Business Intelligence Applied E-Book

Michael S. Gendron

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: SAS Institute Inc
• Sprache: Englisch

Seitenzahl: 310

Veröffentlichungsjahr: 2012

Beschreibung

Expert guidance for building an information communication andtechnology infrastructure that provides best in businessintelligence Enterprise performance management (EPM) technology has beenrapidly advancing, especially in the areas of predictive analysisand cloud-based solutions. Business intelligence caught on as aconcept in the business world as the business strategy applicationof data warehousing in the early 2000s. With the recent surge ininterest in data analytics and big data, it has seen a renewedlevel of interest as the ability of a business to find the valuabledata in a timely--and competitive--fashion. BusinessIntelligence Applied reveals essential information for buildingan optimal and effective information and communication technology(ICT) infrastructure. * Defines ICT infrastructure * Examines best practices for documenting business change and fordocumenting technology recommendations * Includes examples and cases from Europe and Asia * Written for business intelligence staff, CIOs, CTOs, andtechnology managers With examples and cases from Europe and Asia, BusinessIntelligence Applied expertly covers business intelligence, ahot topic in business today as a key element to business and dataanalytics.

Leseprobe

Contents

Cover

Contents

Title Page

Copyright

Dedication

Foreword

Preface

Acknowledgments

Part One: Introducing ICT Strategy

Chapter 1: Defining Information and Communication Technology Infrastructure

ICT and Business Intelligence

ICT Value Management

Business-Driven Infrastructure Design

ICT Infrastructure Defined

Conclusion

Chapter 2: Introductory Business and Technology Strategy Concepts

Introduction to Business and Technology Strategy

Budgeting Technology Expenditures

Conclusion

Chapter 3: Why Build an ICT Infrastructure to Support Business Processes?

Reasons to Build an ICT Infrastructure

Business Processes in an Organizational Context

Organizations, Supply Chains, Value Chains, and Processes

A Summary: What Is a Process?

Conclusion

Part Two: Understanding How ICT Produces Value

Chapter 4: Understanding Your Organization and Its Competitive Environment

Organizational Value Propositions

Value Search Models: Internal and External Analysis

Value Models: Environmental Scanning

Conclusion

Chapter 5: Process Improvement or Innovation?

Improvement versus Innovation

Determining a Starting Point

Organizational Enablers

ICT as an Enabler

ICT Constraints

Summary of Enablers of Process Change

Conclusion

Chapter 6: Measuring the Business Value of ICT

Introductory Theories

Technology Justification Models

Balanced Scorecard

Conclusion

Part Three: Best Practices

Chapter 7: Best Practices for Documenting Process Change

Design Documents

Process Design Diagram Set

Business Process Modeling

Using TSI to Introduce BPM

Conclusion

Chapter 8: Best Practices for Documenting Technology Recommendations

ICT Design Documents

ICT Infrastructure Diagram Set

ICT Infrastructure Modeling

Conclusion

Chapter 9: The Business-Driven Infrastructure Design Cycle

The BDID Process

Members of the ICT Design Team

BDID Phases

Conclusion

Appendix: Ticket Sales Inc.: A Fictitious Business Case*

Introduction

E-Business Innovation Requirement

TSI Business Model

Staffing and Building Specs

TSI Business Operational Objectives

Genenco

GenServe Hardware Requirements

Other TSI Requirements

Preliminary Marketing Study

About the Author

Index

End User License Agreement

List of Illustrations

Chapter 1: Defining Information and Communication Technology Infrastructure

Exhibit 1.1 Value Management Quick Self-Assessment.

Exhibit 1.2 Value Management–Based ICT Creation Process

Exhibit 1.3 Information and Computer Technology Infrastructure

Chapter 2: Introductory Business and Technology Strategy Concepts

Exhibit 2.1 The FedEx Technology Time Line.

Exhibit 2.2 Competitive Orientation of Organizations

Exhibit 2.3 The Business-Technology Relationship

Exhibit 2.4 The IT Planning Process

Exhibit 2.5 Necessary Management Skills.

Exhibit 2.6 Examples of Disruptive Technologies and Innovations.

