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gies. Yet the new reality of information technology is that it is increasingly cross-
functional and cross-organizational. Some things like e-mail and connectivity and
collaboration are obvious. Others are business process-based. Companies that
already have a strong commitment to process management have made inroads
against functional silos. But even in a process-focused company, the issue of
common understanding of strategic intentions and their implementation can be
difficult across functions and among geographies.
The management practices of planning, prioritization, alignment, innova-
tion, and performance management can be equally cross-functional. Doing them,

Outcomes from Goal 1
Goal Title Statement of Goal Desired Outcomes
Actionable, Translate enterprise The business has a set of stated strategic goals
commonly mission and strategy that clearly identify how the business will achieve its
understood into actionable, competitive and operational objectives.
strategic commonly
intentions understood Management has established explicit and actionable
strategic strategic intentions that describe the strategies/goals for
intentions. the business and that lead to the business and IT
initiatives that achieve them.

Business and IT managers have a common
understanding of, and commitment to, enterprise strategic
intentions. Each organizational unit, including
understands how current and future activities in all
functional areas support the enterprise strategic
Goal 2: The Right Bottom-Line Results from IT

as described in the prior section, may encounter cultural barriers, but doing
them may also help in re-directing the culture by engaging managers in new and
different roles with respect to IT.

Get the right bottom-line results from all current and future IT activities by eval-
uating their impact on strategic intentions.
Strategic intentions tell us what management intends to do to improve
strategic and operational performance, in order to improve financial perform-
ance. Therefore, we assess the bottom-line impact of plans, initiatives, and cur-
rent resources based on their impact on those strategic intentions. This is
accomplished through formal and consistent practices that identify and assess
the cause-and-effect links between plans, initiatives, and resources, and the
enterprise strategic intentions. The goal is for all plans, initiatives, and resources
to be connected to achieving enterprise strategic intentions.

The result: Enterprise IT investments and resources will directly support enter-
prise strategic intentions; the business bottom-line impact of IT will be improved.
The company gets the right results from IT.

Principle 2.1: Business-Focused Outcomes
IT™s business impact should be determined by cause-and-effect linkages with busi-
ness outcomes. Activities and resources should be planned, prioritized, executed,
and measured based on their connection and contribution to bottom-line out-
As stated earlier, our basic theme is that IT resources should be allocated to
activities that bring success to management™s strategic intentions. This is what
we mean by impact-based resource allocation. The success of management™s
strategic intentions is determined by actual business outcomes, such as bottom-
line performance in the case of for-profit companies or achieving mission goals
in the case of government and nonprofits.
The key is cause-and-effect. The test for connecting IT to business, for
determining contribution to business outcomes, is how well IT impacts those
outcomes. We understand that IT does not stand alone in this. Impact on oper-
ational or strategic effectiveness, and impact on management strategic inten-
tions, are ultimately achieved by the organizations, managers, and people that
apply IT in their areas of responsibilities. IT is an enabler, a partner, a compo-
nent of the activities leading to business outcomes. It is in this context that
we search for IT™s cause-and-effect connection. How planning, prioritization,

execution, and measurement is done, is based on determining how IT will enable
the specific activities that lead to improved business performance.

Principle 2.2: Impact-Based Resource Allocation
IT resources for both lights-on expenses and new investments should be allocated
and budgeted based on explicit connection to strategic intentions.
A manager™s job is to assure that scarce resources are directed to the most
important areas of the business. IT, like any business resource, is finite. In
IT™s case, the finite characteristic could be based on the money available to
spend on IT, management time available to manage IT, or people available with
the necessary IT talents. Companies must allocate finite IT resources to their
most important problems and opportunities. IT is no different from any other
The way to determine “what is most important” can be tricky. Business
journal articles as early as the 1960s bemoaned the difficulty of effectively apply-
ing data processing to the right business problems.7 During that period, the rec-
ommended approach was careful cost-benefit analysis and financial business
cases, to be done for all proposed data processing projects. Doing ROI, or EVA,
or some other financial analysis has become one popular method for determin-
ing the most important projects. The greater the projected ROI, the more
important the project would be. This makes sense given that a company™s goal
is bottom-line performance.8
The issue that the original Information Economics books9 addressed was the
difficulty of applying ROI to strategic IT projects as well as to projects that pro-
duce so-called intangible benefits. Information Economics described six classes
of benefits, only one of which was economic impact such as ROI. The others
were strategic match, competitive advantage, management information, com-
petitive response, and strategic IT architecture. Information Economics pre-
sented a specific evaluation methodology using the six classes of benefits, and
used the term value rather than benefit to describe them. As will be established
in the following sections, a better interpretation is that the six value-based ben-
efits are part of operational effectiveness and strategic effectiveness, elements of
management and financial principles used in such disciplines as shareholder
value and balanced scorecard.
We operationalize these ideas by defining the concept of strategic intention
to represent management™s goals and strategies to improve the financial per-
formance of the business.10 Impact is defined as the contributions IT has made
towards achieving management™s strategic intentions. This includes strategic
intentions to reduce cost and increase revenue, and consequently ROI, of
course. But strategic intention also includes management™s intentions about the
other Information Economics benefits such as competitive advantage. Taken
together, costs, revenues, competitive advantage, and so forth, are reflected in
management™s strategic intentions to improve operational and strategic effec-
tiveness of the business, and thereby improve its overall financial performance.
Goal 3: The Right Management Culture and Management Roles

