Value Management – We Still Have a Long Way To Go!

I recently worked with ISACA to create a short survey around “Value of IT Investments”. The responses from more than 500 IT professionals in the US raise some interesting questions. While 67% of respondents felt that they were realizing between 50 – 100% of expected value from their IT investments, only 34% felt there was a shared understanding of what value was in their enterprise, and only 29% had a comprehensive approach to measuring that value. This raises the question, “On what basis are spending decisions made?”.

These findings support the results of a number of other studies, anecdotal evidence and my own experience that most decisions related to value from IT are subjective, and all too often based on perception and emotion rather than facts. The survey also confirms that responsibility for ensuring the realization of value from IT-enabled investments continues to be abdicated to the IT function with 57% responding that this is the case. Remarkably, 11% responded that no-one was responsible!

In response to another question about responding to the current economic crisis:

· 16% of enterprises are making across-the-board cuts in IT spending;

· 14% are freezing at current levels;

· 44% are reducing spending selectively; and

· 26% are increasing selectively.

These results are encouraging in that they show that enterprises are moving away from the traditional across-the-board cuts, but again raise the question of how spending decisions – decisions to freeze, spend more or spend less – are made.

We are still consolidating these results with those from other countries, which, while largely consistent, show some interesting differences. I will post and discuss these when they are made public.

The results so far, however, show that we still have a long way to go – organizations will continue to come nowhere near to realizing the full value of their increasingly significant and complex IT-related investments until they implement effective governance of IT, as an integral part of overall enterprise governance, adopt proven value management practices – such as those in the Val IT™ Framework 2.0 from ISACA, and assign accountability for the realization of value for those investments to the business, rather than abdicating it to the IT function.

The Social Process

I am becoming increasingly interested in how social networking, rather than being viewed as a potential problem to be managed within the “traditional” view of governance and management – today still largely based on beliefs and structures that are a hundred years old – has enormous potential to revolutionize governance and management. In doing so, we could truly tap in to the experience of all employees (and other stakeholders) – not be limited to the knowledge/experience of a few anointed leaders or experts – and actually make the much-abused term empowerment mean something by giving people the opportunity to contribute to/participate in decision-making, actually be listened to and, as a result, really make a difference.

Will this be easy? Of course not – it will require major cultural and behavioural changes. Is it worth seriously considering? Absolutely!
This article by Peter Swabey in Information Age provides some food for thought in this regard.

Drive Profit and Sales Growth Through IT Portfolio Planning

A colleague in Australia sent me this document by Asad Quraishi of Knowledgework (a Canadian organization as it turns out). While the ideas are not new, nor necessarily complete (what document is/can be?) – one serious omission being no reference to The Information Paradox (just, not quite, joking) – it is concise and well organized and, as such, a useful addition to the field of portfolio management (not just planning).

The language used in the document does however risk perpetuating beliefs that need to be changed in that the use of the IT label in “IT portfolio planning”, “IT value”, and “IT governance” can be read as reinforcing the prevailing view that the challenge, and poor track record of realizing value from today’s significant and increasingly complex investments in IT is an IT problem, and the responsibility of the IT function – an implication that is reinforced in the Summary which talks only about the requirement for a “highly effective IT organization.”
Whilst no-one could dispute the need for an effective IT organization, this is not enough. IT, in and of itself, delivers no value – it is how the business uses IT – in the context of IT-enabled change – that delivers value. If organizations are to truly realize the full potential of IT, they need to think and act very differently. If we are to accomplish this, one thing we must do is change the language we use. We must move beyond the term “IT governance”, which today largely focus on the “supply” side – the delivery and operation of IT services to “Enterprise (or Corporate) governance of IT” covering both the supply side and the “demand” side – determining what services are required and using those services to create and sustain business value. This requires the executive, business management and the IT function to work in partnership with clearly defined (and accepted) roles, responsibilities and accountabilities for both the supply and demand aspects of IT, supported by processes including portfolio management, and relevant metrics.
While there is still room for improvement in many, if not most organizations, in how IT services are delivered (the supply side) we will continue to come nowhere near realizing the full potential of IT-enabled change – and IT will remain the “black sheep of the corporate family” – until the business takes ownership of the demand side, in partnership with IT on the supply side, within the context of overall enterprise governance, including IT. Let’s start using language that moves us in this direction!

