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Cost and Cost

Impact Reduction
Cost Zone Operational
(“Lights-On” )

Cost Cost and
Lower Higher
Impact Impact
The “So What?” for the CEO

wherever and whenever possible, the company can move from today™s situation
into the IT Improvement Zone and achieve higher impact with lower costs.

NIE principles and practices help business get from strategy to IT action to bot-
tom-line impact. Putting these practices in place is straightforward; keeping them
in action and having the discipline to follow through is difficult. The hard issues
of moving from strategy to action are outside of the processes themselves but
are integral parts of the impact that adopting NIE practices can have on a com-
pany. NIE practices tackle these hard issues head on and become the tools for
solving them.
Cultural barriers loom large in changing any company™s processes, especially
when a silo orientation gets in the way of company-wide thinking and planning.
Using NIE practices forces a company-wide and portfolio-based view of IT
investments, effectively changes the cultural issues that obstruct the most effec-
tive IT investments, and begins the process of eliminating the silo-think present
in many companies. Business management becomes engaged not only in IT plan-
ning and execution but also in a company-wide process of evaluating the best
places to spend IT resources. The process eventually becomes secondary; the
way that management thinks about and acts on IT possibilities becomes the most
important impact of adopting these principles and concepts.
NIE practices must also operate in an existing business planning/budget-
ing/performance measurement environment. The proposed practices tie directly
into these parts of the company™s management processes and leverage the struc-
tures that the company uses for all of its investments in business strategy.
Finally, NIE practices promote a consistent, integrated approach to the five
practices in the strategy-to-results chain. Each is helpful on its own, but an inte-
grated adoption of all five can “supercharge” a company™s efforts.
Many things work to break the strategy-to-results chain. NIE practices help
get rid of these roadblocks and let managers focus on actions, not obstacles.

For the CEO, IT is but one tool for implementing business strategies. Unfortu-
nately it is often the least understood tool, leading to ineffective IT investments
and misdirected IT resources. Although the business strategies may seem to be
clear and adequately articulated, the interpretations of those strategies through-
out the company may differ, and this eventually results in poorly focused IT
investments. The CEO is left to ask, “Why am I spending so much and getting
so little?”
The more appropriate question to ask may be, “Which IT-enabled business
initiatives give the most business bang for the buck?” By integrating the strategy-
to-results processes, the CEO can have more confidence that the company is

spending money where it will have the most impact and is avoiding spending
money that won™t contribute to business success.
Additionally, by introducing the notion of “affordability,” Right Deci-
sions/Right Results puts IT on notice that every dollar is valuable to the com-
pany and makes sure that every dollar spent ”whether for new investments,
infrastructure, or lights-on activities ”will be examined, justified, and managed.
The result for the CEO is a controlled IT budget and improved business results.

For the CFO, IT is also only one possible way to invest scarce dollars to sup-
port business strategies. Years of questionable IT results, indefensible ROI meth-
ods, and infrastructure “sunk costs” have moved many CFOs into a skeptical
posture. The CFO is asking a simple question: By what means can I judge the
return on the IT investment?
Again, the better question may be, “How can I evaluate widely different IT
investments with a consistent, business-based yardstick?” By giving business
management a consistent tool for assessing the business impact of projects across
the company and by quantifying an investment™s impact on business strategies,
the NIE practices and principles give the CFO a solid way to choose IT invest-
ments from among a range of IT possibilities.
The CFO is also charged with controlling the expenses and budgets of the
company. With IT, it™s hard to ensure that all budgets ” especially the lights-on
budgets that are always defended on “keep the doors open” grounds ” are being
effectively controlled and wisely invested. The NIE practices give the CFO a
tool to set a top-line limit on IT expenses (setting affordability targets) with the
assurance that the IT and business managers have the tools and processes to
make rational, business-impact-based investment decisions for the entire IT
spend. IT expenses are controlled, and bottom-line impact is improved.

Business management has a simple message for IT: Spend money in the right
places (from a business perspective), do what you say you will do for us, and
tell us about all of that in words we understand. (And oh, also, get rid of all of
our technology headaches in the meantime.) Unfortunately, this message begs
important questions: How does IT decide where “the right places” are, what
are the best ways to talk about what IT is promising, and what words does busi-
ness understand?
Again, the fragmented business“IT connection introduces problems in two
areas. First, the conversation between business mangers and IT managers occurs
anecdotally, often in a business planning vacuum (or, at least, in a context sig-
nificantly disconnected from business planning processes) and with no common
language for describing goals and performance. Second, and sometimes even
The “So What?” for IT Management

more destructively, business managers cannot agree among themselves (or
simply don™t think they need to) about where IT should be spending its re-
sources ” again, with no common language for understanding IT activities and
NIE principles and practices provide a means for taking business™s simple
message to IT and making it operational for both business and IT management.
Starting with strategic intentions, business management, often for the first time,
can agree on the language, intent, and relative importance of the things it is try-
ing to accomplish. This common language provides a consistent way for man-
agement as a group to look at IT activities and evaluate their potential impact
on the business. These same strategic intentions communicate to IT exactly what
the business wants from it, in terms of business outcomes, and gives IT a way
to describe to the business how its activities will help achieve those intentions.
Additionally, NIE practices are explicitly intended to tie into the business
planning, budgeting, and performance processes already in place in the com-
pany. IT planning and execution ceases to become an “over there” phenome-
non and starts to be integrated into the business planning and execution fabric
of the company.
Finally, and most significantly, the NIE practices produce an important side
effect that in the long run may be the most significant result. Companies that
adopt these practices and concepts tend to develop a new culture for employ-
ing, managing, and leveraging IT, in which IT is an integral part of all business
activities. Business and IT managers become partners in employing IT for busi-
ness results; IT people become active contributors to the business success of the
company; and everyone involved communicates in terms of business goals and
business performance measures. In short, businesspeople understand what IT
can really do for the company, and IT people understand what the business is
trying to do in the first place.

