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with common infrastructure and enterprise-wide information requirements, and
likely in business processes that benefit from cross-silo participation and infor-
mation sharing.
This is more than just a practical problem. This problem also underlies the
fundamental practical difficulties in attempting to change the basis for making
right decisions.

IT Impact Management™s Approach to “Multiple Perspectives”
IT Impact Management addresses the single-voice problem by focusing on man-
ager participation in NIE practices. The problem always is getting management
to participate and to believe in and follow in the results. These are the prob-
lems that IT Impact Management is intended to solve.
It is too easy to expect changing management practices, or adopting new
practices, to be simply a matter of telling managers what to do. Giving managers
126 TACKLE THE PRACTICAL PROBLEMS


a users manual, or a practice definition, or a good-looking diagram is attractive,
but it is not effective. The practical problems are real and substantial and need
effective solutions. Unless these problems are solved, the company™s investments
in IT, and the IT organization™s activities, will not be consistent with business
strategies; and the company will not get the right bottom-line impact from IT.


THE ROLE OF IT IMPACT MANAGEMENT 8
IT Impact Management helps companies and managers decide how best to move
forward with Right Decisions/Right Results and the NIE practices. The IT Impact
Management framework addresses the key practical problems discussed in this
chapter. The result is a roadmap for managers to use to craft the specific solu-
tion for their company™s circumstances.
The goal of the roadmap is to provide guidance for “what™s next?” Because
companies, cultures, and circumstances are unique, there is no single right answer.
There are, however, general guidelines that can be followed.
IT Impact Management provides guidance in three ways. First, it provides
alternate methods to establish Right Decisions/Right Results goals for the com-
pany and to assess the company as-is and to-be with respect to IT management
processes. Second, IT Impact Management looks at the interactions with cor-
porate governance and corporate processes, and provides ideas on how to work
with the owners of those processes, Third, IT Impact Management defines a
“program” view for managers to adapt to their situations. This specifically deals
with the practical problems that have been described here.


The solutions to practical problems and culture require common sense.


We understand we have to work with the corporate budget practice, the
existing legacy of applications and infrastructures, the legacy of management
practices, and the existing management culture. Our message is that while man-
agement practices are important and making changes to them is critical, suc-
cessfully addressing these practical problems is not just a mechanical process.
People are involved, and pragmatism is vital.



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.
127
Tackle the Practical Problems: Management Agenda


TACKLE THE PRACTICAL PROBLEMS:
MANAGEMENT AGENDA

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

Do we have the practical problem of process disconnects?

Do we have the practical problem of legacy mind-sets and
entitlement expectations?

Does our culture impede business and IT managers from
playing the roles they need to?

Can our IT management processes work well with corporate
processes such as budgeting?

Do our managers expect the wrong things?

Are our business managers so comfor table with the way
things now work that they will resist any significant change?

Can our business managers speak with one voice about their
needs and what IT should do to satisfy them?




The balance of the book provides answers to the “What is our plan for cor-
recting this?” statements.


ADDITIONAL READING
Additional information can be found in Website Note 8, “Gap Analysis: Clos-
ing Disconnects between Business and IT,” and at the back of this book in
Appendix A, “The Role of Enterprise Architecture in Right Decisions/Right
Results.”


NOTES
1. In Chapter 11, we suggest a Culture Management approach to help deal with
the problems. In Chapter 12, we introduce the Business Value Maturity Model
as a way to calibrate a company™s as-is and establish to-be goals for adopting the
Value Chain and NIE practices in the company.
2. Our colleague Mike Luby of USAA Bank calls this a “mind legacy.”
3. Chapters 8, 9, and 10 describe these practices and frameworks and, at the same
time, address these critical cultural, motivational, people, and political issues.
128 TACKLE THE PRACTICAL PROBLEMS


When we introduce Culture Management in Chapter 11, we explicitly address
possible solutions and strategies for getting at the underlying people problems.
Right Decisions/Right Results is, fundamentally, an approach for setting the cul-
ture rather than simply a mechanical set of practices and tools.
4. We discussed this problem in Chapter 6 when we introduced the details of the
Strategy-to-Bottom-Line Value Chain, the deliverables, and the interactions with
the corporate business processes. This is just one example of the kinds of dis-
connects that exist.
5. The detailed solutions to the Company Processes practical problems are covered
in Chapters 8, 9, and 10, for each NIE practice.
6. Government and nonprofit managers expect financial returns such as ROI as
well, but they are also concerned about IT™s impact on mission performance. The
practical problems described in this chapter, and their solution, apply just as
strongly to government and nonprofit organizations.
7. Conversation with Cecil Smith, Duke Energy.
8. We explore IT Impact Management in more detail in Chapter 13, “Define What™s
Next.”
8
CHAPTER

