Monday, May 23, 2016

CIO Master Book Tuning XXXVIII: Three Aspects to Enhance IT Value Proposition

CIOs need to maximize IT value via pursuing strategic, innovative, and tactical alignment and integration with the business.

Forward-look IT organizations work hard to reinvent IT reputation as a value creator and innovation engine. IT is an enabler of current and future capabilities of both the organization and its ecosystem. IT needs to deliver value to the organization in order to help the business build competency and implement business strategy. Thus, CIOs need to maximize IT value via pursuing strategic, innovative, and tactical alignment and integration with the business. Maximizing IT value really means a lot: from enabling business strategy via capability to adapting to the changes via agility and flexibility; from revenue growth to business resilience, from “doing more with innovation” to “doing more with less” (efficiency). Here are three aspects to enhance IT value proposition.


Revenue Impact: IT value-based management needs to be driven by concepts like collaborative value or collective advantage and multi-layer ROIs. These engagements are leading IT to be much more proactive in proposing - as opposed to responding to ideas for new ways to improve customer experience or actually create new customer value and revenue. IT value is demonstrated through the rate of productivity increases, the rate of new product development, the rate of market share gains, the rate of customer approval and satisfaction gains, or the rate of sales gains, etc. IT is the steward of the business’s information system, it is, therefore, in the unique position to oversight the business landscape horizontally. Hence, IT should proactively generate ideas and then work with business partners to take those ideas forward. Also, you have to have some measure to show what value was created. IT value is multi-faceted and it’s interesting to see how IT value is in the eye of the beholder. In order to show value, first, all parties need to agree on the common value proposition, then, you need to be able to measure it, if you can not, then you can not show how much value was created or lost. IT executives and departments need to work out how they affect these business output measures, and what they can do to improve them using the means at their disposal. Once they do that and make a unique, valuable, independent contribution to the business outcomes that they can demonstrate in these terms, they will gain credibility and value beyond what any "provider" can deliver.


Cost Optimization: IT can help business to improve net profit, by reducing the cost of doing business via keeping cost down while at the same time maximizing its output so when the business revenue increase, IT cost remain the same which will improve net. IT can also leverage the latest technology to optimize business processes to improve productivity as well as achieve cost efficiency. Thus, leading organizations understand how to leverage IT to improve the top line and at the same time decrease expenses to improve the bottom line. IT also needs to continue fine tune its own infrastructure, applications, and services via consolidation, modernization, integration, optimization, innovation., etc. IT needs to keep improving and optimizing its spending and making a wise investment in running a balanced portfolio of “Running, Growing, and Transforming" the business accordingly.


Business Agility: IT’s value proposition is also built on improving organization level strategic responsibility, changeability, flexibility and business resilience, and overall business maturity. IT leaders should keep asking: Is IT responsive and fast enough to discover the root cause of problems, also quickly find the answers and solution in case of emerging circumstances? Does IT have a platform which is scalable, secure, resilient and well interconnected? Can IT make significant influences on business strategy and innovation? Is IT often driving change, or seems lagging behind or dragging down the business’s change speed? How to run IT on the fast lane, which means to speed up the organizational vehicle as well? Is the gap between business and IT actually enlarged or shrunk? Do you have a rolling plan in addition to the mid-term or long-term strategic planning document, in order to achieve agility? And how to measure business and IT agility and present multidimensional values to the stakeholders for gaining understanding and support?


IT has to define a set of metrics used to inform the business of IT value and performance. IT value to the business can be categorized in a number of ways, such as Improving Revenue (enable the business to gain market share), Improving Speed/Agility (Speed to Market, ability to change etc), Customer Acquisition/Retention (optimize end customer experience...), Lowering Risk (reduces business system downtime, create business continuity), Lowering Cost (reduces the cost of the current business process, improve margins, freeing up capital for new ventures, etc). Each IT organization has a unique set of capabilities that enable it to realize its value propositions and achieve successful outcomes, whether financial, brand, or double bottom line. And high-performing IT should have an optimized prioritization/planning process and ongoing IT efforts to continuously improve IT value proposition and maturity.



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