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activities. A dollar spent on maintaining existing systems is a dollar not spent
on new development. This practice lets business and IT managers together
decide which existing IT initiatives should get resources, rather than assuming
that everything currently operating is critical for the business and should be sup-
ported at existing levels. The result is a more reasoned approach to spending
money for existing activities, which often results in money made available for
new development.

NIE Practice 5: Performance Measurement ” Measures IT performance
in ways that relate to the business. It is easy to measure IT™s performance in
operational and tactical terms. It is hard to measure IT™s impact on the busi-
ness. This practice blends the two and allows IT to determine what to meas-
ure, how to manage IT based on those measures, and how to communicate
its performance to business managers in ways that they can understand. The
result is improved IT performance and improved communication with business
management.


Practice Support: IT Impact, Portfolio, and Culture Management
The five practices are supported through value, portfolio, and culture manage-
ment concepts. IT Impact Management deals with one part of the company™s
management culture and offers a framework and vocabulary to state what is
important to the company. Portfolio Management makes it possible to consider
the entire IT spend, providing an holistic framework for making priority and
investment management decisions. Culture Management enables the company
to deal with its existing culture in the company in order to remove barriers to
management process change.
11
Completing the Picture: The New Information Economics Practices


Business Value Maturity Model
Company management culture, along with limitations on the company™s ability
to execute NIE practices, are significant constraints on management™s success in
adopting new management processes based on NIE practices. The Business
Value Maturity Model helps a company to identify and overcome the two fac-
tors of culture and limitations on the company™s ability to execute. We describe
desired business outcomes for each NIE practice area and we use “maturity” as
the measure of whether the company can produce the outcomes based on a
combination of culture barriers and company capability to act on the results.

Strategy-to-Bottom-Line Value Chain
Each NIE practice creates outcomes that help a company better connect its IT
investments to its business strategies. For example, the prioritization practice
connects IT investments to business strategic intentions; the performance meas-
urement practice tracks progress in producing the desired business results. Get-
ting these outcomes from NIE practices is half the battle. The other half is to
follow through with the right actions in the business and IT organizations to
actually produce the desired business results. This requires an unbroken string
of company business and IT management processes that consistently apply the
outcomes of NIE practices. NIE practices may be embedded in the company™s
existing management processes, and practice outcomes should result in chang-
ing how those processes operate.
Exhibit 1.6 expresses this embedding as a value chain of connected man-
agement processes leading from business strategy to action. The value chain is
expressed as 12 specific deliverables produced from the management processes.
Each process adds value to the overall Strategy-to-Bottom-Line chain by means
of these deliverables, ensuring that the following processes and their deliverables
are consistent and remain focused on business strategy. The connections and
deliverables ensure that the necessary IT and business actions become part of
business and IT organization annual plans, and that those actions will occur.
Moreover, if relevant performance measurement metrics are established, man-
agement can track the actions and their results. The connection to the annual
plan, and to the performance measurement metrics, is critical to assuring that
the right action occurs and the right results are produced.
Twelve elements make up the Strategy-to-Bottom-Line Value Chain.9 They
start with the company™s strategic intentions (Strategic Business Plan) and con-
tinue up to the Operational Plans covering the actions of each business unit,
both business and IT. Exhibit 1.6 symbolizes the goal for Right Decisions/Right
Results in terms of the NIE practices providing the foundation and connections
for producing the elements in the Strategy-to-Bottom-Line Value Chain. The key
point, however, is that most of the underlying management processes or deliv-
erables will already exist in a company. The trick is to coordinate and connect
them using the NIE practices.
12 DEFINE THE GOALS


EXHIBIT 1.6 Strategy-to-Bottom-Line Value Chain
Strategic IT Planning Annual IT Planning
The Business Enterprise: Lines of Business, Departments
Business
Strategic
Business Plan
Intentions
(Annual)
(Strategic Business Strategic IT Projects Budget
Plan)
Agenda
Strategic IT Project Plan
Action
Projects
Requirements (Annual)

Assessed Lights-On
Strategic IT Plan
Portfolios Budget
IT Plan
(Alignment, (Annual)
Service/Quality,
Technology) The IT Enterprise: Four “Lights-On” Asset Pools

Performance Measurement Metrics




Deliverables
Effective Planning
in the
Bottom-
Appropriate Resource Decisions
Business IT
Strategy-to-
Line
Strategies Actions
Results
Workable Budgets, Projects, and
Bottom-Line
Operational Plans
Value Chain
Performance Measurement Metrics




