This is a guest post by Stephen Kell on Value Realization and how it can help IT organizations stay relevant through changing times, as well as become a strategic partner within the organization. For background, Stephen is a Microsoft Enterprise Architect with extensive experience in Telecoms, Manufacturing, Financial Services and government sectors. Over the course of his career, he has played various roles including CTO, IT Director, Enterprise Architect, and Principal Consultant.
Without further ado, here’s Stephen on lessons learned in Value Realization …
IT: Valued Partner or Costly Infrastructure Provider?
During my time working within IT, I have found that business value is something that project teams worry about at the beginning of the project in order to justify initial investment but then is often forgotten as the project goes into the build and implementation phases. During these phases the emphasis is placed on the budget and timescales of the project. Scope changes are made to fit in with the budget and timescales without any thought as to the effect on the business value delivered. ‘On-time and on-budget’ is the project managers’ mantra whereas it should be ‘on-time, on-budget and business value delivered’.
A Lack of Business Value Results in Side-Lined IT
This lack of emphasis on business value delivered gives the business the view that IT is a cost center which provides an essential service rather than seeing IT as a valued business partner. This view is reflected in the position of IT departments under the CFO rather than as a valued member of the board reporting into the CEO or even as part of a business strategy group. The way technical people tend to communicate does not help. Often there is a long explanation of the technical merits of a solution followed by ‘it will save the user 2 hours per day’. This is where value models come in which allow the conversation to have some structure in order to attract and hold the attention of the business community.
IT is so important to the business but they often get frustrated with the IT department’s perceived inability to deliver and thus set up their own Business Unit IT departments, side-lining the IT department to acting as the provider of infrastructure only. This trend was highlighted in the recent MIT CISR 2013 Annual Research Forum in Boston.
Know What the Business Values, Measures, and Reports to Stay Relevant
In order to be able to communicate the value of IT to the business, the CIO and his team need to know what the business values and how these are measured and reported:
- Financial – what are the financial measures that need to be met?
- Business strategy – what aligns to the current business strategy? Is there an IT based disruptor that needs to be factored into the business strategy such as enterprise social?
- Market and industry trends – what are the trends and how can the organization exploit them using technology?
- Regulatory changes – what regulatory changes are coming to which the organization needs to adhere?
- People – what are the values of the organization and what will attract, retain and engage staff? Will using 10 year old technology on a system that takes 10 minutes to boot up attract and retain the right staff, or do they want the latest technology similar to the technology they use at home?
- Social responsibility – does IT align to the social responsibility and ethical business agenda of the company?
- Business Decision Maker’s personal drivers – what is important to the internal customer? What is he/she measured on: Revenue, margin, market penetration, expanding to new markets, acquiring new companies, changing the demographics of the customer base, other?
- Ability to execute – can the organization put the necessary changes in place to realize the value? Has the required change management been taken into account in the project costs and plan?
- Time to value and windows of opportunity – how long does it take before the value starts being realized and is there a window of opportunity which needs to be hit?
Use Value Models to Bring a Level of Maturity to the Value Discussion
How many people in the IT department know and understand the above value dimensions? Most of this information is readily available internally (and often externally). Taking time to understand what the organization values will mean that the IT department becomes much more relevant to the business and the business will start to listen and value the insights that the CIO and his team can bring, enabling them to be at the core of the decision making process and not side-lined.
By using value models the CIO can bring a level of maturity to the value discussion which might well be missing from the business. The CFO will have some financial models but these will not necessarily cover all of the dimensions of value. This can also be a challenge for the CIO; if there are not mature value models within the business then it is difficult to articulate the value of IT.
It’s Difficult to Model and Measure Value
Having said that, it is difficult to model and measure value. Other blog entries on this subject have covered the Observable, Measurable, Quantifiable and Financial categorization of value so I won’t go into detail here but would point out that financial models do not cover all the goals and drivers of certain organizations. Public sector organizations and charities are about delivering social value to the countries/communities that they serve and therefore the Social Impact has to be taken into account as well as the financial aspects and indeed the Social Impact can be much more important than the financial measures. Even commercial companies are now putting emphasis on value other than pure financial such as environmental impact, or helping the unemployed back into work.
Whereas there are some fairly mature models for modeling the financial side of a business, there are very few models for modeling the Social Impact of an organization. I have discussed this in more detail in the following blog post:
Learn Value Models and Frameworks to Play a Strategic Role Within the Organization
So in conclusion, business value to the organization is a very important concept for IT leadership teams to get their head around if they want to play a strategic role within the organization. Without a good understanding of business value there is the risk that they will be relegated to the side-lines as the provider of the infrastructure whilst the business units set up their own IT departments. Researching the different value models and frameworks should be a priority for IT leaders who have not already done so. Understanding what the business values and delivering to increase that business value keeps the IT department at the heart of the organization as a valued partner.