IT asks a simple question of the business: On what basis do we define projects,
set priorities, allocate resources, evaluate performance, and help the business
innovate using technology? Historically, business answers each question anec-
dotally, looking at individual initiatives, needs, and business strategies, without
viewing all IT activities as a whole that is intended to contribute to business
IT can use NIE principles and practices to understand what it needs to do,
based on the business results that the company is looking for. The practices help
the business and IT, together, understand the business™s strategic intentions, use
them to assess the value of each IT initiative to the business, and set priorities
and resource allocations on a consistent, agreed-on, business-focused basis. The
conversation between business and IT changes from “what do we do next” to
“what are the best things that IT can do for the business.”

Perhaps most importantly for managing IT in the future, the NIE practices
provide a disciplined, business-based way to make resource decisions in a cost-
control environment. Often IT, and the business, are told to “cut X% of your
costs,” often in mid-year. The tools of alignment and prioritization give IT a
structured way to control costs, with business participation, by focusing on
bottom line impact, service and quality levels, and importance to the operations
of the company.

NIE is a set of practices and principles for moving from business strategy to IT
action to bottom-line impact. NIE also requires and promotes a philosophical
and cultural change in a company, and this moves the company from anecdotal
and technology-focused assessment of IT activities to a holistic, business-results-
oriented view of the IT“business connection. By implementing the practices and
adopting the principles, the company moves, culturally and managerially, to a
position in which IT is an active contributor to the business™s performance.
While implementing the NIE practices may seem straightforward, getting
results often requires significant change in the company™s culture. Changing the
culture is difficult at best and, in some cases, almost impossible. Business and
IT management must together commit to the NIE principles, suffer the dis-
locations in existing planning and execution processes, and work together to
implement a new culture and philosophy for planning and managing IT.

This book is a work in progress. Further research and experience in companies
in the United States and Europe will continue to develop these ideas. We expect
to update chapter information on a regular basis.
Our websites, www.NewInformationEconomics.com and www.beta-books.
com, contain directions on how to obtain future updates. We can be reached
individually by e-mail at:

Bob Benson
Tom Bugnitz
Bill Walton

The Role of Enterprise Architecture
in Right Decisions/Right Results

M any companies apply enterprise architecture (EA) as part of their IT management
and planning activities. From their perspective, it would seem that EA should play
an important role in strategic planning (e.g., strategy demand/supply planning), align-
ment (e.g., assessment of the as-is IT activities), and prioritization (e.g., deciding on the
projects to be implemented). They might see that right decisions means decisions driven
by or guided by EA, and that right results means using EA to assure that projects do
improve IT™s bottom-line impact.
What should EA™s role be in Right Decisions/Right Results? We address this in
three parts: (1) What is EA? (2) How is EA applied? (3) What role does it play in Right
Decisions/Right Results?

Several years ago, we contributed an EA article to an IT dictionary. Part of it said:
Enterprise architecture describes the structure of a company in terms of means of
production, customer service, strategy and objectives, and use of information and
information technology. It provides models to portray component parts of a com-
pany and how they work together to achieve its business mission and goals. It
connects the company™s business structure, use of information and information
technology, and the technology architectures needed.
Enterprise architecture is a family of related architecture components. These
include information architecture, organization and business process architecture,
and information technology architecture. Each consists of architectural represen-
tations, definitions of architecture entities, their relationships, and specifications
of function and purpose. Enterprise architecture guides the construction and devel-
opment of business organizations and business processes, and the construction and
development of supporting information systems.
Diagrams and schematics are commonly used to represent enterprise architec-
ture. For example, an entity-relationship diagram may portray enterprise informa-
tion architecture, and an organization chart may portray the enterprise management
structure. Such diagrams and schematics come from other disciplines such as orga-
nizational design. They have been adapted to describe enterprise architecture.


Enterprise architecture is a holistic representation of all the components of
the enterprise, and the use of graphics and schematics are used to emphasize all the
parts of the enterprise and how they are interrelated. Data and process models
originally designed for computer application development are used in describing
information architecture. For example, entity-relationship diagrams that describe
information as a set of business entities (e.g., customer and products) and how
they relate (e.g., customers order products) can also be used to represent an enter-
prise information architecture.
Enterprise architectures are used to deal with intra-organizational processes,
inter-organizational cooperation and coordination, and their shared use of infor-
mation and information technologies. Business developments, such as outsourcing,
partnerships, alliances, and electronic data interchange, extend the need for archi-
tecture across company boundaries.
New technologies add to the need for enterprise architecture. Client-server
approaches and related communications networks enable distribution of infor-
mation and computer applications throughout the enterprise. The need for archi-


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