In today's economy, CIOs are under more pressure than ever to demonstrate the business value enabled by their technology investments. Many IT and business executives turn to process-improvement methodologies, such as Six Sigma and Balanced Scorecard, to measure and continually improve the performance of their investments and initiatives.
In this installment of the Executive Guide, consultant Dan Merriman offers his advice on the value of implementing some type of performance management methodology to measure the continuous value of current and future IT investments. Following the expert advice is a list of additional resources to help you understand and evaluate your performance management options.
This Executive Guide is part of the SearchCIO Executive Guide series, which is designed to give IT leaders strategic guidance and advice that addresses the management and decision-making aspects of timely topics. For a complete list of topics covered to date visit the Executive Guide section.
Table of contents
Expert's corner
The business value of IT
ROI
IT governance
More resources
Business performance management methodologies are playing an increasingly important role in the management of IT initiatives as companies focus on the actual business value enabled by their technology investments. Many companies have improved their ability to define expected ROI during the planning phase of projects. Unfortunately, the output of this work is typically relegated to the shelf once the project is given the go-ahead. A more comprehensive IT value management approach is needed in which IT, the business, finance and key vendors work together to define, measure and continually improve the business value enabled by a project throughout its life. Business performance management methodologies and tools provide a great foundation for such an approach.
Balanced Scorecard and Six Sigma are the two most popular performance management methodologies being used by corporations today. Both are very complementary with IT value management. Balanced Scorecards are most often used by executive management to define and continually improve top-level corporate performance metrics in the interdependent areas of customer value, business process, finance and internal development. Unfortunately, from a technology value management perspective, Balanced Scorecard metrics are rarely defined at the level of detail needed for direct use with a technology initiative. To address this, the specific goals, actions (i.e., people, process and technology changes), and metrics of the technology initiative need to be integrated with the high-level Balanced Scorecard metrics. Generally, the technology initiative will address a portion of a target for a related Scorecard metric (e.g., a project to implement self-service would address half of the overall target for reducing the cost of providing customer service).
Six Sigma is typically used by operations teams to improve the quality and cost-effectiveness of specific existing processes. As a result, Six Sigma teams can get too narrowly focused on making relatively small tactical improvements when working on major IT initiatives. To address this, the Six Sigma "continuous improvement culture," methodology and best practices need to be applied to top-level business goals and strategies of the initiative.
Implementing true value-based initiative planning and continuous improvement for technology initiatives is difficult for many companies because it requires significant changes to processes, skills, tools and often the culture that supports them. However, given business demands it needs to be a priority. With the integrated model in mind as an endpoint (see "Driving Quantifiable Value From IT: A Comprehensive Approach" on the Reports page of the Chapin Consulting Group Web site), determine where improvements could be of the greatest benefit and start taking incremental steps. Business performance management has long been used with great success in other parts of organizations. It is time to apply this discipline to IT!
Dan Merriman is president of Chapin Consulting Group Inc. in Needham, Mass. He can be reached at dmerriman@chapinconsulting.com. Visit the Chapin Consulting Group website at www.chapinconsulting.com for more information regarding how IT, the business, finance and key vendors should work together to define, measure and continually improve the quantifiable value of technology initiatives.
