Thursday, April 3, 2014

How to Measure IT VALUE Effectively

VALUE is not something that can easily be measured and is very subjective. Value is measured in time, dollars, quality and customer satisfaction!

Most of IT organizations measure IT via system performance, IT project on budget and on time, or IT department cost commitment, but the most debatable IT measurement discussion is how to measure the VALUE IT delivers to the business, or put simply, customer satisfaction, do IT measure the right things to present to the right audience? And the intention of such brainstorming is to determine if there is a sufficient measure in place to drive the measurements needed. If you commit time and money, then you must have a reason or multiple reasons for doing deep value-based analytics in order to continuously improve IT performance.

VALUE is not something that can easily be measured and is very subjective. Remember that IT is there to deliver the programs that the business wants and states that it needs. The value of these programs is derived from the business and often competing business units will argue that they are more valuable than others. It is not as simple as taking measurements and making quick deductions. Analyzing the data is critical to understanding the measurements. This is not an easy job, but it is not impossible, certainly within the capability of an analytics person. The point is, if the correct goals and objectives are set by the correct people, if measurements are then taken and analyzed, the analysis provided to the right decision makers, and the opportunity is provided to the CIO and the stakeholders to explain the variances, then the correct decisions can be made, the correct actions can be assigned, and improvement in the business can be achieved. and the use of statistical analysis techniques arrives at providing very valuable, insightful, useful and realistic results.

Value is an overall measurement based on the combination of cost, schedule, quality, performance, and satisfaction of the customer, users, and stakeholders. Because of this, cost, schedule, and performance commitments can be met, but if the system does not meet the expected mission, dissatisfaction (reduced satisfaction) over this shortfall negatively impacts the overall value. Degrees of over-budget, late delivery and/or poor system performance conditions also reduce satisfaction. Overall value, therefore, has to be judged at the enterprise level considering the overall satisfaction over each combination of cost, schedule, performance, and satisfaction the customer, user, and each stakeholder considers important to them. Calculating value is where the employment of analytics becomes very critical. This is the level of analytics practice needed to understand and measure value to enable driving improvement in the organization.

Business is looking for and identifying systemic issues and addressing the cause and corrective action. The fact is many IT organizations are not even trying to address measuring their value to the business as they simply have not employed the methods to enable it, and looking only at cost, schedule, and quality, will not fully address value and only leads to conflicts in what value is as it does not address the portion of value that is not measured in these indexes. Perhaps businesses don't properly measure value because they don't want to hear the answers to the questions they are not willing to ask or maybe they just don't know how and think that because they don't know how it can't be done. As the data is showing, on average, 80% of IT budgets across the industry are being spent on fixing previous IT developments, and the percentage keeps increasing with time, anyone that does not address fixing this problem, is a detriment to the future of the business. Also, as is often the case, because people focus upon the budget and not upon the value and when cost cutting occurs, it tends to be based upon department power and perception, things that often IT fail to have and manage. 

It is not the measurement that is important; it is what you do with the data obtained from the measurement. If all you do is collect data, the effort serves no value and is a waste of money, time, and resources. Until you say what it is that you have witnessed in terms of what measurements were taken and what was done with the data. If you put the effort into taking the correct measurements, collecting the data obtained, analyzing it, evaluating it, determining what needs to be improved, determining what the actions are to improve it, assigning actions to perform the improvements, continue to measure the results and make adjustments in the improvement plan, the business will most definitely be improved. 

What is important in any business, whether or not you think you have them, is that systemic problems be constantly looked for, identified and corrective action taken when found, as systemic problems not addressed, grow worse, result in more waste over time, and ultimately cost the business financial losses in one way or the other, if not from the very beginning. Through the holistic and integrated management approach, the problem of demanding IT investments that will never meet the business benefits being claimed in the investment case, will be solved, and addressing IT developments as business projects forming a program/project/ executive/functional organization total enterprise PARTNERSHIP would be in the best interests of all organizations and stakeholders. The measurements can then be presented and effectively and efficiently addressed in an enterprise corrective action board and through this board, enterprise-wide continual improvement can then be achieved.

The purpose of the CAB (Corrective Action Board) is to look at the metrics and situations of multiple projects and when similar or identical problems are seen, this is an indication of a systemic problem and the need for and level of corrective action to be taken. If a measure, measurement or KPI is not correctly indicating the situation, it would be discovered in the evaluation of the metric analyzes by all the stakeholders, concurrently in real time at the CAB. A decision is then made as to what requires attention and actions are assigned. Sometimes a problem will drive multiple actions to multiple parties. In such cases, the problem is broken down and each party owns their piece of it. If the actions turn out to be incorrect, the same problem or another related problem will eventually show up again and the CAB corrective action process repeats. Eventually, all problems get fixed as the dissatisfaction about them not getting fixed gets worse every cycle.

The determination of VALUE is the most valuable aspect of the establishment of the correct measures being placed on the correct people. The issue with measuring value is it can't be fully measured in time or dollars. Value is measured in time, dollars, quality and customer satisfaction. Quality and satisfaction are measured in the combination of the explanation of the variances, the discussion that pursues, and the involvement of all stakeholders to provide input and participate in the solution as determined. Here is a set of assessment questions:
     (1)   What are measurements being taken on what measures (that you seem to think measures on the ability to meet cost, schedule, and quality commitments, and the provisions of value to the business are useless measures on the IT executive)? 
    (2)   What type of evaluation of the analysis of the data is being done? 
   (3)   What effort is being taken in identifying and determining what problems need to be improved based on the results of the evaluation?
      (4)   What effort is being taken in determining what actions are required to improve the problems identified?
      (5)   What effort is being taken to assigning the actions to improve the identified problems? 
      (6)   What efforts are being taken to continue to measure the results of the actions taken to address the identified problems? 
(     (7)   What efforts are being taken to make adjustments in the improvement plan based on the analysis, evaluation of the measurements of the results of the actions taken to address the identified problems?

The CIOs need to genuinely engage both internal and external customers. That engagement is critical - but so are the metrics. While there will also be an element of subjectivity in these matters, there have to be some hard numbers to calculate success...This is what "value" is all about and the importance of calculating it. The business has trouble measuring value because the business does not attempt to understand or account for satisfaction. Cost, schedule, and quality are the normal things that a business sees and judges ITSELF against. Understanding the satisfaction of the customer, user and stakeholders is what allows the measurement of value as value is a feeling and it is held in the guts and emotions of the customer, user, and stakeholders. Taking measurements costs time and money, therefore, the measurement is important to determine if the business decisions being made, and the performance that results, is meeting the overall needs of the business and if these results are benefiting the business in the best way.


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