Exhibit 2.7 Technology S-Curve

Exhibit 2.8 Technology S-Curves for Computers

Exhibit 2.9 Technology S-Curve Example

Exhibit 2.10 Technology Trend Curve

Exhibit 2.11 Technology Investment Recommendations

Chapter 3: Why Build an ICT Infrastructure to Support Business Processes?

Exhibit 3.1 Business Strategy and ICT Alignment

Exhibit 3.2 ICT Initiative to Economic Outcome.

Exhibit 3.3 FedEx and UPS in Hypercompetition.

Exhibit 3.4 Processes, Activities, and Procedures

Exhibit 3.5 Organizational Approaches to Product Innovation

Exhibit 3.6 MasterCard Change Initiative Objectives and Attributes

Chapter 4: Understanding Your Organization and Its Competitive Environment

Exhibit 4.1 Interaction Costs

Exhibit 4.2 The Unbundled Corporation

Exhibit 4.3 An Example of Value Proposition Support

Exhibit 4.4 Generic Value Chain.

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Exhibit 4.5 Deconstruction and Value Support

Exhibit 4.6 Gasoline Production

Exhibit 4.7 Information Flow–Based SCM Model.

Exhibit 4.8 Supply Chain Analysis and Value Support

Exhibit 4.9 Comparative SWOT Analysis

Exhibit 4.10 The Six Competitive Forces Model

Chapter 5: Process Improvement or Innovation?

Exhibit 5.1 Process Innovation versus Process Improvement.

Exhibit 5.2 The Role of ICT in Process Innovation.

Chapter 6: Measuring the Business Value of ICT

Exhibit 6.1 Total Cost of Ownership

Exhibit 6.2 ROI Example for Comparing System Options

Exhibit 6.3 ROI Example for System Upgrade

Exhibit 6.4 Example of Annual and Onetime Payback of ICT

Exhibit 6.5 NPV Example of System Choices

Exhibit 6.6 Sample Customer Attribute Rating Form

Exhibit 6.7 Sample Manager Attribute Rating Form

Exhibit 6.8 Computation of Total Score

Exhibit 6.9 Total Customer Satisfaction Example

Exhibit 6.10 Utility Value Tree for DIQ

Exhibit 6.11 Example of DIQ Ratings and Results

Exhibit 6.12 Historical Data and Correlation

Exhibit 6.13 Independent Variables

Exhibit 6.14 Correlation Matrix for Independent Variables

Exhibit 6.15 Regression Analysis

Exhibit 6.16 Learning and Growth at the CIA.

Exhibit 6.17 Customer's Perspective Index.

Chapter 7: Best Practices for Documenting Process Change

Exhibit 7.1 Process Map Symbols

Exhibit 7.2 TSI Process Map

Exhibit 7.3 Abstract (Public) Business Process

Exhibit 7.4 Abstract (Public) Business Process

Exhibit 7.5 Collaborative Business Process

Exhibit 7.6 Core Business Process Model Elements

Exhibit 7.7 Basic Building Blocks of a Business Process Model

Exhibit 7.8 Credit Card Declination and Compensation Activities

Exhibit 7.9 Patient, Doctor, and Pharmacist Model

Exhibit 7.10 Customer Purchase Ticket Business Process Model

Exhibit 7.11 TSI As-Is Customer Service Process Model

Exhibit 7.12 TSI Customer Service To-Be Model

Chapter 8: Best Practices for Documenting Technology Recommendations

Exhibit 8.1 Flow of ICT Design Documents

Exhibit 8.2 ICT Recommendations and Functionalities

Exhibit 8.3 TSI ICT Functionality List

Exhibit 8.4 ICT Hierarchy Diagram Symbols

Exhibit 8.5 TSI ICT Hierarchy

Exhibit 8.6 5-Kilobyte Pages per Second over Various Connection Types

Exhibit 8.7 TSI Context Diagram

Exhibit 8.8 TSI Context Diagram Notes

Exhibit 8.9 TSI Main Office Core Diagram 1.0

Exhibit 8.10 TSI Main Office Core Diagram 1.0 Notes

Exhibit 8.11 TSI Third-Floor Work-Group Diagram 1.3

Exhibit 8.12 TSI Third-Floor Work-Group Diagram 1.3 Notes

Chapter 9: The Business-Driven Infrastructure Design Cycle

Exhibit 9.1 Flow of the BDID Process

Exhibit 9.2 Five Great Customer-Driven Innovations.

