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xiii
contents


Preface xxi
Acknowledgments xxiii


CHAPTER 1 Define the Goals 1
Today™s Reality 2
The Entire IT Spend: Reducing Cost and Improving
Bottom-Line Impact 4
The Strategy-to-Bottom-Line Value Chain 5
Disconnects 6
Critical Success Factors 7
Completing the Picture: The New Information Economics Practices 8
Summary of the Book 13
Define the Goals: Management Agenda 14


CHAPTER 2 Ask the Right Questions 17
The Right Questions Focus on Affordability and Impact 18
Affordability Questions: The Starting Point for the Right Actions 20
Impact Questions: The Roadmap for the Right Actions 22
Examples: Answering the Questions 24
The Contexts for Management Questions Are Planning and
Budgeting Processes 26
Why Ask Affordability and Impact Questions? 26
Taking Action 28
Chapter Summary 29
Ask the Right Questions: Management Agenda 30


CHAPTER 3 Connect to the Bottom Line 33
Bottom-Line Impact Based on Cause and Effect 35
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Cause and Effect Is Based on Management™s Intentions 36
Management™s Strategic Intentions 37
Principles of IT™s Bottom-Line Impact 39
Summary and Additional Implications 43
Connect to the Bottom Line: Management Agenda 45


CHAPTER 4 Understand Costs and Resources 47
Introduction 47
Origins of Portfolio Management 49
IT Portfolio Management in Prioritization 51
Portfolios in NIE Practices 52
Four IT Portfolio Concepts 56
Practical Problems in Applying Portfolio Management 62
Summing Up Portfolios and Portfolio Management
in Information Technology 67
Chapter Summary 68
Understand Costs and Resources: Management Agenda 70


CHAPTER 5 Focus on the Right Things 73
The Goals and Principles for Right Decisions/Right Results 74
Goal 1: Actionable, Commonly Understood Strategic Intentions 74
Goal 2: The Right Bottom-Line Results from IT 79
Goal 3: The Right Management Culture and Management Roles 81
Goal 4: Portfolios and Portfolio Management 83
Goal 5: Actions and Results 84
Summary of Right Decisions/Right Results ” Goals and Principles 85
Goals and Principles Applied to the Strategy-to-Bottom-Line
Value Chain and NIE Practices 86
Focus on the Right Things: Management Agenda 88


CHAPTER 6 Adopt Effective Process to Produce Action 91
The Strategy-to-Bottom-Line Value Chain 92
Establishing the Process Connections 98
Management Roles 98
New Information Economics Practices 99
Summing Up New Information Economics Practices 106
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Summing Up: Adopt Effective Process to Produce Action 107
Adopt Effective Process to Produce Action: Management Agenda 109


CHAPTER 7 Tackle the Practical Problems 111
A Practical Perspective 111
The Practical Problems Revolve around People 112
Addressing Practical Problems: IT Impact Management 113
Practical Problems Getting from Strategy to
Bottom-Line Impact 113
The Role of IT Impact Management 126
Tackle the Practical Problems: Management Agenda 127


CHAPTER 8 Make the Right Decisions 129
The Management Context for “Make the Right Decisions” 130
Elements of Right Decisions 132
Make the Right Decisions: Two NIE Practices 141
The Prioritization Practice 141
The Alignment Practice 150
Make the Right Decisions with Prioritization
and Alignment 160
Chapter Summary 162
Make the Right Decisions: Management Agenda 164


CHAPTER 9 Plan for the Right Results 167
Two Planning Processes 168
The Strategic Demand/Supply Planning Practice 172
The Innovation Planning Practice 187
Chapter Summary: Plan for the Right Results 194
Plan for the Right Results: Management Agenda 196


CHAPTER 10 Keep Score 199
Management Issues 201
Frameworks and Process Overview 202
Result 207
Critical Success Factors: Right Decisions/Right Results
Principles in Performance Measurement 208
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Summary: Performance Measurement Practice 210
Keep Score: Management Agenda 211


CHAPTER 11 Deal with Culture 213
Part 1: The Impact of Management Culture 214
Part 2: The Need for Culture Change 217
Part 3: Classification of Business/IT Culture 218
Part 4: Applying Culture Management Concepts 225
Deal with Culture: Management Agenda 230


CHAPTER 12 Chart the Path to Implementation 233
Introduction to the Business Value Maturity Model 235
Maturity Model Goals 237
Requirement for Management Action 238
Embedding NIE Practices into Management Processes 240
Using the Business Value Maturity Model 242
Summary: The Business Value Maturity Model 245
Chapter 12 Appendix A: Details of the Business Value
Maturity Model 246
Chapter 12 Appendix B: The Development of
Maturity Models 250


