Ensuring IT Value for Money

A large amount of money is spent on Information Technology each year. Organisations regularly attempt to improve IT efficiency and get a better return on the money spent. According to a January 2014 article by PWC, businesses still are unsure if they are getting the most from their IT investments. CEOs and business leaders ask, “What are we getting from our IT investment?” and “are we spending the right amount to get the outcomes?” CFOs ask, “How do we know whether we are getting the value we expected?” The CIOs struggle with answering the questions, “How do I better explain to the business what it takes to run IT?” and “how do I get the business to understand how it affects the IT budget?”. The marketplace is becoming more dynamic and competitive and product life-cycles are becoming shorter. Organisations are seeking to become more agile. Making changes to the interconnected legacy systems is complex and takes too long.  When the business asks for rapid change, IT cannot deliver. Hence, IT appears to be of lower value. Continue reading “Ensuring IT Value for Money”

Three Tips for a Stronger Business Engagement

Fostering strong engagement with business partners continues to be a challenge for many IT leaders. For periods of time, such as when, a major project is underway or when a strategy is being developed, relationships with business partners can improve, but in matter of months it drops again. CIOs know that effective business relationships are key to their success. What can be done to sustain business engagement in an ongoing way? What techniques do successful CIOs use? Continue reading “Three Tips for a Stronger Business Engagement”

What Makes an IT Strategy Good or Bad?

Most CIOs would claim to have an IT strategy, but what makes some IT strategies ‘good’ and others ‘bad’? Recently there was a discussion on LinkedIn on this topic. Here are some noteworthy comments from that discussion about what makes a good IT strategy.

‘A great IT strategy that sits on the shelf is useless, and a bad IT strategy that gets executed can be even more harmful.’ Continue reading “What Makes an IT Strategy Good or Bad?”

Finding and demonstrating IT value

Some commonly heard complaints about IT are ‘we are spending too much on IT’, or ‘IT is a black-hole’. While IT aspires to become a strategic business partner, business folks complain about the lack of trust between IT and business or the lack of a common language between the two. Business does not know if IT is doing a good job and many IT leaders cannot communicate how they are creating value for the business.

A book by Hunter and Westerman, “Real Business of IT” provides a four step process for finding and communicating IT value. I thought I would share their key ideas. Continue reading “Finding and demonstrating IT value”

Show me the money!

Introduction

The 2009 Standish research shows that only 32% of IT projects are successful. Which means that the new capability is successfully “installed”. But the sad reality is that in a large number of cases this new capability is not used the way it was intended. Thus only a fraction of the desired benefits (or value) are realised. So when the CEO says, “show me the money” or the value the CIO is often caught short.

There are many reasons for this failure.  There may be a lack of understanding about the true intent for the change. Competing agendas and conflicting priorities may dilute the focus. Then there is resistance from the people affected to adapt new behaviours and processes. A key reason is that organisations tend to put all the rigour and energy in the project “installation” and almost none for the benefits realisation post-installation.

Instead of the “installation” focus, the modern CIO needs to adopt a “realisation” or value mindset. With a realisation focus, CIOs ensure that project success is judged by the value created. This article suggests steps CIOs can take to instil a benefits management focus and show the “money”.

Executive Summary

Organisations are good at figuring out what must be done to address their business challenges and capture the opportunities. IT organisations are getting better at delivering technology capabilities to address these challenges. A lot of energy and capital is invested in developing these technology solutions. The plans appear sound. Why is it then that the outcomes fall significantly short of the original ambitions? In today’s markets, CIOs and other leaders cannot afford to spend large amounts of money and risk their reputation just deploying projects, when the success now depends on their ability to manage the change and actually getting the returns on investment (ROI).

Benefit realization mindset

Figure 1 – Realisation mindset

Getting a sustainable ROI requires carefully managing benefits realisation as well as managing the human aspects of the change. The benefits management process provides the framework for blended investment programs that integrate technological change, organisational change and business process design within a common context.

The purpose of the benefits management plan is to identify and organise all activities such that the promised benefits are achieved. It consists of benefits identification, benefits planning, monitoring, realisation and review. A realisation mindset guides the entire project/ program execution. Surveys show that organisations without well-defined benefits planning processes are significantly worse at getting project ROI.

All major changes require shifts in the way people (staff, suppliers, competitors and customers) think, manage and act. These changes will not just happen by themselves. They must be planned and carefully managed. The bigger the change, the larger is the impact and the disruption and resistance to the change.  If people don’t “buy-in”, the change is likely to fail.  In technology enabled changes there is a tendency to focus on the technology side of the project and under-estimate the human change dimension.