NHS Gateway Reviews damn £13bn IT decisions

As followers of this blog will know, I have long held the UK NHS’s massive National program for Information Technology in Health (NPfIT) to be a case study in what to do wrong in implementing IT-enabled change programmes.

What has constantly amazed me about this and other similar debacles is that report after report – which bring to light the issues and recommend corrective actions – are ignored and nothing changes – once again, as I have said on other occasions, I wish I could put this blog to the music of “When will they ever learn?”.
Basil Wood’s latest commentary in his bazpractice blog does a very good job of describing the problem – and the solution!

Factors That Kill Risk Management: Stupidity, Fear, Greed

While this article, by Christine Davis in The Cutter Edge, deals with constraints to risk management, it applies equally well to value management. With my total focus on value, I view risk as one of the factors – a major one – that can significantly impact the creation and sustainment of value and all too often, erode or destroy it.

The article is well worth reading – the only omission is the failure to identify analysts as one of the causes, if not the major cause of short-term thinking. I had hoped when they so dramatically misread and misled the boom, and subsequent bust, that their credibility would have been irreparably damaged but, apparently, not so. We will continue to do stupid things, as a result of fear, greed and blind hope, when driven by people who are big on theory, and enamored with computer models, but low on real-world experience or even basic common sense. The result will continue to be that, rather than creating or sustaining value, we will erode or destroy it.
Until executives and upper management truly lead, within the context of an effective enterprise governance, based on a strong value system decisions will continue to be made
To slightly paraphrase Christine’s last paragraph: “As Albert Einstein said, ‘Three great forces rule the world: stupidity, fear, and greed.’ When it comes to both value management, and risk management, we have all of these forces coming together in a very ugly way, with even more ugly consequences.”

Recession Causes Rising IT Project Failure Rates

Those of you who follow this blog will notice that is been over 3 months since my last post – after many years of heavy workload and extensive travel, and with my 65th birthday coming up fast, Diane and I decided to take an extended European vacation, which ended up being “book-ended” by speaking engagements in Manila and Seoul, the last of which I have just returned from. I had hoped to post occasional blogs while away but my ISP migrated to a new platform the day after I left resulting in the Blogger publisher’s IP addresses being blocked – don’t you just love technology!

Now that I am able to post again, this article by Meredith Levinson in which discusses the latest Standish Chaos Survey results would appear to indicate that not much has changed since I have been away or, indeed, over the years since I wrote The Information Paradox, and began talking about the subject of getting real value from increasingly large and complex investments in IT-enabled change. Certainly, the “failure” rate continues to hover around 30%, with the “challenged” rate fairly constant in the mid 40% range and the “successful” rate equally constant in the low 20% range.
I do however think we need to be very careful in interpreting these numbers and, to his credit, Jim Johnson, Chairman of The Standish Group admits this. First, we need to really understand what we mean by success or failure, and indeed “challenged” – then we need to understand what is really “good” or “bad”.
Is it a “failure” to cancel a project? I would argue that in many cases it is not. Rather, it shows that effective governance is in place to monitor when either a project is unlikely to deliver the results originally expected or that business requirements have changed such that the project is no longer aligned with business objectives. History is replete with projects that should have been cancelled long before they became expensive and highly visible debacles.
Is a “challenged” project bad? If it is over budget &/or over schedule &/or does not deliver all the originally specified functionality but still creates significant business value I could argue that it was successful. On the other hand, if a “successful” project comes in on time, on schedule and delivers all the originally specified functionality, but does not create or sustain business value, or worse, destroys it, I would consider this a failure.
Bottom line – the Standish results are always interesting but we need to move beyond measuring “inputs’ (time and money) and “outputs” (technical capabilities) to measuring “outcomes” – the most important of which (I might say the only one) is creating or sustaining business value.