CHAPTER 13 Define What™s Next 253
Three Methods to Establish Right Decisions/
Right Results Goals 254
Setting Goals from a Corporate Governance and
Process Perspective 261
The IT Impact Management Program to Implement
Right Decisions/Right Results and NIE Practices 263
Conclusion to Chapter 13 267


CHAPTER 14 Answer the “So What?” Question 271
Why This Trip Is Necessary 271
First, Hit the IT Improvement Zone 272
The “So What?” for the Company 273
The “So What?” for the CEO 273
The “So What?” for the CFO 274
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The “So What?” for Line of Business Management 274
The “So What?” for IT Management 275
The “So What?” for the Business 276
Continuing Development 276


APPENDICES 277
Appendix A The Role of Enterprise Architecture in
Right Decisions/Right Results 277
Appendix B Management Team Roles in Right Decisions/
Right Results 283
Appendix C The Development of Strategic Intentions,
with Examples 289
Appendix D Applying Strategic Intentions in Prioritization 297
Appendix E The CFO Role in Right Decisions/Right Results 299
TM
Appendix F The Details of the Business Value Maturity Model 301


Bibliography 313
Index 323
Notes are available on this book™s website: www.wiley.com/go/ITAction.
preface



A lmost 20 years ago, Bob Benson of Washington University and Marilyn Parker
of IBM, with the help of Ed Trainor, broke new ground in understanding
the value relationship between IT and business. As co-principal investigators in
a research project sponsored by the IBM Los Angeles Scientific Center and
Washington University in St. Louis, Bob and Marilyn described a process and
framework for assessing the business value of IT investments in any company.
Their first book, Information Economics: Linking Business Performance and
Information Technology,1 established the view that, to be effective and valuable
to the enterprise, IT has to fundamentally improve how a business2 performs; to
do this, business management must be directly involved in IT decision-making.
This insight defined performance improvement in strategic and operational
terms, in the areas strategically relevant to the company and not merely as meas-
ured in traditional bottom line or ROI terms. Their book established a prac-
tical methodology for prioritizing IT investments, and it demonstrated that
focusing new investment on achieving explicit business strategies and opera-
tional excellence helped maximize the bottom line impact of new investments
for the business.
Over the past two decades, Information Economics has served as the foun-
dation for consulting by The Beta Group3 and research and teaching by Bob
Benson, Tom Bugnitz, and Bill Walton (Beta Group Principals). Through these
experiences, the authors have extended the original Information Economics
concepts and gained a number of key insights that form the foundation for this
new book.
This new book, From Business Strategy to IT Action, applies the original
Information Economics philosophy to all of the activities in which business and
IT management are engaged together ” planning, innovation, prioritization,
alignment, performance measurement, and portfolio and culture management.
The concepts around IT action are a crucial enhancement to the original ideas.


1 Marilyn M. Parker and Robert J. Benson, with E.H. Trainor, Information Economics: Linking Busi-
ness Performance to Information Technology (Prentice-Hall, 1988).
2 While the terminology here and throughout the book is presented in “business” terms, the con-

cepts and practices apply with equal force to government and nonprofit organizations. While busi-
ness is concerned with competitive strategy and financial outcomes, government is just as concerned
with strategy and performance to organizational mission.

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This addition takes the philosophy of IT/business connection from a passive
prioritization to an active let™s-get-the-job-done viewpoint. Without action that
produces bottom-line impact, nothing else matters. But even that isn™t sufficient;
the action must produce business results in line with business strategies. That™s
the message of “Right Decisions for a Better Bottom Line.”
However, “action” also requires that we address issues of culture, process
maturity, and disconnects between business and IT. Toward this end, we intro-
duce the Strategy-to-Bottom-Line Value Chain, a framework that integrates the
five NIE practices and three support areas. In this framework, Culture Man-
agement provides tools for understanding and changing a company™s current
culture with respect to business and IT cooperation. Portfolio Management
establishes information and analysis tools for prioritizing, aligning, and assess-
ing the company™s entire IT investment. IT Impact Management establishes the
IT culture and performance models for the IT/Business connection.
We use the expression “Right Decisions/ Right Results” throughout the
book as a shorthand expression to convey all of this. The five NIE practices lead
to the best decisions about the company™s IT investments; the Strategy-to-Bottom-
Line Value Chain leads to the necessary actions. Taken together, the company
achieves the right results: a powerful impact on its bottom-line.
The original Information Economics concepts applied in the first book
represented only one of the five NIE practices described in this book. By sur-
rounding those concepts with a complete planning and management framework,
we are again establishing a new way for business and IT managers to understand
and use IT to produce better bottom-line results.


CONTINUING DEVELOPMENT
This book is a work in progress. Further research and experience in companies
in the United States and Europe will continue to develop these ideas. We expect
to update chapter information on a regular basis.
Our websites, www.NewInformationEconomics.com and www.beta-books.
com, contain directions on how to obtain future updates. We can be reached

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