CIOs as "Chief Investment Officer": How to Demonstrate the Business Value of IT Initiatives

Compelling business cases describe the initiative’s benefits and costs flow.

Many IT organizations are on the way for radical digital transformation, to change their reputation from a cost center to a value creator; from a back-office support function to a relentless innovation engine; from the process "glue" to the capability builder. So more importantly, what are the best ways to obtain and demonstrate the business value of an IT initiative?

A strategic business case creates a narrative that places a proposed investment within its competitive context: The first thing is to stop calling it an IT initiative. Like any other initiative from another part of the business, IT projects should be called a business project with a clear objective and full alignment with the overall company’s objectives, otherwise, they do not exist. Most commonly, the narratives within strategic business cases reflect multifaceted business value pathways: responding to mandates by external parties; upgrading existing technologies; making business process improvements; responding to a competitive necessity; gain a competitive advantage; and, generating options for provisioning future business capabilities. And the responsibilities need to be well defined such as:
- Who should take on the "ownership/sponsorship" responsibilities?
- Who should be the champions?
- Who should facilitate?
- Who should be engaged or involved?

Compelling business cases describe the initiative’s benefits and costs flow: It is important to be as comprehensive as possible in monetizing costs flows as too-optimistic cost projections are recognized, seeding doubts about an initiative in others’ minds. On the other hand, it is important to be as conservative as possible in identifying and monetizing benefits flows as too-ambitious benefits flows are easily countered. For example, some organizations apply the technique, either being called touchpoint analysis or another term – for identifying and tracing through the manner by which an IT initiative impacts an organization’s bottom line. Such analysis traces through the manner by which the organization’s business processes are ‘touched’ by an IT initiative. Generally, this occurs by the initiative impacting the transaction handling, decision making, and coordination associated with affected business processes. By identifying and visually portraying these touchpoints, the data and knowledge held by others can be tapped in monetizing an initiative’s benefits flows.

Developing a compelling strategic business case is especially critical when an initiative is difficult to monetize: That is, attaching believable dollar values to identified benefits flows. For example, story-lines might be developed around themes such as: how the initiative ensures the organization’s compliance with regulatory requirements; how the initiative restores the organization to competitive parity by reversing erosion in customer loyalty and in profit structures; how the initiative builds business processes that differentiate the organization from its major competitors; and how the initiative situates the organization within a growing and highly profitable product market niche.

Finally, you need to emphasize that it is insufficient to simply communicate an initiative’s promised benefits – these benefits must be delivered, or future efforts to ‘sell’ an IT initiative are likely to fall on increasingly deaf ears. Consequently, you should also cover a set of implementation management, change management, and project management issues that, if effectively addressed, can increase the likelihood that an initiative’s promised benefits will, in fact, be realized.

Posted in: IT Performance Management,IT Transformation