Mismanagement of prisoner IT system exposed

The UK’s litany of failed public-sector IT projects continues, as described in this Information Age article by Peter Swabey, with the latest being the Department of Justice’s National Offender Management Information System (C-Nomis). Originally estimated to cost £234 million through 2020, C-Nomis has currently spent £115, is now two years late, and projected to cost £513 million through 2011. A recent Information Age interview with the CIO of the Department of Justice, Andrew Gay, provided some valuable insight into the cause of these failures. Gay said that:

It doesn’t matter what type of project it is, whether IT or anything else. It’s a question of not nailing down the functionality you actually need, and that has been one of the principal faults with government IT spend. If you are going to deliver an IT project vaguely near budget, it would be far better to spend a huge amount of time working out exactly what you were trying to do with that programme rather than drift into it.”

There is a subtle distinction in Andrew Gay’s comments between an IT project – that delivers a technology capability or service – and a business-change programme – that includes all the initiatives, including but certainly not limited to the IT project, required to realize the expected outcomes. A recent report by the NAO reinforces this saying that “C-Nomis was treated as an IT project and not as a business-change programme” and identifies another all too common problem in that “bad news about the project failed to go up the ladder of command to those who could have made decisions to rescue it.”

This NAO report contains valuable guidance, not just for the public sector, but for all enterprises in managing IT-enabled business change programmes.

Ending the management illusion: Preventing another financial crisis

This is an Ivey Business Journal article by Hersh Shefrin that provides a very interesting perspective on the current financial crisis. While this is interesting in itself, there are many parallels here with other failures of governance, including IT governance – in fact, particularly on the first page, if you drop the word “financial”, what Hersh is presenting is that governance failures all too often result from our failure to understand the need to both recognize and change human behaviour. A few (slightly restructured and “de-financialed”) quotes:

“The root cause…is the psychological excess that was manifest in unsound managerial judgement and poor managerial decisions…much of that excess was preventable….going forward, we need to figure out how to deal with our self-destructive elements. We need to learn how to build organizations that are psychologically smart. We need to structure organizational cultures that foster sensible approaches to risk-taking…the starting point is to face up to a major management illusion…the belief that organizations can ignore psychological obstacles to effective decision-making, and yet succeed in the long-run without being lucky…addressing psychological obstacles effectively requires the development of a co-ordinated, integrated approach…setting clear goals. It means:
  • planning with a view to execution and the achievement of goals;
  • putting in place a balanced mix of financial and non-financial incentives which reward members of the organization according to how well goals are met;
  • excelling in the sharing of information about whether the organization is track in carrying out its plans, achieving its goals, and rewarding its members.

Can IT solve the electronic health records challenge?

An interesting article in InfoWorld by Ephraim Schwartz that relates back to a number of my earlier blogs, including “Will Obama get IT right?”, and discusses the challenges of implementing a “universal” EHR system – in this case in the U.S. – but the same issues exist elsewhere. They include:

  1. Aligning the reward system
  2. Scalability (among other technical issues)
  3. Standards (we’ve never had a shortage of those – if only we could have one!)
  4. Privacy
A vendor comment near the end captures the essence of the challenge here:
“…deploying an EHR system is just like implementing any big enterprise application, only the enterprise in this case is bigger, and the stakes are higher.”
Given the track record of enterprise systems in much smaller and less complex environments, and the history of health systems such as the UK NHS National Program for IT , I would describe this as an overly optimistic understatement.
While this is undoubtedly the right thing to do, how it is done will be the key to success or failure. If it is managed as the huge organizational and behavioural change programme that it is, it will have a chance of succeeding – if it is managed as a technology project, it will fail.
As the article concludes:
“...the challenge of orchestrating and satisfying so many stakeholders remains…to make it happen will require a great deal of cooperation, innovation and investment…this shift will likely happen at a less ambitious level than the political rhetoric suggest…