• rm@rmbastien.com

Decision Making

Value of Technology Part 2 – Corporate IT’s True Business Is Not Your Business

Business value is not an adequate measure of the value of corporate IT work.  As described in Part 1, business value is great for gauging the value of an investment in technology, but should not be applied to gauge IT’s contribution to your business.

It would make sense if your corporate IT team was spun off into a separate business that serves you and other customers in a true competitive market environment.  Then the value of IT staff work would have a direct link to business value, since it would become the business.    But for now, in the majority of organizations, they remain a support function of the business —the one that makes the money to fund all investments, including IT.

Business Metrics Rarely Apply to IT Work

You could try —as many others did— to relate IT work excellence to the quantitative measures of efficacy applicable to your industry, the indicators that the rest of your organization uses.   Sales revenue, customer attrition, surgery waiting list length, square footage built, average waiting time at the gate.  All these gauges are used to determine how good you are in your business.  Using them for IT would be a loss of time and energy.   These measurements are too unconnected to IT work for any IT staff —or their managers— to relate to them.  On a given workday, it is not their job to improve the sample metrics above, or any dozens of others you could find. IT staff have their plate full of mundane technical chores that need to be accomplished in order to keep their heads above water. 

For IT professionals, the “business value of their work” is almost a view of the mind; at best an interesting viewpoint that bears little to no practical substance.  

If one of your IT employees is asked what business they’re in by a stranger at a social event, they will most likely answer IT-something, not banking, insurance, off-shore drilling, health services, retail or whatever business you’re in.  I’ve done it my entire career, and I don’t recall any fellow geek claiming to be in any business besides information technology.

IT Totally Relies on Business to Create Value

If business leaders tell IT staff that the organization needs to steer left to gain a new market share, they will do what they can do to steer left.  In other words, they completely rely on their non-IT, business savvy colleagues to make business decisions that lead to success.  The contribution of IT resides in the execution of the IT activities that ensue from the business endeavors that will provide the value.

Correlating IT Work to Business Value Is No Help for Betterment

If you nevertheless go down the path of linking the delivery of technical platforms, solutions, applications, etc. to the business value it provides to your organization, then beware that it will remain an accounting exercise, not an accountability one.  The lucky ones that worked on highly profitable endeavors will rejoice. The others will sadden, but all of them will feel quite remote from the concept of business value and how it relates to their achievements.  

Since this is an accounting exercise, apart from the CIO and a handful of executives, most IT staff will never be aware that someone has developed spreadsheets that enable financial analysts to correlate yearly IT spending levels to the organization’s revenue or operating costs.  And that’s a good thing to not tell them, since it would be of little help to devise any course of action for improvement. 

The Business Value Comes from Your Business, not IT

That is why you should not be asking —or hoping for—your corporate IT to provide more business value, or worse, to demonstrate the business value of IT.  Continue to gauge the business value of business endeavours.  Do not lower your guard in assessing the business value of the investments you make in your organization.

Leave the so-called “business value of IT” within your funding arbitrage practices and continue to focus on the business value of your business. 

It’s your business that generates the real value, not IT.

But How Good Is Your IT Team?

That said, it’s still a sound business question to fathom how effective your IT function is at doing what it does.  Corporate IT should be asked to demonstrate its effectiveness at supporting your quest for growth or any other business value you may seek. 

In part 3 of this series, I will reveal that within the current and typical engagement model of IT knowhow in organizations, performance measurement is flawed and doesn’t allow IT to truly improve its contribution.

Value of Technology Part 1 – Investment Value and IT Work

Let’s Get Some Business Value Out of IT

There is a strong belief that corporate IT’s performance should be linked to the business value it provides to the organization.  It is wise to want to bind all members of the organizational family to the common goals that provide value. But we must be careful to not cross a very important line between investment value and work value.  

If IT is the business, and the work products of the corporate IT function can be directly linked to sales and customer satisfaction, then yes, the linkage is healthy.  But for  many cases information technology is not your core business and IT acts as an enabler or a support function. If you’re in entertainment, travel, financial services, healthcare, you can’t assess the value of IT the same way.  In short you cannot —and should not— use business metrics as a means for assessing IT’s contribution to your business.    

Do Not Assess Corporate IT Performance With Business Metrics 

Business metrics are for business.  Unless your organization sells IT products or services, IT’s performance cannot and should not be assessed with business success.

There are two reasons underpinning this proscription. The first is that business value does not connect well to corporate IT work.  The second issue is that it creates distracting noise around the subject of IT performance, pushing corporate IT away from true accountability.    

