CIOs Still Struggling with ‘Value’

You’ve probably heard it all before but that doesn’t make it wrong: IT is still struggling with the idea of ceding the measurement of its success to the line-of-business (LOB) managers it is tasked with serving.

“The CIO’s responsibility is to draw the LOB guys in and say, ‘We’re thinking about new technology here. If you don’t think it’s going to help the business then a) lets not do it b) if you think it’s good for your business and you think it’s going to solve a problem rather than solving a localized pain, let’s solve something for the company and show how it’s going to make difference,” said Cutter Consortium Senior Consultant David Caruso.

“At some point the onus of making hay with the IT project shifts from the IT’s shoulders to the shoulders of the line of the business.”

Writing in a recent Cutter Consortium Business-IT Strategies Executive Update, Assessing Business Value Creation from IT: A Diagnostic Roadmap for CIOs
Caruso, said “IT plays an important role in strategic planning, and cost-effective implementation of the right IT investments creates competitive advantage. Too many CIOs face a serious and untenable credibility gap. Even if their performance is stellar, they don’t know how to prove it to themselves or to their CEOs. This is an unenviable spot that requires facts and decisive next steps.”

“Savvy CIOs recognize that to thrive, they must develop a different view of their performance, one expressed not in the language of technology but in terms of profitability and growth.”

The problem is many CIOs are just not equipped to make this transition or to hand over responsibility for IT projects to the business. Many CIOs are still too tech-orientated.

“What I find is the IT side of the business isn’t organized often times to realize it,” said Caruso. “For example they’ll say, ‘We’re putting in this special technology … and they will track down to the minute the project activities and then you’ll say, ‘You came to the end of the project, did you realize the benefits?’ And they’ll say, ‘Well, were done.’”

Caruso asserts that organizations must make three factors inherent to its approach to all projects and ongoing systems usage if it is to realize value from its technology. These factors are:

Adoption. Technology is not effective if it is not used. CIOs should constantly ask, “Are we really effective in the way we deliver technology to users? Are they using it to its fullest potential?”

Far too many ERP projects, for example, set out with lofty user-count targets but years later find that only a fraction of the users and often an even smaller percentage of the functionality was actually put in place.

Process performance improvement. Experience shows that projects are more successful when systems arm users with processes that are better than they had before or that are innovative, which helps them speed delivery, reduce overhead, and create new market opportunities.

For organizations to be successful, managers must link strategic business drivers to business processes via metrics that monitor the achievement of strategic goals, not just project completion. Higher productivity from these processes becomes institutionalized in the profit margins.

Realization of benefits. IT should target improved business results. For most organizations, this means profitability. For others, such as nonprofits, it means an improved ability to achieve the organization’s mission. All project measurements should include ROI or overall financial return.

CIOs must be able to translate the operational changes that come as a result of IT projects into measurable value. And then they must work with the line-of-business (LOB) executives to ensure that the value shows up on the financial statements.

Of his 30-plus years in the IT industry Caruso said “I just kept coming to the same realization: For all of the research data that was out there, for all of the great platitudes that we throw around this industry, a lot of these guys (CIOs) just didn’t really have their arms around ‘It’—how do I prove I’m creating any value for this company.”