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Additional information relating to Chapter 5 can be found in Appendix C, “The
Development of Strategic Intentions, with Examples.”


NOTES
1. We developed the idea of “management factors” in the original Information
Economics work in 1987, and these evolved into strategic intentions. Our use
89
Focus on the Right Things: Management Agenda


of strategic intention is parallel to the concept of strategic intent, described in
Gary Hamel and C.K. Prahaled, “Strategic Intent,” Harvard Business Review,
May“June 1989, pp. 67“ 83.
2. See Chapter 3.
3. See Chapter 3 for other examples of strategic intentions. See also Appendix C,
“The Development of Strategic Intentions, with Examples,” for examples of
strategic intentions from business and government.
Tichy Noel and Stratford Sherman, Control Your Destiny or Someone Else Will
4.
(Doubleday, 1993).
5. Sumantra Ghoshal, Christopher A. Bartlett, and Peter Moran, “A New Mani-
festo for Management,” Sloan Management Review, Spring 1999, pp. 9 “ 20.
6. See Appendix C, “The Development of Strategic Intentions, with Examples,”
for examples of strategic intentions from business and government.
See, for example, R. Swift, M. Mack, and J.M. Descarpentries, Unlocking the
7.
Computer™s Profit Potential (New York: McKinsey, 1968). See also John Dear-
den, “MIS Is a Mirage,” Harvard Business Review, January“February 1972, pp.
90 “ 99.
8. How to do ROI other than on the basis of expense reduction for projects in
nonprofit and government organizations remains problematic.
See Parker and Benson, with Trainor, Information Economics (Englewood Cliffs,
9.
NJ: Prentice-Hall, 1988) and, by the same authors, Information Strategy and
Economics (Englewood Cliffs, NJ: Prentice-Hall, 1989).
10. The ideas and methodologies apply equally to nonprofit and government orga-
nizations.
11. See, for example, David A. Garvin, and Michael A. Roberto, “What You Don™t
Know about Making Decisions,” Harvard Business Review, September 2001, pp.
108 “116.
12. IT expenditures might be enterprise-wide, covering multiple IT organizations and
business units. Hence, portfolio management could open important enterprise-
wide coordination and management issues. In practical terms, however, the
primary application of portfolio management begins within individual IT orga-
nizations and then is extended enterprise-wide.
6
CHAPTER

Adopt Effective Process
to Produce Action



T his book is about controlling the IT spend and maximizing IT™s bottom-line
impact. The goal is to move companies past their disconnected and in-
effective management processes and
into an area where IT can consistently
Control Spending and Maximize
make significant contributions to the Impact on the Bottom Line
business.
1 Define the Goals
We make three basic points here.
2 Ask the Right Questions
First, a company should formally
adopt a connected set of management 3 Connect to the Bottom Line
processes to produce the 12 elements 4 Understand Costs and Resources
of the Strategy-to-Bottom-Line Value 5 Focus on the Right Things
Chain as displayed in Exhibit 6.3.
¤ 6 Adopt Effective Process
Second, we recommend that man- to Produce Action
agement employ five New Informa- 7 Tackle the Practical Problems
tion Economics (NIE) practices to
8 Make the Right Decisions
be embedded in this connected set
9 Plan for the Right Results
of management processes. These five
10 Keep Score
practices will strengthen the deliver-
ables and, significantly, strengthen the 11 Deal with Culture
connections between them. Third, we 12 Char t the Path to Implementation
encourage the management team to 13 Define What™s Next
focus on producing action through the
14 Answer the “So What?” Question
Value Chain and the NIE practices.
We emphasize our third recom-
mendation because merely having good answers to the questions about IT™s
alignment and affordability, and using good management practices to get the
answers, is no longer sufficient for most companies.


Actions, and the resulting bottom-line impacts, are what matter.


91
92 ADOPT EFFECTIVE PROCESS TO PRODUCE ACTION


Action is vital due to the importance of IT to the company™s basic business
strategies. As one commentator put it: “The vast array of web applications for
supply chain integration, customer relationship management, sales force
automation, work group collaboration and the sale of everything from equities
to automobiles should make it perfectly clear that information technology has
evolved beyond the role of mere infrastructure in support of business strategy.
In more and more industries today, IT is the business strategy.”1 Without action,
however, the strategy” and IT” become meaningless.
Too many times, we have seen managers make decisions without the nec-
essary follow-up to ensure actions take place. Even with the best of project pri-
oritization, there is no guarantee that any of the projects will actually get done
successfully or actually affect the bottom line. Decisions are not enough; suc-
cessful action is required. Getting bottom-line results requires action by senior
managers to implement their decisions, and action by IT and business managers
to follow through on the projects and operational decisions.
In this chapter, we describe the Strategy-to-Bottom-Line Value Chain with
its five NIE practices. Applying the Value Chain enables a company to move
from its business strategies to the IT actions that produce the appropriate
business bottom-line results. We previously introduced some of the practical
problems in doing this, such as existing management culture, disconnects in
management practices, and the legacy of IT applications and infrastructures. We
will describe the details of the practices in Chapters 8 through 10, and how they
fit into the existing management practices a company currently employs, such
as capital and operational budgeting, strategic planning, and management com-
pensation.
The five NIE practices have evolved and developed in the two decades since
the original Information Economics book. The core concept, however, has
remained as powerful as when we started in 1985: that IT has to fundamentally
improve how the business2 performs; to do this, business management must be
directly involved in IT decision making. The NIE goals further elaborate this
core concept, defining exactly what the business goals are, assessing and prior-
itizing alternatives, and implementing the right ones and measuring the results.
The five practices implement the ways and means to achieve the goals.