Appendix: Ticket Sales Inc.: A Fictitious Business Case*

Exhibit A.1 Building Breakdown: The Main Office

Exhibit A.2 Transaction Size

Exhibit A.3 Kiosk Utilization

Exhibit A.4 Utilization by Area

Guide

Cover

Table of Contents

Start Reading

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Business Intelligence Applied

Implementing an Effective Information and Communications Technology Infrastructure

Michael S. Gendron

Cover Images: Yellow background image: © Duncan Walker/iStockphoto; Stock data image: © Artiom Muhaciov/iStockphoto; Monitors image: © Danil Melekhin/iStockphoto

Cover Design: Andrew Liefer

Copyright © 2013 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

Some illustrations are adapted with permission of Pearson Education, from Michael Gendron, Business Driven Data Communications, 1st ed., Upper Saddle River, NJ: Pearson Education, publishing as Prentice Hall, 2012.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Gendron, Michael S., 1957–

Business Intelligence Applied : Implementing an Effective Information and Communications Technology Infrastructure / Michael S. Gendron.

pages cm

Includes bibliographical references and index.

ISBN 978-1-118-42308-0 (cloth) — ISBN 978-1-118-47834-9 (ePDF) (print) — ISBN 978-1-118-47833-2 (Mobi) (print) — ISBN 978-1-118-47831-8 (ePub) (print) 1. Business intelligence. I. Title.

HD38.7.G46 2013

658.4'72—dc23

2012026664

Dedicated to business analysts, engineers, and managers who are attempting to gain business value from information and communication technology and to document that value so all stakeholders can understand it.

Foreword

Business intelligence is in a period of generational flux. This book is a welcome addition to our understanding of the changes that are clearly underfoot.

The definition of business intelligence is difficult to pin down and often runs to more than a lengthy paragraph. Perhaps the most concise definition appeared with what might have been the first use of the term in the October 1958 issue of the IBM Journal of Research and Development by Hans Peter Luhn:

The ability to apprehend the interrelationships of presented facts in such a way as to guide action towards a desired goal.

“Presented facts” are presumably extracted from data—in business, this almost always means transaction data housed in enterprise systems such as enterprise resource planning, customer relationship management, and supply chain management. “Action” in business implies decision making, so the role of “guide” is to improve or enhance decision making toward the “desired goal” of improved performance, effectiveness, efficiency, profitability, or other goals.

In its first decades, business intelligence (BI) was often muddled together with decision support systems, and the information and communication technology platforms to support both were quite similar. As noted, the information, or perhaps knowledge, extracted from the data came almost entirely from processing transaction data, and for good reason. Transaction data is internal; it is about “us,” not “them,” so we have it in our databases in well-structured form. External data about customers, competitors, and markets; the financial, regulatory, and international environments; and all of their uncertainties was based on unconfirmed reports at best, and more likely hearsay and rumors—not exactly the hard data that befits a good management information system.

In the last decade, BI has changed dramatically and now offers the promise of truly powerful systems, widespread throughout the enterprise, whose “presented facts” are based on far more than a backward look at transactions and that bring external influences to bear on future-oriented decisions. We can now envision the day when BI systems will not only pull meaningful “interrelationships” out of the data but will also improve decision making by giving insights that lead to improved business processes. Dare one say optimized business processes?

Michael Gendron approaches these challenging issues from the perspective of the underlying information and communication technology (ICT) infrastructure. He stresses the importance of managers developing a good understanding of the organization's ICT value proposition as well as the tools to create it. In his words, “It is important to understand ICT-mediated value propositions”—that is, the creation of value, or competitive advantage, through the use of ICT as an intervening or supporting medium. This approach to BI value, mediated by ICT infrastructure, is a solid contribution to the management literature that will be of interest to information system professionals on both the management and technology sides and to general managers as well.

Earlier I used the term “generational flux” to describe the changes that we are now observing in BI systems. Flux implies change, and change implies gaps to be bridged. What are the gaps to be overcome?

