CIOs as “Chief Investment Officer”: How to Manage IT “Yield On Return”

Quality and satisfaction are measured through the combination of the explanation of the variances.

The digital mantra for IT leaders is to run IT as a business. Statistically, Information Management investment represents one of the largest categories in the business budget. Thus, for many CIOs, they need to be able to support the essential investment with sound Return On Investment reasoning. It tells business management how well IT investment repays the company. When CIOs can present the measurable business value of IT investment, they are on the right way to reinvent IT from a cost center to the value generator.

Asset under construction: Forward-thinking organizations across industrial sectors declare they are in the information management business; information nowadays is the invaluable resource and asset of organizations. IT is the official owner of the information asset of business; CIOs need to address whether or not you are going to treat any software developed for internal users as an asset; in essence, treating IT expenses of portfolio management as capital instead of just operating expenses, helps shaping the mindset to run IT as the business. To put another way: If you see your business as an “asset under construction,” or the crucial investment expecting the return, the CIO is on the right track for becoming an enabler and architect of new business values. Organizations are highly dependent on IT executives who make the proposal to change/replace technologies based on the need of the business. IT budget assignment should not spend to meet a quota, nor should you avoid spending to stay within a quota. You should spend to make a return. Make IT investment justification to ensure that IT spends the money in the right way and getting the right results. IT executives should also continue to review upon the ROIs of existing IT investment, whether IT depreciation life cycle is completed or not; whether new technologies/products mature enough in the business market to adopt. In fact, Information is the most invaluable soft asset in business today, besides people. Information potential directly impacts the business's potential for the organization.

Golden thread: IT is now the threshold of running a digital organization. From an IT investment perspective, there is a concept of the “golden thread” that can link the business strategy to investment goals or business benefit, enabling business change, and finally a technology enabler. Such logical reasoning helps an organization assess if the business change with associated technology is the right investment to be doing in the first place, to ensure the expected return. Every new technology adopted should facilitate the business but also bring down the incremental cost of growth and the time to market. From both IT investment and performance management perspective, the effective measurement selected should be part of a link to cause-and-effect relationships. A set of IT performance indicators should show a clear link to C-Level executives between IT efficiency and top-line revenue generation. Selecting the right KPIs is an important step. The measurement golden thread helps to answer why you choose that, how you will use them and whether you will have enough resource to manage data as well as present them persuasively; and evaluate the overall maturity of IT organization.

Intangible benefit: Many IT organizations have to both support business running and catalyze business growth. The issue with measuring IT value is that it can’t be fully measured in time or dollars. There are also other aspects such as quality, customer satisfaction, or employee engagement. Quality and satisfaction are measured through the combination of the explanation of the variances. Overall value, therefore, it 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 stakeholders consider important to them. Business is looking for and identifying systemic issues and addressing the cause and corrective action. To reinvent IT as a value generator, IT management has to learn and explore different methods to measure and present; because ROI is expanding into other less measurable, but no less tangible areas which cannot be measured fully in time or dollars, such as employee satisfaction, creativity, teamwork, collaboration, as well as making silos disappear, etc.

From IT leadership perspective, there is not just one path to become a revenue-generating CIO. Some empowered CIOs are in the game from the start with the full backing of the top management team, the board and other power brokers in the company. The highly effective measurement and performance management can help IT leaders present information-based IT results which impact the top and bottom-line business result both qualitatively and quantitatively, as well as drive business growth effortlessly.

Posted in: CIO Leadership,IT Finance,IT Performance Management