<<

. 24
( 67 .)



>>

All programs and initiatives are prioritized based on their expected business
impact. All elements of each portfolio are reviewed, and the result of program
prioritization is the strategic IT agenda, which will then drive annual IT invest-
ments. Using the strategic IT agenda, business and IT develop the projects that
will support the agenda. These projects are then also prioritized, providing the
input for the IT annual plans and budgets.

Management Process ” Desired Business ” Desired Outcomes
Outcomes
Prioritization IT investments are prioritized against The company improves bottom-line
business strategy. impact and return on its IT investments.
104 ADOPT EFFECTIVE PROCESS TO PRODUCE ACTION


NIE Practice 4: Alignment
Goal: Base IT spending for lights-on activities on what is actually needed to
meet strategic and operational requirements. As discussed in the Alignment
Practice section in Chapter 8, baseline budgets can typically be on a “cost plus”
basis, with the result that this main part of IT expenses is not subject to strategy-
based decision making. The result is that infrastructure, support, and operations
spending can easily go to efforts that no longer support current business strate-
gies. The company is not getting sufficient impact from its existing IT resources,
nor can it determine whether the right amount is being spent on IT.
In many companies, these legacy activities are sacrosanct, considered by
business management as an entitlement, and rarely reviewed for continued rel-
evance to the business. However, these ongoing activities represent a large por-
tion of IT resources and can dramatically reduce the available supply of IT to
meet new strategic business demands. Unless they are also viewed in the con-
text of the current business strategic intentions, the company cannot determine
if they continue to provide impact and continue to warrant resources.
An important part of alignment is examining the current performance of
existing IT resources. Performance is defined in service-level, quality, technol-
ogy, and intensity-of-use terms. As a part of the alignment practice, the current
portfolios are assessed, and produce the Assessed Portfolios deliverable in the
value chain.


Management Process ”Desired Business ” Desired Outcomes
Outcomes
Alignment The entire IT spend is aligned with The company improves returns from its
business strategy. The entire IT IT activities in terms of bottom-line
spend is assessed for quality, impact. The total IT spend is effectively
technology, and so forth. controlled.




NIE Practice 5: Performance Measurement
Goal: Track the performance of IT investments in the business. As Chapter 10
points out, performance measurement is critical to determining whether strat-
egy and operational goals are being met, and whether the IT resources are per-
forming as well as possible. Without performance measurement, there is no way
to assure that resources are performing, or that goals are being met. The result
is that the company cannot determine if it is getting sufficient impact from IT
resources or even that the right amount is being spent on IT.
A performance measurement process is included in the strategy-to-bottom-
line chain. It is critical for IT to monitor its performance with metrics that the
business understands, not just internal IT operational performance metrics that
do not clearly relate to the business bottom line. By adding business performance
105
New Information Economics Practices


metrics to the chain, we close the loop and insure that IT is focused on pro-
ducing business results. It is the combination of performance metrics with strat-
egy-driven IT plans that produces IT action. Without performance measurement
programs, business will not know how well IT is performing and what impact
IT is having on the business.

Management Process ” Desired Business ” Desired Outcomes
Outcomes
Performance IT business and technical Performance measures lead to
Measurement performance is tracked. improved IT and business performance.


We also employ basic concepts of IT impact, portfolio, and culture man-
agement in the five practices.


IT Impact Management
Goal: Implement NIE practices successfully and achieve the affordability and
alignment goals of controlling IT spending and improving IT™s bottom-line impact.
Using the NIE practices effectively requires planning and coordination. The
connections with corporate and IT processes, and the assurance that the results
of the practices appear in budgets and performance measurement all require
constant and persistent management attention.
Treating the Strategy-to-Bottom-Line Value Chain and the NIE practices as
a significant management initiative is critical to success. That means, among
other things, assigning management responsibilities on an ongoing basis, and
establishing long-term strategies goals and short-term tactics for the Value
Chain and the Practices. We bundle all of this under the heading IT Impact
Management, and devote Chapter 13 to its discussion. We also highlight IT
Impact Management solutions to several practical problems that we discuss in
Chapter 7.
Note that we emphatically do not recommend that a company adopt the
entire Value Chain template or apply all NIE practices at once. The particular
situation of a given company and its management objectives dictate how to
approach improving the processes that influence IT spend and IT™s bottom-line
impact. Nevertheless, doing any of this does affect management roles, culture,
existing practices, and does require appropriate management attention. Thus,
the need for IT Impact Management.

Management Process ” Desired Business ” Desired Outcomes
Outcomes
IT Impact Business and IT management teams The total IT spend is effectively
Management execute the processes that improve controlled. IT™s contribution to bottom-
IT™s contribution to business line impact is improved.
performance.
106 ADOPT EFFECTIVE PROCESS TO PRODUCE ACTION


Portfolios and Portfolio Management
Goal: All the IT resources (infrastructures and legacy applications as well as new
development projects) are directed at business strategies. Is management paying
attention to the proper allocation of ongoing IT expenses as well as new appli-
cation investments? Without looking at the entire IT spend from the perspec-
tive of business strategy, resources will be wasted.

Management Process ” Desired Business ” Desired Outcomes
Outcomes
Portfolio Planning and management All IT investments and resources
Management processes focus on the entire IT contribute to bottom-line impact.
investment.



