<<

. 27
( 67 .)



>>

tices, in order to achieve the benefits of the new practice. (In one case, an insur-
ance company adopted a business-strategy-driven prioritization practice for its
IT application development portfolio. However, these new priorities were not
fully reflected in the annual operating budget, and the key business managers
did not get changes in their personal performance plans. As a result, company
management was frustrated that the IT application development did not pro-
duce all the business changes intended, in the timeframe expected.)
Companies often have processes for these elements but rarely aggressively
coordinate them (see Exhibit 7.4).

Corporate Strategic Management Processes. These are the planning processes
(at the beginning of the Value Chain) and strategy-related capital and multi-
year budget processes. Without question, if our planning does not influence
capital budgeting, or influence final budget decisions, then we have not
accomplished anything. For the same reason, if we have not included the
outcomes of the businesses planning processes in our activities, we then dis-
connect from the business. Both connections are essential.
Technology Management Processes. Internal to IT are the Project Manage-
ment and the Enterprise Architecture processes. Project management is a
prime connector for performance metrics as well as for the processes that
monitor continuing projects. Questions of reprioritization during the life of
projects come into play here. Enterprise Architecture in some companies is
a prime mover in planning from the technical perspective. When EA is vig-
orous, it has to be integrated into the planning and project development
activities and involved with the prioritization processes.
121
Practical Problems Getting from Strategy-to-Bottom-Line Impact


EXHIBIT 7.4 Value Chain Connections to Other Processes

Corporate Strategic Operations
Management Management
Processes Processes
Budgets
Strategic business
Procurement
planning
Human Resources
Capital planning and
budgeting

Plans: Establish business requirements and
IT
IT solutions based on business strategy
Action
Business Resources: Justify and prioritize programs
:
Strategies and projects based on business strategy
Business
Operationalizing: Establish budgets, plans,
Results
and metrics based on business strategy




Technology
Management
Processes
Project Management /SDLC
Enterprise Architecture




Operations Management Processes. These include the annual budget process,
procurement, and human resources. We mentioned budgeting in the corporate
strategic processes, from a multiyear and capital perspective. The critical
point is that budgeting is what enables actions. Money, after all, is the basic
tool for getting things done, and it provides the framework and guidance for
what things should be done. It is critical to make the connections between
these processes and the budgeting/resource allocation processes.

As Exhibit 7.4 illustrates, the need for connection and integration is not only
within the Strategy-to-Bottom-Line Value Chain itself but also between the
Strategy-to-Bottom-Line Value Chain and the other elements of the company™s
management processes. The operational and tactical system requirements
(including maintenance and enhancement requests) of individual business units
are fed into an IT annual planning process, producing IT programs and initia-
tives to support those requirements. The programs that result from the collected
set of business unit requirements must then somehow be prioritized for business
impact, with investment decisions made for high-alignment and affordability
programs (IT Strategic Program Review).
In reality, many companies and planning methodologies fumble a critical
step: Measuring the actual performance, in both business and IT terms, of the
IT organization in putting the plans into action. Very few companies have rele-
122 TACKLE THE PRACTICAL PROBLEMS


vant performance measurement programs that insure that plans are put into
action and that the actions have a demonstrable impact on achieving the busi-
ness™ strategic intentions. This undisciplined management of resources results in
the continuous erosion of planned strategic resources. As a result, many of IT™s
activities remain disconnected from the company™s strategic intentions, and IT™s
overall contribution to the business is much smaller than it could be.4

IT Impact Management™s Approach to “Company Processes”
IT Impact Management solutions emphasize directly engaging the process
owners of the relevant process ” be it corporate, technology management, or
Operations Management ” in the evolution of Right Decisions/Right Results
developments. In particular, these process owners have to see how our approaches
address the problems and concerns they have (the optimal solution) while not
threatening to change or impact their processes needlessly.


EXHIBIT 7.5 Connecting Processes to Owners
Process Their Objectives, Problems, Right Decisions/Right
Owner and Concerns Results Connections and
Solutions to their
Objectives and Concerns

Corporate Strategic
Strategic Business
Management Planning
Processes
Capital
Planning and
Multiyear
Budgeting

Other
Processes

Technology Project
Management Management/
Processes PMO

Enterprise
Architecture

Other
Processes

Operations Budgets
Management
Procurement
Processes

Human
Resources

Other
Processes
123
Practical Problems Getting from Strategy-to-Bottom-Line Impact


The table in Exhibit 7.5 provides a starting point for connecting the use
of NIE practices to the objectives of the owners of corporate, technology, and
management processes. This table is, of course, unique to each given company
situation. It is a useful exercise to complete the table in order for a company to
see exactly how to proceed.
The table provides for other processes as well; each company is likely to
have other process owners in addition to those we have suggested. Also, we do
not mean to ignore the key CxO offices such as CFO and COO. Typically, they
are equally interested and may even be the process owners in some cases.
The five NIE practices,5 applied in connection with a company™s manage-
ment processes, are the critical steps in creating the integrated Strategy-to-
Bottom-Line Value Chain that is required to produce bottom-line impact and
control IT spending. Implementing them begins with the process owners.


