Maximizing the quantifiable business value of IT: Six essential components

Stretched resources make it difficult for companies to take the time to measure their business value, but it has to be done. These six steps will alleviate the stress.

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Maximizing the business value gained from technology initiatives requires a disciplined joint effort by IT, the business, finance, and key vendors. All groups are needed to determine the expected value during the planning process and then continually measure and improve actual value after deployment. While these efforts further burden already stretched resources, relatively modest investments can result in substantial payoffs. Well-executed...

business metric programs generate the following valuable outcomes:

 

  1. Focus -- ensuring that planning and implementation teams concentrate on the true priority business objectives of the initiative
  2. Incentive -- motivating team members by tying compensation, monetary or otherwise, in part to results achieved
  3. Insight -- enabling the team to proactively monitor the effectiveness of the solution and determine underlying causes of any problems.
    These are especially valuable for complex initiatives that will have a major impact on revenue or business costs.

Following are the six essential components of an ongoing business value measurement and improvement process:
 

  • Value Metrics -- quantitative measures of the effectiveness of the solution (people, process, and technology) in achieving priority business goals. These metrics along with the current baselines and future targets are used to create the business case. Metrics are the cornerstone of the entire IT value management effort.
  • Accountable People -- the senior managers responsible for achieving the expected result. Without accountability, the business case is a wish not a plan. Senior IT executives should be responsible for improvements in IT cost-effectiveness, with senior business managers being responsible for expected increases of revenue or reductions of business costs. Achieving planned targets should be part of the compensation plan of these executives, as is the case with their other major business performance metrics. Each value metric and associated target should have one accountable person. If more than one person is initially tied to a metric, the metric should be subdivided (e.g., by geography or division) or roles and responsibilities should be clarified.
  • Metric Team -- the group of people supporting the accountable person in the ongoing measurement and analysis of the metrics, generally including representatives from IT, the business, finance, and key vendors.
  • Analysis Metrics -- the next level of detail underlying the value metrics that enable the team to proactively monitor progress and identify the sources of inevitable problems. This would include leading indicators monitoring effectiveness of each of the steps of the impacted business processes as well as comparisons of the relative results of different user communities. Both are very useful for identifying best practices and opportunities for improvement.
  • Measurement/Analysis Process -- an agreed upon process for measuring, analyzing and acting upon the value and analysis metrics after deployment. Generally includes monthly to quarterly meetings of the team.
  • Measurement/Analysis Mechanism -- the method to be used to collect and analyze the metrics. This can be as simple as a manual survey of improvements in productivity or as complicated as a datamart of value and analysis metrics with extensive drill down and reporting capability. Don't assume that this will be addressed with a few more reports utilizing your current application! Generally some additional data and analysis capability is required.

Metrics and accountable people along with the business plan are defined during the planning process of the initiative. The supporting team, analysis metrics, process and mechanism are defined once the decision is made to go ahead with the project and are then implemented in parallel with the solution.

These benefits have long been understood and leveraged in other parts of organizations using methodologies such as Balanced Scorecard and Six Sigma. It is time to apply this discipline to IT!

Dan Merriman is President of the Chapin Consulting Group, Inc. Visit the Chapin Consulting Group website at www.chapinconsulting.com for more information regarding how corporate users and vendors of IT can increase the quantifiable business value gained from IT.
 

This was first published in January 2004

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