THE STRATEGY-TO-BOTTOM-LINE VALUE CHAIN
We define the Strategy-to-Bottom-Line Value Chain as a series of connected
management processes that culminate in project and operational budgets and the
performance metrics to monitor action and bottom-line impact.
Exhibit 6.1 portrays at a high level the elements of planning and managing
processes needed to produce the right decisions and right results for the bottom
line.

Effective Planning ” Generates IT strategies, programs, and initiatives driven
by business strategies, goals, and operational needs.
93
The Strategy-to-Bottom-Line Value Chain


EXHIBIT 6.1 Strategy-to-Bottom-Line Value Chain


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

Performance Measurement Metrics




Appropriate Resource Decisions ”Reviews investments and prioritizes stra-
tegic programs and initiatives and projects, resulting in resources allocated
to IT projects.
Workable Budgets, Projects, and Operational Plans ” Operationalizes and
establishes the operating budget for the year and determines the schedules
and goals of IT actions and projects, resulting in IT Actions that will pro-
duce the desired business results.

The Value Chain is made up of:

1. An integrated framework for the entire chain that is based on shared and
consistent management roles, responsibilities, and information. The frame-
work uses tools such as the IT portfolios described in the previous chapter
as a kind of connective tissue.
2. A set of interconnected and interrelated practices that can take advantage
of the overall framework and bring it to life. This requires that these prac-
tices be well-defined with consistent roles and processes.
3. A defined set of deliverables (as shown in Exhibit 6.3) that is internally con-
sistent, carrying through from business strategic intentions to the IT proj-
ects and budgets that produce action.

This generic process model incorporates NIE practices and supporting prac-
tices such as portfolio management to provide a more integrated and effective
strategy-to-bottom-line connection, as shown in Exhibit 6.2. These practices
close the gaps within the strategy-to-results.
The practices, when integrated with existing company management processes
such as budgeting and annual planning, will give the company a sound set of
management processes that satisfy the goal of translating business strategy into
IT actions that produce the right business results. The practices used in a con-
nected set of management processes will enable management to control IT
spending and improve IT™s impact on the bottom line.
Unfortunately, many companies lack the integrated and connected plan-
ning processes that can produce IT plans or budgets that consistently support
business strategies. Our experience has shown that companies, no matter how
94 ADOPT EFFECTIVE PROCESS TO PRODUCE ACTION


EXHIBIT 6.2 NIE Practices in the Strategy-to-Bottom-Line Value Chain

1. Strategic Demand/Supply Planning 3. Prioritization



2. Innovation 4. Alignment




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

Performance Measurement Metrics


5. Performance Measurement




sophisticated or formal their planning processes, usually fall short of getting IT
to contribute all that it can to achieving the strategic intentions. This chapter
will offer specific ideas, techniques, and tools that will address that problem.
At a minimum, a company should have management processes that result
in a strategic plan, IT projects, and an operating plan covering the business and
IT. Many companies have processes that also produce the other deliverables as
shown in Exhibit 6.3.
For companies with robust planning processes, the NIE practices are tools
that can be plugged into the existing planning and management processes, and
modified to meet the specific needs and circumstances of the company. Used in
this way, the practices can serve to strengthen existing management and plan-
ning processes, and help the company improve IT™s impact. (We do not propose
that companies replace functioning planning processes with these practices.
However, we do suggest that these five practices will provide new and useful
data and insights that can be fed into existing processes, greatly improving their
results.)

The Deliverables in the Strategy-to-Bottom-Line Value Chain
Twelve deliverables make up the Value Chain. They provide the information
context within which each NIE practice operates and establish the basis for the
process and information connections that lead from business strategy to the bot-
tom-line outcomes.
Exhibit 6.3 should be looked at as a template defining the 12 deliverables.
A company with well-established management processes may find they obtain
the same information in different formats. However, the key points are:
95
The Strategy-to-Bottom-Line Value Chain


EXHIBIT 6.3 Value Chain Deliverables
Strategic IT Planning Annual IT Planning
1
The Business Enterprise: Lines of Business, Departments
Business
Strategic
7 Business Plan
Intentions
10
3 (Annual)

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