, replaced by a
more sober era where IT
decisions are made with far
greater scrutiny. Once bit-
ten, twice shy is the name
of the game, as CEOs take

more control of IT initiatives and
tighten the purse strings by demanding
greater justification for new initiatives.
This cautious, less trusting environment
has resulted in a credibility gap between
management and IT, with IT staff in the
vulnerable position of feeling expend-

able as long as the outsourcing bug is in
the air. And IT staff frustration is often
compounded as staff members are
blamed for IT decisions made by top
management!
The irony of this scenario is that there

has never been a more important role for
IT in the e-business environment of
today. Integration of IT in internal
processes and external markets is grow-
ing at a furious pace. The stakes for good
communication are high. On one hand
there is an adversarial relationship due to
the credibility gap and the starkly differ-
ent language spoken at the business and

“The perils of screwing up (with technology) are greater every
year, making the stakes for effective communication even higher.”

—STAN LEPEAK, VP OF TECHNOLOGY
RESEARCH SERVICES AT METAGROUP.

FIX IT-BUSINESS
RELATIONSHIPS
THROUGH

80 December 2007/Vol. 50, No. 12 COMMUNICATIONS OF THE ACM

By Varun Grover, Raymond M. Henry,
and Jason B. Thatcher

IT ends. On the other, there is the need
for executive management and the top
IT brass to come together to synchronize
organizational IT with business needs
[1]. A sour relationship between these
groups is not good in an environment
where the downside risks of IT failure
are catastrophic and the upside potential
is often dictated by competitors.
Just how bad is it? We surveyed senior

IT managers in a variety of industries and
focused on some very simple questions:

• Who makes major IT decisions? Who
is held accountable for them?

• Does this affect the relationship of your
group with top management?

In this article, we discuss the concepts of
decision rights and accountability, and the
gap that might sour the relationship
between IT management and top man-
agement.

DECISION RIGHTS AND ACCOUNTABILITY
IT decisions in organizations are made in
a wide variety of areas. Major decision
areas range from those involving IT strat-
egy, or the role of technology in trans-
forming business, to more technical
decisions concerning IT infrastructure.
An appropriate decision-making frame-
work is critical for organizations that want
to effectively manage IT and information
assets. These include not only the hard-
ware and software assets, but the increas-
ingly important data on customers,
suppliers, and business processes. Without
an effective framework that allocates deci-
sion rights to the appropriate people, deci-
sions regarding IT assets will be
conducted in a piecemeal, incomplete, or
sub-optimal manner. Such non-integrated
thinking doesai Regulation Is Coming

102 Harvard Business ReviewSeptember–October 2021

AUTHORS

REGULATION
ai Regulation Is Coming

PHOTOGRAPHER LI SUN

How
to prepare
for the
inevitable

François Candelon
Global director, BCG
Henderson Institute

Rodolphe Charme di Carlo
Partner, Boston Consulting Group

Midas De Bondt
Project leader, Boston
Consulting Group

Theodoros Evgeniou
Professor, INSEAD

Harvard Business Review
September–October 2021  103

I D E A I N B R I E F

ABOUT THE ART

Li Sun sees the “creatures” in his photographs as embodying the
contradiction between the sense of freedom he felt as a child
growing up in the countryside and the surveillance cameras he
feels watching him on every corner in modern cities.

THE CHALLENGE
As companies increas-
ingly embed artificial
intelligence in their
products, processes, and
decision-making, the
focus of discussions
about digital risk is shift-
ing to what the software
does with the data.

WHY IS THIS A PROBLEM?
Misapplied and un-
regulated AI may lead
to unfair outcomes,
primarily because it can
amplify biases in data.
And algorithms often
defy easy explanation,
which is complicated by
the fact that they change
and adapt as more data
comes in.

HOW TO FIX IT
Business leaders need
to explicitly examine
a number of factors.
To ensure equitable
decisions, they need to
evaluate the impact of
unfair outcomes, the
scope of decisions taken,
operational complexity,
and their organizations’
governance capabilities.
In setting standards
for transparency, they
must look at the level of
explanation required and
the trade-offs involved.
In controlling the evolv-
ability of AI, they need to
consider risks, complex-
ity, and the interaction
between AI and humans.

104 Harvard Business ReviewSeptember–October 2021

O R M O S T O F T H E PA S T D E C A D E ,
public concerns about digital technology have focused
on the potential abuse of personal data. People were
uncomfortable with the way companies could track their
movements online, often gathering credit card numbers,
addresses, and other critical information. They found it
creepy to be followed around the web by ads that had clearly
been triggered by their idle searches, and they worried about
identity theft and fraud.