Keeping track of the “money”– Benefits Management Process

A benefits management plan is a critical tool for focussing the mind on the value.. It has five stages.

  • Benefit Identification is about clarity around the intent of the change. Benefits identification determines project scope.  The sponsors must be clear about what beneficial outcomes (or value) they want to obtain. Where the benefits will occur? When? Who will receive these? Who is responsible for the delivery of benefits? How the project outcomes link to the value?

Figure 2  – Benefits Management Process

  • Benefits planning stage covers all steps needed to leverage the project outcomes to realise the desired value. (E.g. The project may deliver new technology capability, people need to be trained, new processes and structures may need to be implemented, product/ service features need to be changed, new marketing programs may need to be devised.) In planning evaluate the organisation’s capability to execute and capacity to absorb the change. Also consider the various risks and capability to govern and support the change.
  • Benefits Monitoring covers many stages of the technology development / implementation process. It ensures that the benefits are not diminished during the project life cycle.
  • Benefits realisation should be performed from the time changes begin to be implemented right through to routine operations stage. It would indicate if more actions are necessary to realise the benefit or whether further benefits are achievable.
  • Benefits review captures on lessons learned.

Ten success factors for realising the value

  1. Active Sponsor – Effective management requires a single leader who is visibly committed to success and accountable for realising the benefits. Major changes need senior level executive leadership. Active leadership means selling ideas repeatedly and being there to overcome obstacles.  The sponsor should be accountable.
  2. Clear Intent – There must be clarity about the reasons for the change. What “pain” this initiative will address? How well do key people share the intent?  Is it aligned to the strategy? What would success look like? Is the “price to be paid (dollars, political, organisational)” justified? A lack of clear and shared intent at the beginning would invariably result in a weak or failed initiative.
  3. Business Case – There are many examples of weak business cases that have just sufficient funding for the technology solution. All the post implementation activities and resources are assumed to come from the “business as usual” budget. Without adequate funding and resources for change management in the business case, benefits realisation would be suboptimal.
  4. Full life-cycle governance  – In business changes are to be expected.  The business case will change when the circumstances change. At agreed project stages or upon discovering major variations, both the costs and benefits should be reassessed. If project costs are higher, ask if is it still viable? Should more benefits be found? Should the scope be reduced? Remember that the business benefits are the reason for the project and not technology installation.
  5. People – People are the greatest variable in a change. Systems are at times easier to change than people. Benefits realisation will depend on transforming the way people think and operate. Don’t underestimate the difficulties employees will have in learning to work with new systems that require new skills and new ways of thinking. Take the views of affected people into account early. Try and understand reasons for their resistance and develop action plans to address these. Align consequences and rewards with benefit realisation.
  6. Capacity for change – Do you really know your organisation’s capacity for change? Do you have executives who have a track record of leading the change? Are there are too many changes going on in the organisation? Be truthful with yourselves about what the capacity for change is and what is realistic and then plan accordingly.
  7. Relevant measurement – Measurements must clearly demonstrate how investments contribute to the beneficial outcomes. They must support decisions regarding progressive allocation of funding and resources via agreed “stage-gates”. Secondly, measurements help adjust the benefits path to changing environments. Techniques such as “results-chain” would help choose the right measurements.
  8. Clear accountability – Assign clear ownership to each of the measurable outcomes including project milestones and outcome measures.
  9. Independent governance – Importance of independent governance cannot be overstated. Investment governance board should ideally also monitor benefits realisation. This creates transparency around investment and the returns on investment, provides due diligence on the change initiative and holds sponsors accountable for the benefits. It also helps create peer pressure and reinforces good governance. Experience suggests leaving the entire governance to the sponsor alone is a mistake. Sponsors are known to downplay mistakes and to overstate success.
  10. Value Management Office (VMO) – A VMO serves two purposes; first it provides expert advice and tools to the sponsors for assessing value (validating business cases). Secondly, it helps monitor program progress, and provides rigorous value assessments to the investment governance board. A VMO, like a Project management office, would promote consistency in the approach as well as promoting transparency via reporting.

Benefits management is process is applicable to all initiatives and not just for technology. But changing the organisations mindset from installation to realisation is neither a quick nor an easy process. It requires an ongoing commitment from the top. This mindset enables a big picture view of capital investments and enhances ROI.

For more information on how to create a realisation mindset in your organisation please contact the author.