Our basic theme is that IT resources should be allocated to activities that
bring success to management™s strategic intentions. This is what we mean by
impact-based resource allocation. Whereas the original Information Economics
focused on new IT investments, Right Decisions/Right Results applies impact-
based resource allocation to the entire IT spend. Most companies spend only a
small fraction of their overall IT resources on new development. The bulk of a
company™s IT expenditures are in maintenance, operations, and supporting
existing applications and infrastructure.
Further, there is a tendency for managers to think of new IT projects in
strictly capital budgeting terms, focusing on spending new resources rather than
spending ongoing budget resources. For example, maintenance budgets typically
are larger than many new development projects, and often business units have
budgets for small projects as large as maintenance or development budgets.
Managers may not think of these budgets are part of the resource-allocation
opportunities, but they are certainly part of the company™s IT spend.
Impact-based resource allocation applies to the entire IT spend, and to the
annual budget process as well as capital or new resource processes. We expect
to improve the company™s overall performance by improving the allocation of
IT resources, for development as well as lights-on, in operating budgets as well
as capital budgeting. This puts the IT budget under significant business-based
scrutiny, which can affect the management culture as well.

Outcomes from Goal 2
Title Statement of Desired Outcomes
Right Assess the IT resources, both lights-on and future investments, are
Bottom-Line impact, and get evaluated according to their impact on the achieving the
Results from the right results, businessís strategic intentions.
IT from all current
and future IT Resources, both lights-on expenses and new investments,
activities by are allocated and budgeted based on explicit connection
evaluating their to strategic intentions.
impact on
strategic Activities and resources are planned, prioritized, and
intentions. measured based on their cause-and-effect connection and
contribution to business operational and strategic

Manage the culture and define management roles regarding the use of IT to achieve
business strategic intentions.
Business managers generally know what IT is doing for them in their func-
tional area because of their tactical, day-to-day dependence on IT in their opera-
tions, but are largely unaware of what IT accomplishes elsewhere in the enterprise.
To successfully link business strategy with IT action, business managers must

participate in IT planning and decision making, based on enterprise strategic
intentions and with an enterprise point-of-view. Their role and responsibility in
IT planning and decision making requires understanding the full range of IT
possibilities across the enterprise, the possible IT demands from the business,
and the organizational requirements for successful implementation.
The Right Decisions/Right Results framework and NIE practices define
business management roles in planning initiatives, investments, and the decision-
making associated with them. For IT investments especially, it is business man-
agers, not IT, who are most suited to making connections to enterprise strategic
intentions. We expect business managers who are responsible for enterprise
investments to understand the full range of IT resources, activities, and invest-
ments under consideration, and their business impact. This is one example of the
management culture implications of Right Decisions/Right Results. It can change
the roles that managers play and alter the perspective managers have of IT.11

The result: Business managers will understand the full range of IT activities and
the overall impact of IT on enterprise performance; this understanding influences
the management culture and management™s roles with regard to IT.

Principle 3.1: Role-Based Culture Management
Managers™ roles are clearly defined to assure proper participation and avoid dis-
connects created by an organization™s existing culture.
Getting from business strategy to IT action requires a disciplined, formal
approach to business and IT planning. This discipline requires a culture that
accepts the role of IT in the business and requires an enterprise-wide view on
the part of each manager. New Information Economics practices deal with the
cultural requirements of business strategy to IT action by clearly defining the
role of business and IT managers in each of the practices. Both business and IT
management needs to have a common understanding of the strategic intentions
of the company, and each has specific roles in creating the plans for driving IT
actions. IT managers for their part are measured in business terms and are
responsible for producing, with business partners, business results from IT activ-
ities. By clearly defining all of these roles and responsibilities, the cultural obsta-
cles to effective IT actions can be overcome, and in fact over time a culture that
accepts an enterprise-wide view of IT contributions emerges throughout the
An emphasis of this book is on management role development, with man-
agement practice development as a means to that end. This approach addresses
the practical problems associated with executive participation and support. In
the final analysis, it is the people and culture that will dictate success. In this
way, we will help managers understand how to improve IT™s contribution to
Goal 4: Portfolios and Portfolio Management

company performance. This understanding focuses on the roles each leadership
group needs to play. For example, the CEO understands the role of his senior
leadership team. The senior leadership team members can see their role in estab-
lishing strategic direction and priorities. The IT leadership team members can
see their specific leadership role and their role in setting the stage for the CEO
and senior leadership team™s involvement.

Outcomes from Goal 3
Title Statement of Goal Desired Outcomes
Culture and Manage the Business and IT managers have a common, consensus
Management culture and view as to the role of IT to achieve the business strategic
Roles management intentions.
roles regarding the
use of IT to achieve Business and IT managers have a common
business strategic understanding of and commitment to enterprise strategic
intentions. intentions.

Managers™ roles are clearly defined to assure proper
participation and avoid disconnects created by an
organization™s existing culture.

Manage IT as a set of resource and process portfolios.
It is not just investments in new IT capabilities that are important to improv-
ing a company™s strategic and operational performance. Most of a company™s
IT expenditures are for the more mundane maintenance, operations, and infra-
structure activities. To be effective at improving operational and strategic effec-
tiveness, a company needs to manage the impact of all of its IT investments, not
just new development. Portfolio Management is the foundation for increased IT
impact through improved operational and strategic effectiveness.
The NIE practices of Planning, Innovation, Prioritization, Alignment, and
Performance Measurement focus on all resources devoted to IT, including devel-
opment, maintenance, operations, and management. By looking at IT as a set
of portfolios, all of the resources can be managed for bottom-line impact.12 The
key is to look at all the resources in a consistent manner, linking them to busi-
ness outcomes, and including cost, service level and quality, and technical obso-
lescence in the assessments.

The result: The entire IT spend, the complete set of IT activities and resources,
is considered in assessing business bottom-line impact, service and quality, and


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