Thursday, October 18, 2018

Three Metrics and Measurement Aspects of Shaping IT as the Growth Engine of the Digital Business

The performance measure setting should focus on achieving the ultimate goals of the organization as a whole, not just the individual or the team’s performance.

 Forward-looking IT organizations re-invent themselves from a cost center to the revenue generator. A measurement system is a necessary foundation for making continuous improvement and building a strong IT value proposition. However, the fact is that many IT organizations are not even trying to address measuring their value to the business as they simply have not employed the methodologies to enable it. The good metrics can help you get some objective perspectives on what you are trying to manage, but they need to be crafted and interpreted well. Here are three aspects of metrics and measurement management to keep IT on the right track of becoming the growth engine of the digital business.

Cost optimization metrics: With frequent disruptions driven by technology, companies across sectors are highly dependent on IT executives who make the proposal to changes or replace the technology based on the need for the business. Continually accelerating changes in IT consumption and production require faster responses and better performance metrics. From the finance perspective, every new technology adopted must facilitate business but also bring down the incremental cost of growth and the time to market. IT management needs to be in the continuous tuning mode through consolidation, modernization, integration, and streamlined process optimization. The new thinking about IT KPIs/metrics can be categorized into infrastructure performance metrics, key process optimization metrics, key innovation measurement., etc. IT metrics have to evolve from being a cost center to becoming a revenue generator. The only way to do this is to show a clear link to top executives between IT performance and productivity/ top-line revenues. When selecting the right set of metrics for cost optimization, ask whether the metrics can reveal anything meaningful for the identified purpose, and ensure the management buy-in for the metrics collection processes. Those should be the true metric for a CIOs success – how have they been able to impact the top and bottom-line and facilitate business growth and competitiveness.

The measurement of IT contribution to revenue generation:  When people speak about an IT initiative generating new revenue, visibility of costs measured against the visibility of quantifiable benefits is a way to show how IT contributes to the top and bottom line. It provides a pathway into technology optimization and justification of IT value contribution to the organization's bottom line performance within each revenue stream. More specifically, IT infrastructure asset including both hardware and software must be linked to business services that support the revenue generation. In other words, IT value is measured by optimization and consumption of IT assets in support of business products or services that are identified within the organization’s producing revenue streams. These metrics increasingly put emphasis on measuring things the business care and making IT function as a clear value-adding partner in the company, in addition to an ever greater strategic element to the business.

IT metrics must get focused on the end-users: It is undoubtedly dynamic time, although the fundamentals of a business seldom change, it is about creating value by serving customers. Digital IT is customer-centric. The end-user continues to be the key component of any people-centric and digital-driven business. This is where the metrics for a CIO should rest – the end-user experience. IT leaders are encouraging their teams to spend more time with leaders on the business side as well as directly with customers, to improve their satisfaction and experience. IT needs to transform from an operationally driven support function into outside-in, customer-focused business partners. IT has both internal and external customers. From IT metrics and measurement perspective, efficiency, customer retention, acquisition, and penetration metrics are powerful ways to improve customer-centric IT performance. These data-oriented and metrics-wise engagements are leading IT to be much more proactive in proposing, as opposed to responding to ideas, and take new ways to improve customer service or actually create new customer value and revenue. Broadly speaking, business needs to understand the maturity of customer-centric practices at the overall organizational scope (quantified across all measures) and at specific section levels, with the objective to develop the related business capability to improve customer satisfaction across all areas.

Do not confuse the means with the end. An effective CIO is a true business partner! With "SMART" IT metrics and measurement, a higher priority on the development needs and customer relationship management skills that align with the organization's strategy helps to improve communication effectiveness and drive IT business engagement throughout the enterprise. The leverage point is to keep the light on, also maximize the business growth. The performance measure setting should focus on achieving the ultimate goals of the organization as a whole, not just the individual or the team’s performance.


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