Tuesday, September 5, 2017

Running High-Performance IT with Multi-layer ROIs

Outside-in IT performance perspectives and outcome-based measurement practices are important to improve IT maturity and focus on the performance of the entire organization.

The commercial goal of all businesses is to generate revenue, expand the net-new business, enlarge their business footprint, and monetize their core competencies. The business paradigm is shifting from the industrial era with the scarcity of knowledge to an information-abundant digital era, technology plays a pivotal role in the digital transformation. And therefore, the role of IT in the current business environment should reflect such a significant shift, transform from the cost center to the revenue generator, and be able to enable business outcomes. Here are three aspects to run high-performance IT with multi-layer ROIs.

Multi-layer ROIs: Traditional IT organizations are perceived as the cost center because IT cannot communicate with the business via tangible and quantitative value IT can bring to the business either via increasing the top line business growth or improving customer retention rate. IT is struggling with keeping the lights on via improving cost efficiency. In order to become a better business partner, IT value-based management needs to be driven by concepts like collaborative value or collective advantage and multi-layer ROIs. IT leaders need to have a seat to contributing to strategy making proactively, and IT should become known as a revenue rainmaker by associating its efforts directly with sources of the business income. IT performance with multi-layer ROIs should be demonstrated through the rate of productivity increases, the rate of new products/services development, the rate of new market share gains, the rate of customer satisfaction/retention, and the rate of market shares gain, etc. IT leaders need to take the bold move in pursuing strategic and innovative engagement with the business, and they should be able to spot the opportunities to increase revenues, look for tailored solutions which will directly benefit the external end customers, improve the long-term competitive advantage of the organization and in-turn bring increased business revenue.

Tangible and intangible IT value proposition: IT is an enabler of current and future capabilities of both the organization and its ecosystem. Each IT organization has a set of capabilities that enable it to achieve successful outcomes, whether financial, brand, or double bottom line. There are tangible (cost savings, efficiency, productivity etc.) and intangible (brand equity, sales enablement, etc.) components of IT value proposition. Therefore, it is important to triangulate IT value from the different lens in building a more comprehensive IT value proposition. As a CIO, if your focus only on the cost, the bottom line business efficiency from inside-out operation lens, to keep the lights on only, then don't be surprised if you are managed on cost only. No wonder the business partners will perceive IT as the cost center as well. The matter of fact is that, there are few business units that are as deeply embedded into each corporate function as IT, to reinvent IT as the value creator, it is important to use this knowledge to uncover hidden value, not only within IT but benefit the entire organization. Hence, running IT and evaluating IT performance from outside-in business and customer lens, as well as leveraging unique IT knowledge and capability to build business competence are crucial steps for rebranding IT and improving the business's growth capacity and maturity.

Define how you will measure IT performance in meeting that purpose and vision: As the old saying goes, ”You can only manage what you measure.” Because a measurement system is a necessary foundation for continuous improvement. Nowadays IT makes a significant impact on almost every core process of the business. Thus, your measures should cover all areas that IT contributes to value creation including service quality, employee productivity/engagement, customer satisfaction, and financial outcomes. Also, ensure that these measures are quantitative, and implement whatever mechanisms you need to be able to gather the information and measure them in an objective way. In reality, for many IT organizations still get stuck at the lower level of maturity, they are not even trying to address measuring multidimensional IT value to the business because they are simply have not employed the right methodologies and developed the next practices to enable it. Metrics can help you get some objective perspectives on what you are trying to manage, but they need to be crafted and interpreted well. To put another way, how you measure IT performance directly impact on how you manage IT in meeting the business goal and whether you can unleash IT potential as the revenue generator. Assuming an organization believes that metrics can lead to continuous improvement or even make a leap of digital transformation, it won’t be just a matter of explicit communicating the intention behind metrics, but a matter of leadership guidance to steer the team in the right direction via understanding the purpose of doing that and engaging on that.

Outside-in IT performance perspectives and outcome-based measurement practices are important to improve IT maturity and focus on the performance of the entire organization. With the right set of metrics to measure the right things, and running high-performance IT with multi-layer ROIs, IT leaders don't just need to stay in tune with the times, rather stay ahead of the change curve, and be able to allocate and align their capabilities to what the business really needs, and rebrand IT as the revenue generator and digital transformer.


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