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Smart Enterprise: Greater Expectations

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benefits are to be achieved, and what is required of the organization if the project is going to be successful." Adds Thorp: "The right people must sit down together and have the right conversation." Thorp also recommends that a business case contain not only the expected benefits of an IT investment, but also how those benefits will actually be achieved. That is: To achieve the planned benefits, which process, organizational and infrastructure changes are required? More traditionally, success has been defined as satisfying a project's budget, schedule and features requirements. But Peppard cites a study from McKinsey Quarterly showing that such "success" actually provides only 20 percent of an IT project's potential business value. To achieve the remaining 80 percent of value, Peppard adds, management must be involved. Peppard believes that many business executives incorrectly view their CIO as a chief infrastructure officer — someone who merely keeps the lights on. "Even in organizations where there is alignment, the CIO is often seen as an order-taker," Peppard says. "Whereas IT should shape as well as enable strategy." Corporate executives need to understand that IT decisions are also business decisions, he says. Those who don't may simply dictate business strategy to the CIO, and then leave the IT executive to his or her own devices to define and even implement a technology portfolio to support that strategy. "In a lot of organizations, even if business colleagues have been involved in building the case, they will abandon their responsibility to the CIO to actually deliver the project," Peppard says. As for how it's done in the trenches, the history of ESPN has included one successful IT project after another since its founding. EVP Pagano says he has a practice, both formal and informal, of making sure that business-side people are "embedded" in every technology project from its definition through its execution. "The customer has to be there during the project's development and its changes, to guide it and mold it," Pagano says. "[He or she] can't just turn it over to the techies to figure out [what to do] miraculously or through osmosis." Business on Board Once a CIO gets his or her business man- agers involved, there's hope, Thorp and Peppard agree. But that's just the start. "The tipping point comes when senior management says, 'We own this, and we need to get serious,'" Thorp says. "At that point, there is some basic governance that must be put in place." First, CIOs and their business leaders need to connect the dots between IT and business value. The result is what Peppard calls a Business Dependency Network. (See sidebar, "Five Steps to Business Benefits," p. 49.) "It helps you get clarity on the outcomes you are trying to achieve," he says. "It also shows the intermediate outcomes you need to get to those final outcomes." Offering an example, Thorp asks: "Why [implement] CRM? A common answer is, 'So we have more information about the custom- ers.' But that is an intermediate outcome, not a business outcome. The business out- come is higher profitability through higher customer retention — or higher revenue per customer." The reference to CRM is not accidental. Peppard's research shows that between 2000 and 2005, the most recent years for which data is available, some $220 billion was spent worldwide on CRM projects. But during these years, as many as 75 percent of all CRM projects failed to achieve their expected ROI. Next, the experts advise, CIOs and their business counterparts need to understand which IT initiatives are needed for the desired business outcomes. "You must get all that on the table," Thorp says. "Those doing well put a lot of effort into the front end." What's more, say both experts, just because an IT project is delivered doesn't mean it's finished. In fact, that's when the true value of most IT projects is actually delivered. "You have to manage the journey," Thorp says. "Rarely is the end what you thought it would be at the start, and how you get there also changes. There is nothing wrong with that as long as you are not surprised and you take appropriate action as things change." Adds Peppard: "Technology itself has no inherent value — to unlock technology's value, it has to be used. Most organizations use elaborate methods to get the technology Business Value: Closer, But Still Not There DATA: The Standish Group, 2010, custom data provided for Smart Enterprise, using worldwide project statistics Note: User waste = features paid for and implemented, but never actually used. Project waste = the amount over budget User Waste Project Waste Value 2000 2002 2004 2006 2008 60 50 40 30 20 10 THE 5 PRINCIPLES OF REALIZING BUSINESS BENEFITS To deliver value from IT projects, CIOs must ensure that project stakehold- ers understand some basic principles, says Joe Peppard, Director of the IT Leadership Program at the Cranfield University School of Management in Bedfordshire, U.K. To help, Peppard has defined five basic principles: IT has no inherent value. Simply possessing it is of no benefit. Benefits arise when IT lets people do things differently, presumably by being more efficient and effective in the use of information. Only business managers and users can trigger benefits. The IT staff cannot be held responsible for realizing business benefits. The goal of any IT project should be a positive outcome that delivers explicit benefits to the business. To be achieved, IT benefits must be actively and continuously managed — until they are either achieved or abandoned. —L.W. 1 2 3 4 5 Percent of total IT spending 50 SMARTENTERPRISEMAG.COM

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