The first gap is quite clear and is already starting to be bridged: BI must not simply rely on reporting on past events and reacting to change, it must also assist in anticipating change and perhaps even cause change in the organization so that its structures and processes can deal with a new future situation. Dealing with a new future suggests adaptability. A statement attributed to Charles Darwin says the following about evolution:

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptive to change.

The data explosion and accompanying data overload suggests a second gap: the difficulty of processing vast amounts of data in real time and in context to provide tailored, timely, smart results to a broadly diverse audience.

The past decade has seen the development of a diverse array of dashboards and cockpits that now greet managers as they arrive at their desks. A confusing array of dials, charts, lists, and colors may help decision making, but much improvement is possible.

For generations, managers have made decisions based on exceptions: things that were out of line, unexpected, and not normal. Future BI systems will stick to this time-tested methodology, but they will present exceptions in real time based on interpretive models and analytics that will present the exceptions with sharper, more interpretable background information and context. And the information will be tailored to small groups or even individuals in the organization, rather than presenting one view of the world to all users.

In contemporary organizations, the flood of incoming data—much of it in text form from social networks, tweets, e-mail, white papers, PDFs, and so on—is unintelligible to BI systems, but that is changing quickly. As the improved capability of hardware combined with analytics starts to extract meaningful insight from the muddy flow of data, answers to eternal questions such as “What do customers want?” and “How can we deliver it to them?” are coming closer and closer.

All of this progress and gap filling will be based on ICT applied creatively to enhance the value of the BI produced. Managers will be aided in that effort by this book. I am pleased to recommend it to you.

William K. Holstein Professor of Strategy and Information Technology Lorange Institute of Business, Zurich D. Hollins Ryan Professor, Retired College of William and Mary, Williamsburg, Virginia Distinguished Service Professor Emeritus State University of New York at Albany

Preface

It's 4 p.m. on a Friday, and Sally, a manager in your company, comes to her boss and says, “Joe, budgets are due next Friday morning, and I am not sure how much to ask for in our technology lines. Can you help me?”

Joe is the manager of information technology for the organization and thinks, “Umm, I guess I will have her ask for enough money to implement that new idea I have for [insert your favorite project here].” During the week Joe tells Sally to ask for double last year's budget because he wants to [insert your favorite project here].

Next Friday morning, Sally is presenting to the board of directors, and she asks for double last year's budget. The board wants a better rationale for the sum being requested. Sally turns to Joe and asks, “Can you assist with a rationale?”

This situation is not too unreal. We ask for resources to support our favorite projects, but the question should not be “How much is our budget?” but rather “What are the organization's objectives for implementing information and communication technology, and how much is the organization willing to devote to that implementation?” Gone are the days when we can build technology in the belief that it will get used; rather, we must understand why we are building infrastructure and what business imperatives it supports.

Building infrastructure that supports the organization's value propositions takes skills. This book is about creating those skills so the organization can maximize the use of its resources. Among the skills needed are (1) understanding the business value of information and communication technology (ICT) and how to align it with the organization's strategy, (2) seeing an organization as a set of interconnected processes that work together to create value for customers, and (3) documenting infrastructure (both new and changes to an existing one) in a way that all stakeholders can understand and appreciate it. This book sets out to build those skills.

This book presents business theories and their application. It is divided into three parts. Part One, “Introducing ICT Strategy,” provides a foundation for understanding how ICT infrastructure supports business strategy. Part Two, “Understanding How ICT Produces Value,” gives background and instruction so the organization knows how to achieve maximum value from its ICT investments. Part Three, “Best Practices,” offers the organization tools to document process change and ICT infrastructure, within the context of best practices for designing ICT infrastructure. The text within the chapters is supported by extensive notes and exhibits (figures and tables) that emphasize key points.

This book was created to draw together the current knowledge about using information and computer technology to create competitive advantage. The reader will come away from this book with a set of tools based on sound business theories. That tool kit will aid you in finding the elusive business value of ICT. You will have the tools to convey that value to the stakeholders, and unlike Joe and Sally, you will understand how to convince others of the business value of your ideas.

