Senior executives are increasingly demanding that the actual value enabled by IT projects be measured and continually improved as a follow-up to ROI work done during the planning process. Value metric measurement and improvement have long been key management practices in other parts of organizations, using methodologies such as Balanced Scorecard and Six Sigma. This discipline is now being applied to IT as a result of the magnitude and importance of technology investments.
Those responsible for the expected benefits of an IT investment certainly want to know the actual value that is being enabled by it on an ongoing basis. However, with complex projects that have a major impact on the business, it is equally important to be able proactively monitor how well the people, process, and technology components of the solution are working and determine the likely places to focus when the inevitable problems arise.
Metrics that measure actual business results (Value Metrics) are "lagging indicators" that quantify the overall impact of a process and its supporting applications after the fact (e.g., to what extent revenues have gone up, costs have gone down). "Leading indicators" provide insight into how well the underlying components are functioning, enabling proactive monitoring and troubleshooting. A value management program should include a combination of leading and lagging indicators as well as drill-down comparisons of these metrics across different user communities.
Two types of leading indicators (business process and implementation) along with drill-down comparisons should be used with Value Metrics to enable proactive monitoring and analysis of underlying issues. These are referred to as Analysis Metrics, and are summarized below:
- Business process leading indicators: measures of the efficiency and effectiveness of each step of the business process, from the perspective of the owner of the business area. For a sales process, examples would include: number of opportunities, number of qualified prospects, number of proposals, number of closed deals, and number of signed contracts. Monitoring the results of these metrics provides valuable insight into where time is being spent in the process and how well each of the steps are functioning.
- Implementation leading indicators: measures of the progress being made with the deployment of each solution component, from the perspective of the project manager. Examples would include extent of usage, quality and completeness of data, and the occurrence of expected events. This information helps determine the progress of the implementation as well as the effectiveness of utilizing the components of the solution.
- Drill-down comparisons: relative comparisons of the efficiency and effectiveness of different communities using the solution (e.g., by region, user population, division, product/service). This information helps identify the active and effective users, as well as those that need more assistance.
Analysis Metrics should be defined and implemented right after the project is given the go-ahead, in parallel with the implementation of the solution itself. It is possible to add Analysis Metric capability to an existing application for measuring and improving value from that point forward, but it is far more expensive at that point.
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 can increase the quantifiable business value gained from IT.