Friday, May 23, 2014

What are the Pitfalls in Measuring Innovative IT Effectively?

The intersection of Information, Technology, and People is where innovation happens!

IT as an enterprise group is in a bigger identity crisis than ever, the industrial mode of IT running as a cost center no longer satisfies stakeholders and business partner anymore; the digital mode of IT means speed, agility, and innovation. IT needs to become a business’s innovation engine, as the intersection of IT and people is where innovation happens! Companies need to invest in IT necessary to make the business advances through either incremental or radical innovation! However, what are the pitfalls in measuring such innovative IT effectively?

Bottom line thinking is one of the great limitations of modern IT organization: The true IT value is hard to derive from support services since measuring productivity can be elusive and difficult to quantify. In addition, CIOs need to translate business speak and tech speaks fluently, as more often, the channels of communication are further muddied because of the language barrier associated with IT. The hypothesis is that whatever new service or solution IT provides, it needs to result in a business value which in most of the cases is tangible; it means either top line growth or bottom line profitability increase. Unfortunately, the stove-pipe functional silos are still prevalent and all too often fighting for who owns what versus, who should and runs it best.

IT performance metrics alone is not sufficient in communicating IT effectiveness: It is true that the majority of IT organizations still cannot articulate their economic value to the board or shareholders in a language they understand and performance metrics alone will not solve the problem. Costs are part of the solution, but they need to be understood in terms of usage or volume patterns, and they need to be distributed across often very complex revenue models that are in a constant state of flux. There is also a bit of a political battle that goes on where IT claims it's a proportion of revenue value, even when far more precise mappings exist between costs and revenue. Once it plays that game, IT matures beyond being a cost center and acts more like a business partner, or business within a business, because its value proposition can be backed up with something approaching empirical evidence and analytical clarity as opposed to gut instinct.

"Measuring up" is intriguing: Taking the time to do all metrics up front and treat a project as a static amount of work is a toxic illusion. Can any IT manager provide clear metrics up front? Only a small part of IT is predictable, and it is often a commodity. Most of the IT has to continue working together with business to find out what they need and developing tailored solutions side by side to advance the company. IT is mad when the business keeps changing its mind and is not happy with what they ordered, and on the other side, the business thinks IT is expensive and has no understanding of changing business needs. How does valued IT change and technology advancement happen? From fostering the spirit and value of collaboration across functional lines to speaking each others' language and knowing enough to understand the business impact on all sides of the house helps break that down.

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 it is very difficult to measure the value of many of the IT maintenance type expenditures. It is more important to measure return on innovation accordingly. Overall, the value a change has brought to the company is the measure of success. Although the consumerization of IT changes the way to run IT and business, there is still an IT element necessary to make all those pieces connect and run - not just once, but sustainably, and of course, adapting on-going as things continue to develop. That said, it is critical in investing IT in innovation for opportunity management, sometimes more is learned and gained from failing. The key is to fail fast. Opening up a spirit and opportunity for people to stretch and try new things will, in the end, generate many more returns than whatever thought possible!

When IT executives move beyond commodity management and begin to show higher level strategic value and dedicate more resources on innovation, then all that's needed is an open and receptive, collaborative C-Suite. IT is the key component in building up differentiated business capabilities nowadays. You need to attribute business value to your company in building close companionship with your business peers, customers and partners, also in developing multi-dimensional views of KPIs that show how IT is improving business and enforcing business capabilities.


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