Acknowledgments

I want to acknowledge those who helped me create this book. First, I want to acknowledge those who wrote about the topics covered in this book before I did—too many to list here. They created the intellectual capital that formed the foundation for this work. I also want to thank my family for its support and understanding while I created this work.

Part OneIntroducing ICT Strategy

Chapter 1Defining Information and Communication Technology Infrastructure

This chapter sets the context for the rest of this book by introducing the terms and concepts that will be used throughout. This book covers the methods for understanding the business imperatives for building information and communication technology (ICT) infrastructure. Assessing the value of ICT infrastructure is both important and difficult. It is important because an organization needs to understand how ICT can bring value to its bottom line. It is difficult because ICT value has traditionally been paradoxical. That paradox is evident in the contradiction between the rapid increase in the speed of desktop computers over the last few decades and the slow growth in productivity and economic measures caused by computers during the same time. In other words, that paradox is the discrepancy between investment in ICT and output at the national level.1 This book will provide the tools with which to assess the effect of ICT investment. This chapter provides an introduction to the concepts of value management, ICT value, and the business-driven infrastructure design cycle.

ICT and Business Intelligence

Business intelligence (BI) is a set of techniques that takes business data and creates information from those data so that managers can make decisions. In that way, organizations create business intelligence. We see many vendors offering BI solutions, which come in many varieties, including stand-alone solutions and solutions that are additions to larger suites of business applications. What is common across all BI solutions is that they utilize business data to support ad hoc and planned reporting and thus managerial decision making. Analyzing sales trends and customer buying patterns are just two examples of analysis that can be done using BI software. Another defining attribute of all BI software solutions is that they need ICT to enable them.

It is difficult for organizations to determine when and why ICT infrastructure should be built, and creating BI is just one reason to do so. The ICT value proposition is elusive, and, ironically, an organization needs to create business intelligence in order to understand when and why ICT infrastructure should be built. This book offers tools for organizations to use to determine ICT value to support the organizational value proposition. These tools include methods for creating BI.

When deciding when and why to build an ICT infrastructure, an organization should proceed in a planned way. Personnel with skills in a number of areas are required, and in fact the chief information officer (CIO), chief marketing officer (CMO), chief financial officer (CFO), chief operating officer (COO), and the chief executive officer (CEO) are but a few of the individuals who must be involved in determining when and why an ICT infrastructure should be built. ICT infrastructure is built to do everything, from supporting transaction processing to creating BI reports, and many other things in between.

All organizations have a number of projects, both ICT-oriented and nontechnology projects, in which they can expend their resources. That necessitates that all organizations have a structured way to determine which projects will get funding and which will not. That is referred to as value management.

ICT Value Management

Before discussing ways to assess a specific ICT value proposition, it is important to determine if your organization has a culture that views ICT as a value-producing resource. In order to maximize the benefit of ICT, your organization must believe that ICT resources are not only used to support a business's internal processes but should also be dedicated to projects that create value (e.g., that increase market share, enhance customer relationships, and create the perception of value for customers).

Gone are the days when the information technology (IT) department can ask, “What is my budget this year?” Rather, the question must be “How can we use ICT to support the organization's value proposition(s), and how much is the organization willing to spend on ICT to do so?” Things have changed; we no longer build ICT using a “field of dreams” approach—if we built it, they will use it.2 Rather, we must use a decided approach to expending an organization's scarce resources on ICT projects. The projects selected for funding must support the organization's value proposition.3

Challenges to Value Management

The first step is to ascertain whether your organization is ready to adopt a value management approach to allocating resources for ICT projects. Organizations often face challenges when considering ICT projects as value-creating entities. The following are several of the more common challenges:

Problems with delivering technical capabilities.

Often an enterprise's delivery processes and competencies within its ICT function are not mature enough to effectively and efficiently deliver the technology capabilities needed to support business operations and enable business change. This challenge highlights the need to improve ICT governance and management processes along with the introduction of value management practices.

Limited or no understanding of ICT expenditures.