Culture Management
Goal: The management team understands the impact of IT, and manages the
business to achieve it. A company™s culture can have many facets that inhibit
effective use of IT resources, including agreement on what is important, what
planning and management behavior is to be encouraged, the value of working
together across silos and between IT and business, and so forth. IT is inherently
cross-silo and integrating; the culture can make this most difficult. The result is
that the company may not be getting full impact from IT.

Business Value Maturity Model
Goal: Overcome company management culture hurdles and limitations on
the company™s ability to execute NIE practices. The Business Value Maturity
Model describes desired business outcomes for each NIE practice area, and we
use “maturity” as the measure of whether the company can produce the out-
comes based on a combination of culture barriers and company capability to act
on the results.

Management Process ” Desired Business ” Desired Outcomes
Outcomes
Culture IT and business managers IT™s contribution to bottom-line impact is
Management participate effectively in all NIE- improved through effective business
and the Maturity enabled processes. and IT manager participation in NIE
Model processes.




SUMMING UP NEW INFORMATION ECONOMICS PRACTICES
The five NIE practices, together with the three supporting areas of IT Impact,
Portfolio, and Culture Management, work in concert with the company™s man-
agement processes that deal with IT™s plans and budgets. By embedding the NIE
practices into company processes, business and process outcomes are produced,
all of which are part of successfully getting from strategy to the right IT Action
107
Summing Up: Adopt Effective Process to Produce Action


and the right Business Results, thereby controlling IT spending and improving
IT™s bottom-line impact.
These practice outcomes are in two categories as shown in Exhibit 6.9. Man-
agement Process ” Desired Outcomes are those that change, and strengthen, the
existing company processes that deal with IT plans and budgets. These process
outcomes affect how the company management teams conduct the management
processes, and changes the roles management plays. Business ” Desired Out-
comes directly affect bottom-line impact and, for government and nonprofits,
impact on mission performance.


EXHIBIT 6.9 Management and Business ”Desired Outcomes
NIE Practices Management Process ” Desired Business ” Desired Outcomes
and Support Outcomes
Practices
Strategic IT and business planning are fully The company improves strategic and
Demand/Supply connected and integrated. bottom-line impact from its IT
Planning investments.
Innovation IT-enabled innovations impact The company continually improves
business planning and offer new products, processes, and bottom-line
strategies. performance through IT innovations.
Prioritization IT investments are prioritized against The company improves bottom-line
business strategy. impact and return on its IT investments.
Alignment The entire IT spend is aligned with The company improves returns from its
business strategy. IT activities in terms of bottom-line
impact. The total IT spend is effectively
controlled.
Performance IT business and technical Performance measures lead to
Measurement performance is tracked. improved IT and business performance.
IT Impact Business and IT management teams The total IT spend is effectively
Management execute the processes that improve controlled. IT™s contribution to bottom-
IT™s contribution to business line impact is improved.
performance.
Portfolio Planning and management All IT investments and resources”
Management processes focus on the entire IT development and lights-on”contribute
investment. to bottom-line impact.
Culture IT and business managers IT™s contribution to bottom-line impact is
Management participate effectively in all NIE- improved through effective business
and Maturity enabled processes. and IT manager participation in NIE
Model processes.




SUMMING UP: ADOPT EFFECTIVE PROCESS
TO PRODUCE ACTION
At the outset of this chapter, we made three recommendations.

1. A company should formally adopt a connected set of management processes
to produce the 12 deliverables of the Strategy-to-Bottom-Line Value Chain,
as displayed in Exhibit 6.3.
108 ADOPT EFFECTIVE PROCESS TO PRODUCE ACTION


2. Management should employ five NIE practices to be embedded in this con-
nected set of management processes. These five practices will strengthen the
deliverables and strengthen the connections between them.
3. The management team should focus on producing action through the Value
Chain and the NIE practices.

We have described the Value Chain and the NIE practices, along with an
implementation management program we call IT Impact Management.
Putting the five practices together, Exhibit 6.10 states the results:



EXHIBIT 6.10 NIE Practice Outcomes
Statement of Right NIE Practices Outcomes as Applied in the
Decisions/Right Results Strategy-to-Bottom-Line Value Chain
Goal
Translate enterprise mission The business strategic intentions are used in all five NIE practices.
and strategy into actionable,
commonly understood All IT actions and spending are driven by business strategic
strategic intentions. intentions, through Prioritization and Alignment practices.

Managers across all functional areas understand strategic intentions
and IT™s role in achieving them, through participation in the NIE
practices of Planning, Prioritization, and Alignment.
Assess the impact and get IT activities and resources are planned, prioritized, executed, and
the right bottom-line results measured based on their connection and contribution to business
from all current and future IT outcomes and strategic intentions.
spending by evaluating the
impact on strategic IT™s business impact is assessed through its cause-and-effect
intentions. linkages with strategic intentions leading to bottom-line outcomes.

IT Activities and resources are planned, prioritized, executed, and
measured based on their connection and contribution to strategic
intentions which lead to bottom-line business outcomes.

Resources”both lights-on expenses and new investments ”are
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 for achieving
business strategic intentions. Managers, through participating in NIE practices, understand IT™s role
and connection to strategic intentions.
Manage IT as a set of All IT activities and spending are organized into resource and process
resource and 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 combine support of “strategy to
and bottom-line results and bottom line” with the ability to react to unexpected events and
use budgets, projects, and business change.
performance measurement
to achieve them.
109

<<

. 24
( 67 .)



>>