Practical Problem 5: Management Expectations
Company managers expect simple ROI-based measurement of costs and benefits.
A contributor 7 to our thinking about this book said it well: Senior managers
want the issues about IT investments to be simple, and they want the issues
expressed in simple financial terms. What are we going to spend, and what will
our return be? Unfortunately, much of the complexity around IT planning and
management has grown up because existing management practices have made
things appear complicated. We have to provide the simplicity and still respond
to management expectations for financial returns from IT.
From the very beginning of IT in business, we have experienced a dichotomy
between the immediate cost and revenue aspects of IT justification (a hard-line
view of ROI) and the “strategic” or “infrastructure” aspects of IT justification.
This means that a proposed investment may not have an easily or credibly cal-
culable ROI, even though the investment enables others (managers, business
units) to themselves reduce costs or improve revenue.
Often, this latter view is framed in “intangible benefits” terms. The tangi-
ble effect may well be to increase IT costs, but the benefits of customer satis-
faction, or quality, or time-to-market are expected to reduce costs or improve
revenue. When management expectations are solely focused on financial out-
comes, the senior management team may take a relatively passive view, review-
ing investments and ongoing IT spending solely on a restricted justification basis
like ROI.
We do not take sides in this. Making a good financial case for an individ-
ual IT investment is always good. But using ROI as the sole basis for deciding
on the development portfolio, or as the only arbiter for the ongoing lights-on
budget, will not produce the best decisions.
We recommend that management teams always use strategic intentions to
express their business goals, and then aggressively link the IT investment portfo-
lio to those goals. This is more effective than relying solely on financial measures
124 TACKLE THE PRACTICAL PROBLEMS


for making better decisions. The right decisions means basing decisions on what
is important to the business and the management team.

IT Impact Management™s Approach to “Management Expectations”
A business case for an individual project may rely largely on ROI calculations.
But to fully understand the right decision to improve IT impact on the bottom
line, we must consider how the management team expects to improve the bot-
tom line. This is strategic intention, and IT does best when it directly supports
those intentions. Focusing on strategic intentions keeps the process simple and
understandable.

Practical Problem 6: It Ain™t Broke
Business and IT managers get what they need from current processes, and they
resist new processes that appear to make it more difficult to obtain what they need.
In most situations, managers have adapted to the processes that currently
exist. Managers who can effectively use politics and personal relationships, or
even use the “loudest voice” method, are generally comfortable with the exist-
ing situation and do not welcome changes in the process. They have worked out
ways to get what they need and, therefore, resist new processes that may appear
to make this more difficult. This also extends to related process owners such as
corporate budgeting, enterprise architecture, systems development managers,
and computer support managers. They have all worked out ways to do what they
perceive they need to do, using current ways of doing business.
It is no surprise, then, when Right Decisions/Right Results process changes
like prioritization and alignment are perceived not as solving their problems but,
rather, as adding to them. One of our colleagues has remarked that “managers
will always gravitate to the fastest/shortest path to money.” This means that
when managers need support for applications or new development projects,
they will circumvent any complex or potentially unresponsive (to their specific
needs) process and go directly to the source, rely on personal relationships, or
work through their own hierarchies to find the necessary funds.
Of all the practical problems, this is perhaps the most direct and most
threatening. We can talk about culture and disconnected processes and so forth
(which are, in fact, real practical problems), but if we cannot control this prob-
lem, nothing good will happen.

IT Impact Management™s Approach to “It Ain™t Broke”
The pain of the solution must be less than the pain of the problem. IT Impact
Management works to help management understand that much of the current
pain is hidden from the organization, with suboptimal business impact and
higher IT costs than would occur using integrated, coordinated processes. A
major part of this is establishing the business reasons behind the adoption of the
125
Practical Problems Getting from Strategy-to-Bottom-Line Impact


Strategy-to-Bottom-Line Value Chain and the NIE practices. When senior man-
agers understand the costs (both dollars and organizational inefficiencies) of
existing processes, implementing changes becomes easier.

Practical Problem 7: Multiple Perspectives
The company does not speak with one voice.
Even small companies have the problem that different parts of the business
have different views of priorities and the best role for IT to play. Larger organ-
izations have multiple business units and functional organizations. Conse-
quently, IT often has to work for multiple and inconsistent business units. A lot
of this is a management culture that encourages autonomy and resists coordi-
nation. Much is structural as well, where the company itself does not recognize
the inconsistencies among business units or treat them as important problems
to resolve. For such companies, IT governance and decision-making processes
are largely incapable of connecting IT to business strategy. Instead, typically, the
loudest voices determine direction and priorities.
For example, a large government agency has several operating divisions and
functional divisions, all competing for IT resources from the same IT service
organization. Even though division management is involved in IT governance,
and prioritization processes require consensus across divisions, the result is most
often determined by political clout or maneuvering, rather than connection to
strategy. In this case, IT is forced to function as the referee and, in effect, make
priority decisions on behalf of the agency.
This is a problem that is often larger than the business/IT processes we are
discussing; it involves business and IT governance issues as well. The problem
has two related aspects. First, there may be little agreement among senior man-
agers about the basic strategic intentions of the business. Second, partly because
of this, decision making and resource allocation operate separately within the
silos of the company. IT decisions, however, tend to cross those silos, certainly

<<

. 27
( 67 .)



>>