Those concerns led to the passage of measures in the
United States and Europe guaranteeing internet users some
level of control over their personal data and images—most
notably, the European Union’s 2018 General Data Protec-
tion Regulation (GDPR). Of course, those measures didn’t
end the debate around companies’ use of personal data.
Some argue that curbing it will hamper the economic
performance of Europe and the United States relative to less
restrictive countries, notably China, whose digital giants
have thrived with the help of ready, lightly regulated access
to personal information of all sorts. (Recently, however, the
Chinese government has started to limit Kudos to Robert Kaplan and Michael Porter
for their illustration of careful process
analysis and cost accounting in health care.
Their idea is terrific—but it is hardly novel.
Geisinger Health System in Pennsylvania
and Intermountain Healthcare in Utah have
long employed process analysis, and in
my 1997 book, Market-Driven Health Care,
I advocated activity-based costing of medi-
cal care bundles, which I called “health
care focused factories.”

Kaplan and Porter barely mention, how-
ever, that people are not fungible, so their
costs cannot be measured like the costs of

widgets in manufacturing. Some patients
are much sicker than others. A process fre-
quently called risk adjustment accounts for
these differences. The impact of risk ad-
justments on costs can be enormous. In a
risk-adjustment and activity-based costing
analysis that my students and I performed
for a total-knee-replacement procedure,
we found that while the average payment
was $35,000, the top decile averaged
$615,000. Useful risk adjustment requires
complex statistical analysis. If it were done
as the authors suggest, by simply adding
comorbidities, the analysis could create

thousands of different products, each
requiring separate analysis.

Furthermore, the implementation of
activity-based costing can “solve the
U.S. health care cost crisis” only if, as the
authors suggest, payers switch to reim-
bursing providers for value and bundles of
care. But those adopting the Kaplan-Porter
methods could repeat the mistakes of the
California health care providers that used
process analysis to price their offerings to
insurers in the 1990s: Many suffered sub-
stantial financial losses, in part because
their prices lacked risk adjustments and
reinsurance to protect them against ad-
verse selection by very sick patients.
Regina E. Herzlinger, Nancy R. McPherson
Professor of Business Administration,
Harvard Business School

HBR article by Robert S. Kaplan and Michael E. Porter, September 2011

“U.S. health care costs currently exceed 17% of GDP
and continue to rise,” say Harvard Business School
professors Kaplan and Porter. They trace spending to
its source: health care providers. Doctors, nurses, and
specialists do not understand the value of medical care
to the consumer; they overspend because they can’t
accurately measure health outcomes. The authors take
a look at providers that are measuring costs the right
way, and then prescribe a cost-measurement system
based on individual patient conditions.

How to Solve the Cost
Crisis in Health Care

Why Your IT Project May Be
Riskier Than You Think
HBR article by Bent Flyvbjerg and Alexander
Budzier, September 2011
The authors’ research found that one in
six IT projects finishes wildly over budget,
with an average cost overrun of 200%.

The article avoids the root cause of IT
failures: the lack of a framework for
effective collaboration. Far too many
organizations can’t do joined-up think-
A Matrixed Approach toD*-f& aI %’ o- IrNnI~ a. L 3
U~ …. s I I T overnance

Throughout an organization,

individuals make decisions

daily that influence the need

for and the value received

from information technology.

A simple one-page framework

can help companies allocate

IT decision rights and

accountabilities so that

individual IT decisions align

with strategic objectives.

Peter Weill and Jeanne Ross

very enterprise engages in IT decision making, but each differs considerably
C in how thoughtfully it defines accountability and how rigorously it formal-

izes and communicates decision-making processes. Without formal IT gov-
ernance, individual managers are left to resolve isolated issues as they arise,

and those individual actions can often be at odds with each other. Our study of almost
300 enterprises around the world suggests that IT governance is a mystery to key deci-
sion makers at most companies. On average, just one in three senior managers knows
how IT is governed at his company. (See “About the Research,” p. 28.) In this case, igno-
rance is definitely not bliss. When senior managers take the time to design, implement,
and communicate IT governance processes, companies get more value from IT.

While the research did not identify a single best formula for governing IT, one thing
is abundantly clear: Effective IT governance doesn’t happen by accident. Top-per-
forming enterprises carefully design governance. In those companies, managers at all
levels throughout the enterprise apply that design as they make daily decisions about
the use of IT. Further, 60% to 80% of senior executives in those companies have a clear
understanding of and can describe their IT governance. In fact, senior management
awareness of IT governance is the single best indicator of its effectiveness.

The effectiveness of an enterprise’s or business unit’s IT governance can be assessed
by evaluating how well it enables IT to deliver on four objectives: cost-effectiveness,
asset utilization, business growth and business flexibility. Our research, which weighed
each factor according to its relative importance to each company, showed that gover-
nance performance varies significantly across enterprises in an approximately bell-
shaped distribution. (See ‘Assessing IT Governance Performance’ p. 29.) According to
this measure, high IT governance performance correlated with the achievement of
other desired measures of success. For example, companies that effectively govern
information technology garner profits that are 20% higher than those of other com-
panies pursuing similar strategies.’ They also achieve higher returns on equity and
growth in market capitalization.

Although it cannot be conduded that superior governance performance causes
superior financial performance, it can definitely be said that the two measures corre-
late quite well. It is certainly plausible that the two are linked. Effective governance
aligns IT investments with overall busine




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