Wednesday, August 17, 2016

“CIO Master” Book Tuning XXXXXXXVIIII: Three Aspects of IT Performance Management

IT metrics need to evolve to something that matters to the business audience and focuses on end-customers.

Traditional IT organizations were running inside-out operation driven, CIOs and technique managers assess IT performance via the lenses of IT, and mainly about “keeping the business bottom line.” Hence, business partners perceive IT as a cost center, or support desk only, because they don’t have a clear picture with quantitative information about contemporary IT's value proposition, and thus, lack of knowledge on how critical IT contributes to the business’s top-line growth and customer satisfaction. Thus, managing performance and improving IT reputation means understanding results, setting metrics, fixing plans, and making decisions to ensure the strategic goals are on the right track to get implemented, and communicated effectively at the different level of the business. In order to reinvent the tarnished reputation of IT, CIOs need to focusing on managing IT performance effectively via selecting key indicators, measuring both the right things and measuring them in the right way?
IT Value Indicator: IT metrics need to evolve to something that matters to the business audience, at the same time that "business sentiment" needs to get put into something more tangible, such as optimize processes, or improve productivity. Every new technology adopted must facilitate business but also bring down the incremental cost of growth and the time to market. That should be the true metric for a CIO’s success – how has he/she been able to impact the top and bottom-line and facilitate growth and competitiveness.These are undoubtedly dynamic times, with increasing speed of changes and high expectation of customers due to IT consumerization trends and continuous digital disruptions, but the fundamentals of a business seldom change. From IT performance perspective, measure what it matters, to reflect the business value, also make sure IT and business are always on the same page. It almost sounds like a “business dialect translation” issue - two different languages or cultures that need to find a common ground. Measure IT performance through the benchmark which can reflect the multidimensional value of IT to the business, not only for the bottom line but also for the top line growth.

IT Innovation Indicator (end customer retention, revenue growth): Digital is the age of innovation and customer centricity. IT metrics must get focused on the end-users. The end-user continues to be the key component of any customer-centric business.This is where the metrics for a CIO should rest – the end-user experience. To measure innovation, you choose those KPIs by deciding which are seen as critical to making progress on in order to deliver more innovations. The fewer the better, but they have to be credible and relevant also in the eyes of the stakeholders. For example, how much revenue is generated by innovations launched in the last 3-5 years? Are innovation failures caused by the time lag, inefficiency of financial systems? Normally organizations look for KPIs measuring business results generated by innovation efforts. But it takes quite some time for a new innovation drive to produce those measures. One of the solutions is to define process KPIs, which demonstrate the growing capability of the organization to deliver more innovation with business impact in the future.  

IT Investment Indicator (long term vision & strategy vs. quick win, low hanging fruit etc): Performances are not just numbers with metrics, they are numbers in context, results related to your strategic GOALS. As for success metrics, either new or old - for success will be predicated on the strategy and sourcing model. If the business strategy is an early adopter and rewards innovation which is an important component of the business strategy, then the metrics have to accommodate IT investment outcomes that may have a higher level of business value for the long run than that of a laggard who focuses on efficiency only- picking the low hanging fruit only. New competitive challenges and active market changes underscore the strategic imperative of managing performance more than ever. The well-selected IT investment indicators will help management make effective decisions on IT-enabled business innovation and information management to achieve high performance and driving long-term growth.

In the end, the business expects ROI. The answer upon how to measure properly is somewhere in the middle. Bottom line ROI and financial analysis are a great way to evaluate a new product or change to an existing system. But the various activities needed to manage performance— STRATEGIC and OPERATIONAL plans, innovation METRICS, day-to-day decisions. Your measures should cover all areas that contribute to value creation including service quality, employee engagement, customer satisfaction, innovation benefit, and financial outcomes.

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