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Elapsed time and 19
Product The Company will continuously reduce the time from
deadlines
Development Time product conception to implementation.
Cycle
17
Market-Driven The Company will create new products and services Number of projects
Initiatives based on market demands.
15
Knowledge about The Company will develop complete information Percent coverage
Customer about its customers and markets. consumers and
markets
7
Virtual Enterprise The Company will connect with Company suppliers Percent supplier
and alliances to create seamless information costs via
services for customers. connection




NOTES
1. Thanks to Tom Porter, Rollins Corporation.
2. See Chapters 6 and 12 for the definition of the leadership team and the role its mem-
bers play.
295
Examples of Strategic Intentions


3. For those old enough to remember, we remind you that Deep Throat advised, during
the Watergate investigation, to “follow the money.” We believe that executive spending
patterns are a significant indicator of what managers believe is important and, hence,
what their intentions are.
4. There are some parallels between our approach to developing strategic intentions and
the approaches taken for the development of “business maxims” as described in Peter
Weill and Marianne Broadbent, Leveraging the New Infrastructure: How Market Leaders
Capitalize on Information Technology (Boston, MA: Harvard Business School Press,
1998).
D
APPENDIX

Applying Strategic Intentions
in Prioritization



I n a number of sections of this book, we referred to the concept of “cause and effect”
as a way to determine the bottom-line impact of a proposed new investment on the
set of strategic intentions. We tried to answer the question “if we undertake Project
X, what will be the impact on Strategic Intention Y?” We repeated the question for each
strategic intention and developed an overall assessment of the bottom-line impact of
the project.
Using the same assessment scale for each project is key to this concept and to the
Prioritization practice. First, we want to be sure that there is a level playing field for
all projects and that all are assessed against the same yardstick. Second, we want to be
sure that every manager involved in assessment uses the same vocabulary and means the
same thing when he or she describes the bottom-line impact of a project. Finally, we want
to add substance to the assessment and take it beyond simple “this is 3 on a scale of
0-5” answers to a scoring system that has a specific definition for each level of poten-
tial bottom-line impact.
We propose the scale in Exhibit D.1 as an example of a scoring tool for a specific
strategic intention. Using a simple 0-5 scale, we use a consistent definition of bottom-
line impact, varying by degrees the specific impact that the project will have on various
characteristics specific to the strategic intention. Take the example of a bank that had
as one of its strategic intentions an e-commerce initiative to provide services electron-
ically while helping the bank improve its competitive position.
Strategic Intention: The bank will improve its competitive position by providing
its services and products to customers through e-commerce channels, including the
Internet and all of its connection options (wireless, home, office, wireless phone,
PDA, etc.).
In most cause-and-effect scales, 0 and 5 are easily defined: 0 is a project with no
impact, while 5 is a project that is critical to the initiative. Note that in the example,
though, scores 1“ 4 vary according to the impact of the project on competitive posi-
tion and the type of services the bank can offer.
We propose that all scoring scales follow this format, so that managers can look
at a project and use clear criteria, rather than intuition or gut feeling, to assess the
impact of proposed projects.

297
298 APPLYING STRATEGIC INTENTIONS IN PRIORITIZATION


EXHIBIT D.1 Cause and Effect Used in Prioritization
Cause-and-Effect Language Score Effect

0 None
• The Project has no relationship to electronic commerce objectives.

1 Minor
• The Project is indirectly related to providing electronic commerce-
based products and services.

2 Small
• The Project will enhance existing electronic commerce applications or
products and services in a minor way, but will not measurably impact
the bank™s electronic commerce offerings.

3 Important
• The Project will create a new electronic commerce product or service,
but will not significantly change the bank™s competitive position in
electronic commerce.

4 Very
• The Project will create a new electronic commerce product or service,
Important
which will provide a significant improvement in the bank™s competitive
position in electronic commerce, or provide a broad-based competitive
advantage.

5 Critical
• The Project is critical for implementing electronic commerce-based
products and services, or is itself an important electronic commerce
product or service. This project is critical to establishing or maintaining
the bank as a major player in the electronic commerce area, and
represents a major advance relative to competitors.
E
APPENDIX

