ROI analyses are a key component of efforts to drive quantifiable value from IT. However, driving significant business
results on an ongoing basis requires a more comprehensive and continuous approach that maintains the focus on quantifiable business value throughout planning, implementation, and deployment. Due to the complexity and far-reaching nature of this issue, IT value management capability needs to evolve over time. A "Value Maturity Model" is useful for guiding this evolution, helping organizations assess their current state and develop action plans for moving forward.
Value maturity applies to both corporate users and vendors. While users are ultimately responsible for the value enabled by an IT initiative, vendors should actively help their customers maximize the value of these investments.
An example Value Maturity Model is summarized below, specifying the five distinct levels of neglect, promote, commit, demonstrate and continuously improve.
Level 0: Neglect -- complete lack of focus on value
The lowest level of Value Maturity is Neglect, in which the IT user/vendor lacks any active focus on value -- concentrating instead on other factors, such as functionality and performance. While ignorance could explain why companies stagnate at this level, a more typical reason is the difficulty associated with initiating efforts to develop the processes and skills for value-oriented planning and implementation. Fortunately, senior management within IT, business groups, and vendors is increasingly realizing that a focus on value is critical. As a result, the number of organizations at the Neglect level is steadily decreasing.
Level 1: Promote -- active discussion and promotion of expected value
Once business value is deemed to be an important focus, organizations typically move to the next level of maturity: Promote. At this level, to improve the likelihood of project approval, both user and vendor organizations actively discuss and market the expected value improvements from an initiative. However, little is done after that point. While ROI tools, business justifications and case studies are used during planning, no value-oriented follow-up occurs after the project has been approved and implemented. Needless to say, as a result of this lack of follow-through, little additional value is generated at the Promote level. Unfortunately, Promote is the most common maturity level for corporate users and vendors today.
Level 2: Commit -- senior management takes responsibility for value targets
The actual value enabled typically increases substantially when organizations move to the third level of maturity, Commit. At this level, senior managers of corporate users and vendors -- individuals who control the personnel, processes, and technologies that must change in order for the touted gains to occur -- take responsibility for delivering on value targets. Accountability for increases in revenue and reductions in business costs reside within the business organizations, with the CIO being accountable for improvements in IT cost-effectiveness. This maturity level involves much more extensive review and sign-off during the planning and justification phase, with manager performance reviews and compensation tied to the actual results. This greatly improves the accuracy of the justification, as well as the likelihood that the expected value will be delivered. However, lack of a consistent process for value measurement frequently leaves execution and ongoing follow-up to the accountable person with significantly varying results.
Level 3: Demonstrate -- actual value enabled is measured via consistent process
The lack of consistent follow-through is addressed in the fourth level of maturity, Demonstrate. Here the actual value enabled by the IT initiative is passively measured and communicated after deployment through the use of a consistent, disciplined process. This enables the organizations involved to build credibility and user satisfaction by demonstrating actual results. However, the passive use of the value data eliminates the ability to actively improve value on an ongoing basis. With complex projects, it is very difficult to get all personnel, process, and technology changes right the first time -- resulting in many missed opportunities to make improvements and increase the value over time.
Level 4: Continuously Improve -- value is actively improved over time
The fifth and ultimate level of maturity is Continuously Improve. At this level, IT, the business groups, finance, and key vendors actively work with business results and supporting analysis data to continually increase the value enabled by an IT initiative. Examples of analysis information would include:
- the measurable progress made in each step of a business process (e.g., increases in the number of sales opportunities that must precede increases in sales revenues)
- the effectiveness of each element of the implementation of the IT initiative (e.g., user adoption of systems)
- comparisons of results from different groups (e.g., success of the initiative with one product group versus another). These analyses provide extremely valuable information regarding the underlying causes of problems, as well as opportunities for improvement.
By attaining the Continuously Improve level, IT achieves the objective of being a true partner to the business. The business groups realize measurable gains through increased value enabled. Vendors also win by increasing revenue and margin through improved customer satisfaction and retention, and through additional business opportunities with current clients. At this level, IT initiatives can also become integral components of other corporate metric and improvement processes such as Balanced Scorecard and Six Sigma.
With this in mind: what is the current level of maturity of your organization, and how would you benefit by moving to the next level? Are your competitors doing a better job in gaining value from their investments in IT, or in their ability to help their customers derive value? Remember, this is an evolutionary process. Determine the appropriate next step and then follow through.
Dan Merriman is President of the Chapin Consulting Group, Inc. Visit the Chapin Consulting Group website at www.chapinconsulting.com for more information regarding how corporate users and vendors of IT can improve their value management maturity.