Rethinking Business Value

In my first post, I asked the question – “what constitutes business value?” I argued that it’s not simply delivering what the client asks because sometimes the client doesn’t have the right perspective. Most of my clients begin their conversation with me by talking about their IT problems. These conversations are typically characterized by the focus on IT systems and the immediacy of the need - they need better functionality from their CRM solution to remove some manual step or they need a specific report. In an order-taking IT organization, we might promptly write down the requirement and try to figure out when we will slot it into a release calendar. The customer’s requirement is heard, understood, and a plan is presented for meeting the requirement. This provides the customer with the value they’re looking for, right?

What’s missing from this conversation, in my mind, is context. Why do they need this particular report or functionality? What is the business goal that they are ultimately driving towards? If we have a good relationship with our clients, we may already know the answer to this question. There are others, though, that we need to have good answers for such as what are the other goals that the business is driving? Over what time horizon? How does this goal or requirement stack up against the others?

Absent a strong understanding of the business goals, strategies, and priorities, information technology organizations risk limiting the value they bring to their business clients.  Deloitte’s Center for the Edge recently published results from their “Shift Index” which found that while labor productivity has more than doubled in the past forty years, return-on-assets have declined by 75%. The researchers point out that much of the capital investment made by companies in the past forty years has been in information technology leading them to the conclusion that IT has failed to deliver significant value. Deloitte hypothesizes that "technology investment... has been overly focused on an industrial-era model. 'It’s been all about standardization and automation of business processes... Until and unless companies learn how to harness knowledge flows, the impact of the technology will mainly be continuing competitive pressure.”

Anecdotally, I have found this to be true. Many IT planning meetings with business clients amount to identifying manual processes and targeting them for automation, irrespective of the value that such automation might bring. The key success measure for one of Microsoft IT’s major strategic programs is being measured in labor productivity. While this isn’t inherently wrong, the question remains, can IT deliver greater value to its customers?

Most non-IT senior executives believe so. A McKinsey & Company survey (registration required) found that while most were satisfied with the ability of their IT divisions to provide basic IT services such as email, workstations, office productivity software, etc., what they found lacking was IT’s ability to provide transformative new business capabilities and innovation. These executives believed that IT was overly focused on creating greater efficiency – a view echoed by many IT executives who were also surveyed by McKinsey.

I am suggesting that IT leaders set a high bar for delivering business value – not just incremental improvements in productivity, cost reduction, and efficiency but significant, transformative changes that leverage the full potential of IT as an engine of the business to achieve its goals and objectives. IT organizations that can accomplish this are ones that have strong understanding of how the business functions and visibility into their clients’ strategy and goals.

This is no short-term journey for most IT organizations. This can involve a major paradigm shift in how we think about the relationship between IT and our business clients; it means changing how we think about the process by which we engage the business in strategic and investment planning; it involves skill sets that are not traditionally found in IT organizations.  In my next post, I will describe a planning framework that can be used to translate business strategies into investment plans.

Comments

[bespoke software development]

That was an inspiring post,

Keep up the good work,

Thanks