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Principle 4.1: Impact and Portfolio-Based Resource Management
All IT activities and spending should be organized into resource and process port-
folios for purposes of impact assessment, performance management, quality and
service level assessment, and resource commitment.
Getting a handle on IT for the purpose of impact-based resource allocation
is difficult because of its dispersion throughout the enterprise, a complex mix-
ture of people, space, hardware, and software, and management practices in
managing support, operations, and infrastructure. Development projects, of
course, are not difficult. It is the rest of the IT spend that is hard.
Our goal is to examine 100 percent of the IT spend, wherever it occurs in
the organization. Our objective is to improve the impact all expenditures have
on achieving the company™s strategic intentions, and consequently its financial
performance.
Our approach is to apply portfolio management. Information Economics
examined all IT development projects and ranked them according to their
impact. This required looking at all projects together in a consistent fashion,
determining the highest impact projects and allocating resources to them. This
is a simple form of portfolio management. The key idea is that the entire port-
folio is being managed as an entity rather than as a collection of individual proj-
ect approval decisions.
With Right Decisions/Right Results, we apply portfolio management to the
entire IT spend. This allows impact assessments of each resource portfolio and
also provides the context for a larger set of management questions, such as serv-
ice level and quality assessment, technology obsolescence, and other perform-
ance measurements. The result is a comprehensive IT management discipline
that enables management to achieve the basic goal of maximizing the impact IT
resources have on the strategies and performance of the company.

Outcomes from Goal 4
Title Statement of Goal Desired Outcomes
Resource Manage IT as a set IT activities are organized into resource and process
and of resource and portfolios for purposes of impact assessment,
Process process portfolios. performance management, quality and service level
Portfolios assessment, and resource commitment.

Resources ” both ongoing expenses and new
investments ” are allocated and budgeted based on
explicit connection to strategic intentions.



GOAL 5: ACTIONS AND RESULTS
Produce the right actions and bottom-line results and use budgets, project eval-
uations, and performance measurement to achieve them.
The consequences of portfolio management must be explicitly connected to
budgets, which results in channeling resources to the activities that most support
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Summary of Right Decisions/Right Results ”Goals and Principles


strategic intentions This is also done by tracking the performance of IT projects
against strategies and, in particular, by tracking the performance of managers in
terms of the budgets, portfolios, and projects they manage. This, ultimately, is
how change is produced in the practices and cultures of an organization.


The result: All IT resources are actively deployed on projects and in support of
activities that directly support business strategies. IT produces actions and the
right results.



Principle 5.1: Responsive to Change
Planning, prioritizing, and measuring should combine the support of “strategy to
action” with the ability to react to unexpected events and business change.
Neither business nor IT environments remain static, especially in the time-
line of one- to five-year strategic planning processes and resulting plans. New
Information Economics processes drive the organization to actions that are
directly related to the organization™s strategic intentions. We must understand
that those actions may become less relevant as the business environment changes
and the company adjusts its strategic intentions to account for new opportuni-
ties or problems. The tools we use should help the organization respond quickly
to these strategic changes and allow management to understand the downstream
impact of the changes and adjust IT actions accordingly.

Outcomes from Goal 5
Title Statement of Goal Desired Outcomes
Management applies budgets, project evaluations, and
Actions and Produce the right
performance measurement to determine the success
Results actions and
and contribution of IT to business success.
bottom-line results
and use budgets,
Activities and resources are planned, prioritized, and
project evaluations,
measured based on their cause-and-effect connection
and performance
and contribution to business operational and strategic
measurement to
effectiveness.
achieve them.

Planning, prioritizing, and measuring combine “strategy
to action” with the ability to react to unexpected events
and business change.




SUMMARY OF RIGHT DECISIONS/RIGHT RESULTS ”
GOALS AND PRINCIPLES
The table below summarizes the Goals and Principles for Right Decisions/Right
Results and the five NIE practices.
86 FOCUS ON THE RIGHT THINGS


Goals Principles
Translate enterprise mission Enterprise planning and management processes should produce
and strategy into actionable, explicit and actionable strategic intentions that will lead to the
commonly understood business and IT initiatives that will achieve them.
strategic intentions.
All IT actions and spending should be driven by business strategic
intentions.

