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Smart Enterprise: Greater Expectations

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have any signifi cant impact beyond keeping the lights on," Peppard adds. Among CIOs, even those who are willing to discuss this topic prefer to do so in the context of other companies. "The reason [behind] projects sometimes disappears, and I've heard of other organizations con- tinuing to work on a project they no longer need," says Chuck Pagano, Executive VP for Technology at ESPN Inc., who is credited with bringing high-defi nition and 3D tech- nology to its TV network. "But we don't do it in that fashion. As in sailing, you sometimes need to jibe and tack, or make a 180-degree turn. You need to learn from everything around you, and that includes failure." If so, there is plenty of learning to go around. According to the Standish Group, IT failure rates rise with project scale, mean- ing the largest, most-expensive IT projects are also the most likely to fail. In fact, when looking at large IT projects (those with price tags of more than $10 million), the Standish Group found that nearly 50 percent fail and almost the same percentage are challenged. A mere 2 percent are outright successes. Only when budgets fall below $750,000 do successful IT projects outnumber failures and challenged projects, the Standish Group reports. (See chart, p. 51.) Waste Not… Another issue is IT waste. In 2008, the last full year measured by the Standish Group, only 57 percent of total worldwide IT spending delivered full value. Of the rest, 18 per- cent was lost to what Standish Group calls "project waste" (the amount over budget). The fi nal 25 percent was lost to user waste — features paid for and implemented, but never actually used. (See chart, p. 50.) With global IT spending in 2008 hitting the $291 billion mark, these percentages translate into real money. "Developers have been paying closer attention to feedback from the users," says Jim Johnson, Chairman of the Standish Group. "Those who pay closer attention do better, but it's amazing how many people have not learned this lesson," he says. Another lesson, say both Peppard and Thorp, is that business managers should be staying involved in IT projects from start to fi nish. What's more, that start begins long before the hardware is ordered, and the fi n- ish comes long after the system is installed. An IT project truly begins with making of the business case, Peppard argues. But too often, he adds, this process involves fl imsy data and reasoning. He cites his own research showing that, with less successful organizations, more than half the people involved gain funding by overstating the expected benefi ts. "Some business cases are fi ction," Peppard says. "And even when they aren't, they often lack rigor." Adds Thorp: "I have spent the last 15 years talking to large and small audiences, and I always ask how many in the room believe they have an effective business case process. Over that entire time, no more than 20 or 30 hands in all have gone up." Also, how decisions about IT systems are made is at least as important as which decisions are made. Specifi cally, decisions about IT must be made in consultation with everyone involved, while always keeping in mind the project's ultimate business goals. "The quality of the process is criti- cal," Peppard says. "It must include the key stakeholders, who understand both what is required of them and their people if the There is a formula for successful IT projects, says Joe Peppard, a Professor at Cranfi eld School of Management in Bedfordshire, U.K., and Director of the school's IT Leader- ship Program. CIOs and business executives, working together, must fi rst decide on the desired benefi ts. Then they can work backward to determine which intermediate steps will deliver those benefi ts. Only then can they decide which IT investments will be needed to support those steps. To help, Peppard has created what he calls the Benefi ts Dependency Network (BDN). It provides an organized framework for getting the maximum benefi ts from an IT project. BDN is organized into fi ve main sections: ■ Investment objectives: the bottom-line results being sought; for example, "increase sales value and volume from new customers." ■ Benefi ts: the business gains that will underlie the bottom-line results; for example, "increase rate of follow-up on leads" and "increase conversion rate of leads to orders." ■ Business changes: permanent changes to the enterprise's practices, processes or relationships that are needed to achieve the stated ends; for example, "increase sales time with customers" and "allocate sales time to potential high-value leads." ■ Enabling changes: one-off organizational changes needed to connect the IT invest- ments with the desired business changes; for example, "release sales time from post-sales activity to pre-sales." ■ IT enablers: hardware and so ware necessary to support the rest of the process; for example, wireless computers and mobile devices for the sales staff . SEVEN QUESTIONS FOR YOUR NEXT PROJECT Getting ready to launch a new IT project? Peppard says answering these seven questions fi rst can help ensure that your project delivers its promised business value: ■ Why must we improve? ■ What improvements are necessary/possible? (These become the objectives.) ■ If the objectives are achieved, what benefi ts will be realized by each stakeholder? ■ Who will be accountable for the delivery of each benefi t? ■ What changes are needed to achieve each benefi t? ■ Who will be responsible for ensuring that these changes are successfully made? ■ How and when can these changes be made? —L.W. FIVE STEPS TO BUSINESS BENEFITS )'('SMART ENTERPRISE 49

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