Assessing business value in itself is a healthy practice, as long as it is used to evaluate the business returns of IT expenses from an investor’s point of view.

Value Is In the Investment

The need to find metrics that relate information technology to business value is not new.   You can find a steady flow of scholar and trade articles from the 80’s up to a few months ago that show the continued interest on the subject.   

This infatuation is well founded. Each organization must allocate a finite amount of resources over a number of initiatives.  It must arbitrage the distribution of limited investment dollars and scarce human resources to maximize business returns.  It starts usually 12 to 18 months before the actual IT work begins, as part of what is often labelled the Investment Governance Cycle.

Whatever the name given, it is the formal process of assessing the relevance of proposed endeavors that require funding.  The archetypical technique used to assess the investment worthiness is the Cost Benefit Analysis (CBA), but there are several other techniques to help guide funding decisions.  

Some business projects have a clear intent of changing business processes  —and their underlying technologies.  It can be revamped customer experiences, new business models, or just good old optimizations of the current ways of doing.  In these cases, the business value of IT should be quite simple to grasp.  The need to change the technology should be based on business outcomes with clear benefits that justify the whole endeavour, including its technology parts. 

Some changes are cross-functional, cross-projects and often initiated by corporate IT as a means of optimizing its technical operations.  Think for example of a knowledge sharing platform or a VPN infrastructure that better support work-from-home.  For these projects, the task of identifying business value is much more difficult.   

The Knowledge Gap

Try to answer this question: What is the business value of moving all your business applications to a cloud-based Dockers operational model?  

As a business person, you’re surely clueless about the actual meaning of this Docker thing.  You’re probably somewhat aware about the ubiquitous but still mysterious cloud.  In all honesty, you might not be 100% sure about the real meaning of the word application.  

There’s an obvious knowledge gap. 

Your response to the risks of making a decision about these types of project is to fall back on standard cost and benefits management practices.  You’d probably ask for quantitatively measured benefits, in units of dollars preferably. You may add an additional multi-year benefits tracking process to ensure that the declared benefits are indeed reaped. 

That’s great, but remember that all of this is investment wisdom, not technology value assessment.  The assessment of the value is ‘detached’ from technology and the teams that work on it.  If you couldn’t understand what a ‘cloud-based, Docker model’ is, there is also a high probability that you will not grasp the true meaning of the CBA that was produced to justify the investment.

Identification of the business value of IT should be kept where it makes sense: assessing the value of the investment.  Do not make the mistake of transposing a funding governance practice to the assessment of the performance of your IT teams.

Investment Worthiness Is Not IT Excellence

As long as you are linking business value solely to the worth of the IT investments, then business value is used within a healthy and advisable practice in your quest to identify the right funding choices.   However, business value is not a valid proxy for assessing the actual work done by your corporate IT function when it all starts, 12 to 18 months after the financing decision is made. 

Business value of a technology investment is no proxy for assessing the work done with that investment money.

In an upcoming article (part 3), we’ll dive into what performance means for corporate IT. But before that, in part 2 of this series, we need to clarify that for most corporate IT professionals, creating business value is difficult to attain and hard to relate to.

Episode Two – Wolfgang Göbl on Radical Change Ideas for Corporate IT

If you had a magic wand and you could radically change the way corporate IT engages itself in organizations, what would you change?
That’s the question we asked Wolfgang Göbl, founder and President of the Architectural Thinking Association®.

Wolfgang provides great answers to the question, with a focus on accountability.
In addition, he shares his opinions on a several important topics, including:

  • The CIO, a role that is bound to become irrelevant;
  • Why certain key tasks should not be left to a distinct IT team;
  • The death of the corporate IT department;
  • The importance of the vocabulary when designing business change;
  • Why the devil may hide in too much detail;

You can also follow the episode with transcript.

Silo Generator #1

In most organizations of a certain size, IT budgets are allocated by business units, roughly following the organizational chart.  Business units need to present their investment projects which invariably require to purchase, develop or modify some information system component.  In many industries, business projects are often quasi exclusively made of IT activities.  The investment projects presented do need to show positive business returns when not clearly proven financial returns on investment (ROI).

But very often, the costs and the benefits of a given project are aligned with a corresponding business unit.  This impedes the sharing of IT resources across these lines of business.  It also hampers the creation of IT assets that could be eventually shared with other units.

Regardless of the benefits they provide, the more IT assets you have, the more you will spend in future change endeavors.

Learn more about how silos of all sorts hamper business agility: https://rmbastien.com/book-summary-the-new-age-of-corporate-it-volume-1/

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