Make the Right Decisions



T his chapter introduces the Prioritization and Alignment NIE practices that
enable and support management decision making about new IT investments
and existing IT resource allocations. Prioritization looks at new IT development
alternatives and ranks them by busi-
ness impact. Alignment looks at ex- Control Spending and Maximize
isting IT activities and assesses their Impact on the Bottom Line
effectiveness at supporting the busi- 1 Define the Goals
ness in the existing environment. 2 Ask the Right Questions
The underlying decision-making
3 Connect to the Bottom Line
philosophy is that company resources
4 Understand Costs and Resources
devoted to IT are finite. As a con-
5 Focus on the Right Things
sequence, choices have to be made
among alternatives: there aren™t enough 6 Adopt Effective Process to Produce Action
resources to do everything, so choices 7 Tackle the Practical Problems
have to be made as to which things ¤ 8 Make the Right Decisions
will be funded and which things will 9 Plan for the Right Results
not. This is the crucial point. We are
10 Keep Score
not using a “hurdle rate” or strong
11 Deal with Culture
business case to justify individual proj-
ects or ongoing expenses. That is, we 12 Char t the Path to Implementation
are not trying to make a specific go/ 13 Define What™s Next
no-go decision about a specific project 14 Answer the “So What?” Question
or line item. We proceed as though
every potential project or individual
lights-on line item has been based on an appropriate business case. Rather, the
problem is to choose among the desirable alternatives that exist in a project port-
folio or a lights-on asset pool. “Make the right decision” means choosing the
best alternatives, those that will improve IT™s bottom-line impact. At the same
time, by positing that resources are finite, we enable management to exercise
appropriate control over IT spending.
The right decisions are those that improve IT™s bottom-line impact and con-
trol IT spending. We are concerned about the entire IT spend, which includes

129
130 MAKE THE RIGHT DECISIONS


new investment in development and enhancement projects, and the ongoing
lights-on operational budget. (Note that we include both total capital for proj-
ects and expense items when we say IT spend. Fundamentally, we are interested
in the overall cash flow that IT requires, rather than the details of accounting
decisions. Because many IT expenses are sometimes “hidden” by their account-
ing treatment (leasing, capitalization, etc.), we prefer to deal with the amount
of cash that the company will need to lay out in the budget period, rather than
the accounting impact to the bottom line.)
One major purpose of the Prioritization and Alignment decision-making
support tools is to give management a complete view of the new investment and
lights-on budget alternatives and indicate which alternatives have higher bottom-
line impact or control IT spending more effectively. A second major purpose is
to fully engage business and IT management together in making IT investment
decisions. A desired outcome is, as we stated in Chapter 5 in the discussion of
Goals and Principles, that “business and IT management have a common, con-
sensus view as to the role of IT to achieve business strategic intentions.” Their
participation in the decision-making processes, using Prioritization and Align-
ment, are a large part of achieving that goal.


THE MANAGEMENT CONTEXT FOR
“MAKE THE RIGHT DECISIONS”
Affordability and Impact are key to making the right decisions about new invest-
ments and ongoing lights-on expense budgets (see Exhibit 8.1). Prioritization


EXHIBIT 8.1 Alignment /Assessment and Prioritization in the
Value Chain

Prioritization




Strategic IT Planning Annual IT Planning
Business The Business Enterprise: Lines of Business, Departments
Strategic
Business
Intentions
Plan Projects
Strategic
(Strategic Budget
IT Agenda Strategic
Business Plan)
Proj- Projects
Action
IT Require-
ects Plan
ments
Assessed Strategic Lights-On
Portfolios IT Plan Budget
IT Plan
(Alignment,
Service/Quality,
The IT Enterprise: Four “Lights-On” Asset Pools
Technology)
Performance Measurement Metrics


Alignment/Assessment
131
The Management Context for “Make the RIght Decisions”


and Alignment occur throughout the Strategy-to-Bottom-Line Value Chain. In
Chapter 2, we introduced the basic IT questions about affordability and impact:

Affordability Questions
What can we afford to spend on IT?
Can we reduce unnecessary IT costs?
Can we redeploy expenses to support needed projects?

Impact Questions
Are we investing IT resources in the right places?
Do our business strategies drive our IT actions and produce bottom-line
impact?
Are we getting bottom-line impact, and sufficient value, from our current
IT assets and resources?
Are we balancing our strategic and tactical investments?

The answers are based on a comprehensive total portfolio assessment of
development and enhancement projects (prioritization) and the lights-on budget
(alignment). The key questions are whether the
IT development investment options make busi- EXHIBIT 8.2 Total IT Spend
ness sense and whether the lights-on budget
is the best way to spend scarce IT dollars. (We
continue to note that although most of the IT
money in a company is spent in the lights-

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