Rarely do executives enjoy a sufficiently transparent view of ICT expenditures and ICT investments across all ICT services, assets, and other resources. This means that often decision makers can only estimate how much they are investing. The benefits of an ICT expense and the full business rationale for the commitment can be elusive. This may be caused by ICT expenditures being sourced from many different uncoordinated budgets, resulting in significant duplication and unreconciled conflicts in demand for resources (i.e., “the right hand does not know what the left hand is doing”).

Business abdication of decision making to the ICT function.

The roles, responsibilities, and accountabilities of the ICT function and other business functions are often unclear. In this state of unclarity, the ICT function tends to usurp the driver's seat, determining which ICT-enabled business investments should be pursued. This results in the ICT function prioritizing business investments based on the ICT function's limited insights, and thus inappropriately relieving the business of its responsibility to define and defend the business rationale for every ICT investment decision.

Communication gaps between the ICT function and the business.

Close collaboration between the ICT function and other business functions is crucial to value creation. When such a partnership is absent, communication suffers, inefficiencies mount, synergies fail to emerge, and the work environment tends to devolve into a culture of blame. In some cases, the ICT function is relegated to the role of follower instead of innovator and is engaged in investment proposals too late in the decision-making process to contribute significant value. In other cases, the ICT function is blamed for not delivering value from ICT investments—value that only other business functions, in partnership with the ICT function, can deliver.

Questions about the value of ICT.

Ironically, while most enterprises continue to invest more and more in technology, many of their key executive decision makers continue to question whether value is actually realized from these investments. Frequently, the dominant focus is merely on managing ICT costs rather than understanding, managing, and leveraging ICT's role in the process of creating concrete business value. Since ICT investments increasingly involve significant organizational change, the failure to shift the focus from cost to value will continue to be a major constraint to realizing value from these ICT-enabled investments.

Major investment failure.

When ICT projects stumble, the business costs can be enormous and highly visible. Project cancellations can trigger unexpected effects across the business. Delays can use up a substantial portion of an organization's annual budget, and budget overruns can starve other projects of crucial resources. Among the most common examples of ICT investment failures are poorly planned enterprise resource planning (ERP) and customer relationship management (CRM) initiatives. In fact, Gartner, a leading information technology research think tank, estimates that these large-scale IT debacles represent the largest major cause of value leakage.

4

Exacerbating this issue is the fact that in many cases, problems are ignored until it is much too late to take any corrective action.

Changes in funding.

Sometimes available funding for ICT-related projects change. This may be due to an organization not meeting its expected revenue targets and/or due to economic changes in the marketplace. Whatever the cause, changes in funding represent challenges that investment management must be ready for.

Value Management Best Practices

Organizations must position themselves so they can maximize their investment in ICT projects. This book provides tools to aid in the analysis of challenges faced by companies and suggests ways to analyze them. These tools will aid staff in the quest to recommend and deploy ICT resources that support the value propositions of the organization, and they will aid the managers (right up through C-suite members) in the analysis of the viability of ICT projects. The tools given in this book are helpful to the ICT professional who is trying to propose a project to management, and they are useful for management in determining how to assess whether ICT solutions align with the value propositions of the organization. Value management includes several best practices that occur in organizations that are successful in the deployment of ICT resources to support their strategy and create value. These value management best practices include the following:

Awareness and communications.

In an organization that is aware of and communicating about the value of ICT investments, the ICT function is trusted because it generally delivers what it promises. Executives, managers, and staff understand ICT value management and have adopted a culture of investing in ICT projects and investment decision making that aims to support the organization's value propositions. Decision makers understand and accept that value management practices, when in place, enhance competitive positioning and, when absent, erode it.

Responsibility and accountability.

Key personnel (e.g., C-suite members, business analysts, and staff) must identify attractive opportunities for ICT investments, while investment decision makers pick and actively support the ICT projects most likely to benefit the organization's value propositions. The ICT project manager should be tasked with detecting and dealing early with ICT projects that do not deliver the promised or expected value. Business units, rather than the ICT staff, drive investment decision making and monitoring the benefit-resource balance. Executive management becomes involved in monitoring ICT projects based on objective data and not on internal politics. The business case for each ICT investment has a fully committed business sponsor from a specified business function. Well-defined accountabilities exist for the business sponsor and project manager for each investment. Collaboration—supported by clear roles, responsibilities, and processes—helps to avoid organizational gaps and overlaps by defining what the business requires and how ICT will provide it. Key issues such as investment criteria, payback periods, and the selection of the individual investments to be funded are decided at the C-suite and/or board level, supported by input from the heads of the business units.