The CFO Role in
Right Decisions/Right Results


I ncreasingly, the CFO is responsible for IT plans and budgets and is being asked to
ensure that the IT investments are improving shareholder value. The CFO, in turn,
is asking IT people hard questions: How do we justify new IT investments? Are we
balancing our resources between requests for new investment and the needs of exist-
ing IT activities? How do we know IT is contributing to our business success? How do
we measure and report the business return on IT investments? Overall, the CFO should
also be asking, “How can I evaluate widely different IT investments with a consistent,
business-based yardstick, and ensure that they produce predictable, consistent results
for the company?”
In the past, senior management teams have looked to IT management for answers
to these IT value questions. However, the questions are not simply about IT but are con-
nected to business as well. IT is, fundamentally, an enabler of business activity, enabling
managers to make better decisions using information. It may also, for example, enable
marketers to target more profitable markets, or may enable the reengineering of a busi-
ness process to reduce time cycles. In all of these cases, IT™s contribution is to enable
a more efficient or effective business activity, which in turn results in improved profit-
ability. IT is a partner in the bottom-line result, but it isn™t the only determining factor.
Traditional IT financial analysis works to translate IT™s enabling contributions into
concrete estimates of reduced cost or increased income and, thereby, produce a meas-
ure of IT™s contribution to profitability, or ROI. Clearly, the financial community needs
new ways to assess IT bottom-line impact. Whatever we do with IT, we do it with the
expectation of directly or indirectly improving financial performance. The problem is,
what constitutes a “direct contribution to” profitability?
First, IT can enable improvements in a company™s operations (operational effective-
ness). If these business operational improvements reduce cost or improve revenue, the
benefits may be directly measurable and an ROI can be calculated. In other cases, the
connection to profitability may be less clear (e.g., improves customer satisfaction) and
ROI is difficult. IT can also enable the success of a company™s strategy (strategic effec-
tiveness). For example, if a key strategy is increasing customer loyalty through improved
customer service, IT has value when it provides tools and information for improved
customer service.
In this context, the CFO plays a critical role, not only in understanding and com-
municating IT value but also in shaping the way a company uses IT. By insisting on a

299
300 THE CFO ROLE IN RIGHT DECISIONS/RIGHT RESULTS


consistent, business-based yardstick for measuring all IT investments (new and ongoing
support for existing IT activities), the CFO can bring rigor to an historically political,
informal process of making corporate decisions about IT. By making operational and
strategic effectiveness the basis for this yardstick, the CFO can also inject a business-
results rationale for assessing all IT investments.
Unfortunately, many companies lack IT and business planning processes that fol-
low these principles and, hence, cannot produce IT plans and budgets that consistently
support business strategies. For companies to effectively answer the hard questions posed
above, the CFO and the rest of the senior management team needs to work not only
to adopt the principles but also to implement process and culture changes to explicitly
link IT investments and business strategic intentions.
We want the CFO to be able to say: (1) We are able to translate our business strate-
gies into IT actions; (2) We are investing new IT resources in the right places; (3) We
are getting sufficient value from our existing IT assets and resources; and (4) We are
spending the right amount on IT. Any company can learn and implement these prac-
tices. With effective management leadership, proper training, and a focus on adapting
these practices to fit the company™s culture, the CFO will answer the value questions
with confidence.
F
APPENDIX

The Details of the
Business Value Maturity Model „




C hapter 12 introduced the Business Value Maturity Model„ and described the six
basic levels, shown in Exhibit F.1. Definitions for the areas covered by NIE prac-
tices are given in Exhibits F.2 “ F.6.


EXHIBIT F.1 Business Value Maturity Model„

Level 5 ” Optimized. Management processes
that apply the practices are central to the company and
continuously improved.


Level 4 ” Managed and Measurable.
Management processes are standard practices; execution
is monitored; outcomes affect the business.


Level 3 ” Defined Process. Management
processes exist to apply the practice, but no company-
wide standards or enforcement.


Level 2 ” Repeatable but Intuitive. No
formal management processes, but the idea is understood
and informally applied to produce the desired outcomes.


Level 1 ” Initial/Ad Hoc. No formal
management processes, but a few managers attempt to
apply the practice informally to produce the outcomes.


Level 0 ” Nonexistent. No management
processes apply the practice to produce the desired
outcomes.




301
Strategic Demand/Supply Planning
EXHIBIT F.2
Maturity Level Description Practice Outcomes Business Outcomes
0 Nonexistent There are no company management None None
processes to produce IT performance
measures that are connected to
business impact.
1 Initial/Ad The need for demand/supply planning IT initiatives and projects are driven by IT™s role is limited to “squeaky wheel”
Hoc is recognized by IT but there is no IT in response to general business initiatives and incremental process
structured process in place. It occurs requirements. These requirements are improvements.
only in response to a specific business typically based on automating existing
requirement and is driven by IT business processes or
management. IT plans are rarely enhancing/extending current systems.
discussed at business management




302
meetings. Risk and alignment are
handled at the project level.
2 Repeatable IT management understands IT has a transactional strategy that is Some projects are roaring successes,
but Intuitive demand/supply planning but the driven project by project. but too many others are dismal failures.
process is not documented. It occurs Lack of coordination between No coordination between initiatives limits
on an irregular cycle. No process for individual projects creates multiple value across the enterprise.
communicating changes in business push/pulls on IT architecture. IT experiences an increase in
and IT plans and requirements. There is little involvement from the infrastructure complexity.
Some local integrated planning occurs business in capturing the value of a Management attention is given to the
between IT and the business. project (IT projects happen to the application development process.
business). IT alignment and TCO become a
Project duplication and overlaps business management issue.
commonly occur.
Strategic Demand/Supply Planning (Continued)
EXHIBIT F.2
Maturity Level Description Practice Outcomes Business Outcomes
3 Defined A policy defines when and how to IT strategic plan is translated into Increase in the percent of business units
Process perform IT/business strategic planning. roadmaps and initiatives (projects). that have clear, understood and current
Management buy-in and support is IT capabilities.
Increase in the percentage of IT
enabled by a documented budget that is actively championed by Management attention is placed on
methodology for joint IT/business the business. project formation process and identifying
strategy development, the support of project (ROI).
The planning process still happens at
validated data, and a structured, the business-unit level.

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