The value chain is a management process view of how things need to work.
There is a lot more to it than just getting the management processes right.
Specifically, a company™s existing management culture determines whether or
not such a value chain can be successful. Whether the company™s leadership
teams can play the roles, and support and carry out the results, is critical.
This book outlines how all elements of the company™s activities, including
management culture, can consistently apply the concepts and principles of Right
Decisions/Right Results and New Information Economics practices. Our goal
is to enable a company to achieve an effective Strategy-to-Bottom-Line Value
Chain. We describe the five key New Information Economics practices and the
role they play in management processes. We outline the value chain in the com-
pany™s management processes, and the roles that the company™s senior, business,
and IT leadership teams play in it. We examine management culture and how
management culture supports each practice. We introduce the Business Value
Maturity Model as a tool for assessing where the company currently stands in
its Strategy-to-Bottom-Line Value Chain. Through Culture and IT Impact Man-
agement, assisted by the Business Value Maturity Model , we address process
and culture change issues.

Right Decisions/Right Results: Getting to the Right Actions Is the Key
Too often, we find companies that do have good planning practices, do align-
ment and prioritization well, and employ good enterprise architecture practices,
13
Summary of the Book


yet fail to get it all together in the form of action. Action, after all, is what pro-
duces results. In our view, action that produces the right results is all that really
matters.
What do we mean by “right action”? An easy way to think of it is: For every
business strategy, whether corporate, line of business, or functional, IT should
have a clear idea of exactly what it is doing to further the strategy. IT should
also have a clear idea that those things it is doing that do not connect to strat-
egy should not be done. This is the basis, ultimately, for controlling cost at the
same time as improving bottom-line impact.


SUMMARY OF THE BOOK
This book is about controlling spending and choosing the right things on which
to spend. This problem applies to every part of the business. In every case, man-
agers need to control spending, choose the right things to invest in, and thereby
control costs and improve impact.
Controlling spending means controlling the total of all spending, the aggre-
gate of all IT spend for a company. This includes everything from operational
costs to project costs. It includes expense and capital, as well as depreciation
and amortization. The goal is to understand what the company spends and then
keep that total spend within parameters established by management.
Choosing the right spend means, within the total of all spending, making
the best choices about the detailed expenditures. While “controlling spending”
means keeping the total within the desired parameters, “choosing the right
spend” focuses on each line item, determining its performance and contribution
to the bottom line.
You are likely to be reading this book because you believe your organiza-
tion must improve how it directs and applies IT. You believe that IT should pro-
duce greater value and have a greater impact on organizational performance.
You want to know that you are spending IT resources on the right problems,
and you need assurance that the IT resources produce value. You want to get
action and produce the right results from IT.
Further, you are interested in understating how your company can get Right
Decisions and Right Results, as shown in Exhibit 1.7. Ideally, you want to
achieve the “sweet spot.”
This book describes the framework, the NIE principles and management
practices for applying them, and the changes in management culture that result.
The book is the outcome of the authors™ consulting, research, and teaching
engagements over the past 20 years.
Beyond merely describing these elements, this book explains in practical
terms what it takes to implement the principles and practices in the business
environment. Using a Business Value Maturity Model framework, the book
also addresses ways to assess an organization™s readiness for implementing and
utilizing the tools, and gives practical advice for implementing the cultural and
process changes required. The book also explains the “takeaways” for business
14 DEFINE THE GOALS


EXHIBIT 1.7 Our Goal Is the IT Improvement Zone
Higher Growth:
Higher Cost
Higher Impact
Higher
Cost


Stable Cost:
Today™s
Same (current) Cost
Situation
Cost Higher Impact
IT Improvement
Zone

Sweet Spot:
Lower Cost
Reduced Cost: Higher Impact
Lower
Lower Cost
Cost
Same (current) Impact


Lower Higher
Bottom-Line
Impact Impact
Impact



and IT management, detailing the overall benefits that the management team
will realize from adopting these frameworks.


DEFINE THE GOALS: MANAGEMENT AGENDA
The following is a self-examination for the critical success factors for Right Deci-
sions/Right Results.

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

Are business and IT planning processes fully connected and
integrated?

Do IT-enabled innovations impact business planning and offer
new business strategies?

Are IT investments prioritized against business strategy?

Does the entire IT spend, including development, operations,
maintenance, and services, align with business strategy?

Is IT business and technical performance tracked?

Do business and IT management teams consistently execute
the management processes that improve IT™s contribution to
business bottom-line performance?
15
Define the Goals: Management Agenda


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

Do planning and management processes focus on the entire
IT spend, both lights-on and projects?

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