Goal setting and measurement.

The organization routinely practices goal setting and measurement of projects to ensure the alignment of investments with corporate strategy and the delivery of promised value. Projects are funded only after clear goals and measurements are set that exhibit an alignment between the resource expenditure and the organization's strategy. The organization must undertake a measurement program that monitors the ICT project, ensures that it delivers as promised, and continues the alignment between the project and the organization's strategy. This should make returns from investments more stable and increasingly predictable. All ICT expenditures must contribute to the enterprise's strategy in a demonstrable and internally auditable manner. ICT's role in the creation of value and ICT costs should not be a source of executive concern, because they are transparent and predictable and therefore manageable. This results in a significant increase in the percentage of successful investments, measured in terms of benefits realization and contribution to value. A regular review of investment in projects measures benefit realization, strategic alignment, costs, and risks. The review also monitors the progress toward value creation. Management information and forecasts are consistent, relevant, accurate, and timely and are made available on a regular basis. The total cost of ownership of ICT investments is understood, and all direct and indirect costs (including maintenance costs) are included in the operating costs. Key indicators have been established to assess the level of maturity of value management processes and practices.

Policies, standards, and procedures.

The process of ICT project (as well as non-ICT project) investment planning begins with a consideration of the business benefits being targeted rather than the existing resource constraints. This type of value management must be “business as usual.” The relationship between the business benefits sought and the resources needed to achieve them is known and actively managed. All business case rationales are required to include cost-benefit justification based on the total cost of all changes required to realize the benefits, including changes to areas such as business models and processes, people skills and competencies, organizational structure, and technology. A clear distinction is made between onetime investment expenditures and ongoing operational costs; both are considered throughout the full economic life cycle of the investment, creating a total cost of ownership estimate for the project. ICT investments are categorized to distinguish between mandatory and discretionary investments. Investment decisions are made using objective criteria that are measurable, verifiable, and repeatable. The portfolio of all business change investment projects is continually reviewed and updated, based on the needs of the enterprise as a whole, rather than on those of the individual business unit, in order to exploit synergies, avoid duplication of effort, and avoid double counting of business benefits. There is a formal process for retiring investment programs when expected benefits have been realized or when it is determined that no further benefits are achievable.

Skills and expertise.

Effective program and project management processes are in place and are recognized as essential management practices for value creation. Portfolio management practices and structures are applied across different investment types, including those that are and are not based on ICT.

Tools and automation.

Standard tools are engaged across the enterprise to evaluate investments, detect exceptions, and identify positive trends, as well as to evaluate and communicate the performance of individual investments and the overall portfolio. Examples of these tools are covered in the remainder of this book.

This list of best practices might be a bit overwhelming, but it sets targets for creating an organization that objectively creates and understands ICT value creation. Creating an organization that adopts this list will often require a culture shift. Most organizations do not manage the ICT resource as one that produces value, but rather treat it as a required part of the organization's infrastructure. An organization should search to create value through ICT and become an enterprise that adopts a culture that recognizes value. In order to determine if your organization sees ICT as a value-producing resource, it is often helpful to do a self-assessment. The value management quick self-assessment (see Exhibit 1.1) is one such self-assessment. This tool allows an organization to understand where it is today and where it needs improvement. Administering this tool to the staff, managers, and executives in your organization will allow the organization to understand its culture and where it needs to change so ICT becomes a value-creating entity.

Exhibit 1.1 Value Management Quick Self-Assessment.

Adapted from the IT Governance Institute

Approaches to Attain Value Management

In order to adopt a value management culture, organizations need to move from Level 0, “Management is unaware of the need for the practice,” to Level 5, “This practice is embedded in the enterprise's way of working.” The target is to adopt the best practices listed previously. There are many ways to move an organization to Level 5. The approaches used to make that move depend on many factors, including the existing culture and management style. Some approaches to make this move are the following:

Build awareness and understanding of value management.