Managers across all functional areas should have a common
understanding of, and commitment to, enterprise strategic intentions.
Each organizational unit, including IT, should understand how current
and future activities in all functional areas support the enterprise
strategic intentions.
Get the right bottom-line IT™s business impact should be determined by cause-and-effect
results from all current and linkages with business outcomes. Activities and resources should be
future IT activities by planned, prioritized, executed, and measured based on their
evaluating the impact on connection and contribution to business outcomes.
strategic intentions.
Resources for both ongoing expenses and new investments should
be allocated and budgeted based on explicit connection to strategic
intentions.
Manage the culture and Managers™ roles are clearly defined to assure proper participation and
management roles regarding avoid disconnects created by an organization™s existing culture.
the use of IT to achieve
business strategic intentions.
Manage IT as a set of All IT activities and spending should be organized into resource and
resource and process process portfolios for purposes of impact assessment, performance
portfolios. management, quality and service level assessment, and resource
commitment.
Produce the right actions Planning, prioritizing, and measuring should combine support of
and bottom-line results and “strategy to action” with the ability to react to unexpected events and
use budgets, project business change.
evaluations, and
performance measurement
to achieve them.



GOALS AND PRINCIPLES APPLIED TO THE STRATEGY-
TO-BOTTOM-LINE VALUE CHAIN AND NIE PRACTICES
The solution being presented here is more than just prioritizing activities by
applying Right Decisions/Right Results frameworks, New Information Eco-
nomics practices, and choosing the most valuable. It is a complete, full-process,
full life-cycle view of the relationship between business units and IT, based on
the principle that all of an enterprise™s activities must be consistent with, and
support, enterprise strategic intentions. This requires a consistent, integrated
approach to planning, prioritizing, allocating resources, and managing per-
formance of business and IT activities across the enterprise. See Exhibit 5.1.
We began by stating the five goals we seek: actionable strategic intentions,
business evaluation of IT™s impact on these intentions, an appropriate manage-
ment culture, portfolios to manage IT resources, and action leading to business
results. These goals, and desired outcomes, lead to the one important result: that
the company gets the most business impact from their IT investments compa-
nies by managing and deploying their scarce IT resources most effectively.
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Goals and Principles Applied to the Strategy-to-Bottom-Line Value Chain and NIE Principles


EXHIBIT 5.1 Tying Goals to Practice Principles
Right Decisions/ New Information Economics
Right Results Practice Principles
Goals
Actionable, 1. Actionable Strategic Intentions
Commonly 2. Actions Tied to Strategy
Understood Strategic
3. Common Understanding of, and
Intentions
Commitment to, Strategic
Intentions
The Right Bottom-line 4. Business-Focused Outcomes
Results from IT 5. Impact-Based Resource
Allocation
Culture and 6. Role-Based Culture
Management Roles Management
Portfolios and 7. Impact/Portfolio-Based
Portfolio Management Resource Management
Actions and Results 8. Responsive to Change




Summing Up: The Eight NIE Principles
Although processes are important, they are not the complete solution to the
problems that we have described. We will later present the details of five practice
areas to achieve our objective of maximum IT impact on company performance.


EXHIBIT 5.2 NIE Principles as Critical Success Factors

Eight NIE Principles
1-1. Actionable Strategic Intentions
1-2. Actions Tied to Strategy
1-3. Common Understanding and
Commitment
2-1. Impact-Based Resource
Allocation
2-2. Impact/Portfolio-Based
Resource Management
3-1. The Right Action and Results
4-1. Role-Based Culture
Management
5-1. Responsive to Change




Effective Planning
Bottom-
Appropriate Resource Decisions
Business IT
Line
Strategies Actions
Results
Workable Budgets, Projects, and
Operational Plans

Performance Measurement Metrics
88 FOCUS ON THE RIGHT THINGS


However, the management culture issues are equally important, not only as
impediments but also as outcomes from applying the processes. We will devote
considerable time to addressing the culture issues and the disconnects, as we
present our five practice areas.


FOCUS ON THE RIGHT THINGS: MANAGEMENT AGENDA

If No, What Is
Yes or Our Plan for
Management Question No? Correcting This?

Do enterprise planning and management processes
produce explicit and actionable strategic intentions?

Are all IT actions and spending driven by business
strategic intentions?

Are IT activities and resources planned, prioritized,
executed, and measured based on their connection and
contribution to business outcomes?

Are resources ” both ongoing expenses and new
investments ” allocated and budgeted based on explicit
connection to strategic intentions?

Are managers™ roles clearly defined to assure proper
par ticipation and avoid disconnects created by an
organization™s existing culture?

Are all IT activities and spending organized into resource
and process por tfolios for purposes of impact assessment,
performance management, quality and service level
assessment, and resource commitment?

Do planning, prioritizing, and measuring combine suppor t
of “strategy to action” with the ability to react to
unexpected events and business change?



ADDITIONAL READINGS

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