Proving the value of IT - Part two
- 03 February, 2011 10:54
To some extent, organisations are being held back from realising the value of IT projects by the very way in which they measure success. Too often, it is based solely on the business case.
"The business case sows the seeds for success or failure of IT-enabled investments," says Peter Harrison, who leads the value management competency within IBM. Harrison thinks organisations need a better vision for the much-maligned business case.
"There is a huge dissatisfaction with the business case approach, philosophy and practice," he says. "It's all about promising things that are rarely delivered. And that is why there is a lot of scepticism. Very few people believe business cases and it all comes back to a fundamental point: A lot of organisations don't spend enough time in the rigour up front."
Harrison cites one CIO who laconically observed that were his organisation to have banked all the business case benefits for lead time reduction, the company would be delivering goods to customers before the product was made. Rather than promising things that are rarely delivered, clued-up CIOs are spending the time to build a rigorous case based on business strategy. It's a high level conversation not traditionally associated with IT value.
Read Part one of CIO Australia's IT value series]].
"When we talk about the value of IT, we are often really talking about reducing the total cost of ownership and how we run the IT quotient -- which is a lower level conversation," Harrison says. "The conversation shouldn't be about 'IT and the business'; it should be 'IT and the other parts of the business'." It may seem like a subtle distinction, but it's an important one, and it's something that has always puzzled Grant Swinbourne, former general manager for business systems with the Jetset Travelworld Group.
"If IT and the business are not aligned from the start, somebody must be doing something wrong," he says. "Nobody talks about finance-business alignment or marketing-business alignment, so why do organisations persist in talking about the IT-business alignment as if they're separate entities with little relationship to each other?"
Swinbourne was instrumental in developing the systems for the budget airline, Jetstar, when it launched in Australia and says the experience showed him the value of having IT as an integral part of the commercial team. Working literally alongside other parts of the business, the team was able to develop innovative products that have become part and parcel of today's airline experience, such as seat selection.
"We turned on membership functionality on day one," he recalls. In its early stages, the functionality allowed customers to simply enter their details and sign up for marketing information.
Jetstar gained about 100,000 members in its first month. Within 12 months, that figure had skyrocketed to 750,000 and, today, the airline boasts more than 2.5 million members.
Capability Management partner, Jed Simms, who along with colleague Vince Gill co-authored the Shifting focus, shifting results paper, says the issue is that the business case is seen by most organisations as a financial document that therefore comes under the auspices of finance.
"It's not -- it's a strategic document" he says. "It's about how you are implementing strategy and the returns you will receive for the funds invested.
"It's also often just a collection of fields; it doesn't actually tell a story or capture the value proposition you are trying to put up. [People] think it's just a grab for cash when, in fact, it is very much the focal point of the project."
Rather than thinking in terms of cost first, benefits later, executives -- not just CIOs -- should be inverting their thinking.
"By swapping those two concepts around, you suddenly get value," Simms says. "Because our research has found that, in the whole end-to-end process, the business case was the greatest destroyer of value."
In fact 46 per cent of CIOs surveyed considered their current business case to be a destroyer of value.
Download the joint research by Capability Management and the CIO Executive Council.