Value Management is not just a challenge for IT

I had the opportunity to deliver the closing keynote to the APM Benefits Management SIG Annual Conference at the National Motorcycle Museum in Birmingham, UK on Tuesday – from my home office in Victoria on Vancouver Island in BC, Canada (the view from which you can see below).
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The purpose of this blog is not to dwell on the technology that allowed me to do so – which has both advantages (in terms of not having to travel) and disadvantages (in terms of audience engagement and feedback) but to share some thoughts that I got from listening to the presentation that preceded my keynote. The presentation was entitled “Benefits in the Built Environment” and given by Matthew Walker.

Matthew defined the “Built Environment” as being “output centric” and relating to infrastructure programmes in the communications, energy, transportation, waste and water sectors. Within the UK context – and indeed any nation – these are often taken for granted – only thought about when they break – but are of strategic importance in terms of providing an economic backbone, having national security and quality of life implications and impact, and requiring sustainability targets. Investment in these sectors in the UK 2005/6 to 2009/10 has been ~£30b/yr and is currently projected to be ~£50b/yr in 2010/11 and to continue at that level until 2030, with the current drivers for investment in these areas being the economic situation, population growth and carbon reduction. Rising to this challenge requires diversification of investment methods and the political will and capability to make long-term investments. To deliver value for money, this will require prioritization of desired outcomes, and understanding of interdependency’s through effective benefits management, or – in my preferred terminology – value management. Does this sound familiar? This is what we have been talking about in the context of IT – or IT-enabled change programmes – for well over a decade or more! It gets even more familiar.

The track record of benefits management for such infrastructure investments – if you go beyond schedule, cost, and delivery to specification is largely unknown, but the indicators are not good. A 2009 APM report, “Change for the better. A Study on Benefits Management across the UK”, found that >60% of organizations had no more than an informal or incidental approach to benefits management, and ~70% felt that value was added only some of the time, or never.

Matthew’s recommendations included:

  • defining success in terms of benefits;
  • putting benefits management at the heart of oversight and governance of major programmes and projects;
  • increasing awareness and exposure of the business case;
  • using benefits management to prioritize investments; and
  • providing transparency through assurance.

Matthew stressed that achieving such a “benefits renaissance” would not be an “overnight journey”, but one that we must take – the “we” in this case including:

  • funders;
  • professional bodies;
  • business executives; and
  • construction industry practitioners.

I have long said that the issues around realizing value from IT investments or, more accurately investments in IT-enabled change, are not an IT issue but a business issue – a business issue that is not unique to IT. They are a symptom of our preoccupation with cost, activities and outputs, and our failure to move beyond this preoccupation to a focus on value – understanding the desired outcomes of an investment, and the full scope of interdependent effort required to deliver these outcomes, assigning clear accountability for outcomes – supported by relevant metrics and an aligned reward system, and designing and managing complete and comprehensive programmes to deliver those outcomes. Only when we do this – which will require significant behavioural change – will we  address “the challenge of value”,  and begin to consistently create and sustain value  for all stakeholders, including shareholders in the private sector, and taxpayers in the public sector. In today’s complex and rapidly changing economic environment, to quote from “Apollo 13”, “Failure is not an option!” Or, to quote General Erik Shinseki, a former Chief of Staff of the US Army, “If you don’t like change, you’re going to like irrelevance even less!

Addressing the Behavioural Challenges

In my previous post, Behavioural Change – The Crux of the Value Challenge, I suggested that we don’t need any more frameworks – there is no shortage of books, frameworks, methods, techniques, tools etc. to address the effective governance and management of IT and the use of IT to create and sustain value. It is the adoption of these that is painfully slow. It is human behaviour – or rather our inability to change it –  that is at the core of the challenge. I am currently working – both individually and with others – on a number of initiatives around the need to change how we think, manage, and act – to change behaviour – both individual and group behaviour – from the Boardroom to the front-line.

I also said that I would be looking for ways to broaden the dialogue and to engage with practitioners who are wrestling with these issues on a daily basis. My silence on the blog front has largely been the result of my being engaged with a number of individuals and groups in this space, including a quick trip to Europe and the UK last week, where I met and talked with a number of enterprises – some of whom have been on this value journey for 10 years or more. These discussions, and subsequent reflection, have crystallized a number of thoughts in my mind. These include:

  1. A critical factor in determining success or failure of value management is the presence or absence of a clear owner of the value management issue or process.
  2. The “tipping point” – when value management practices start to get traction and become embedded in enterprises – is when the executive and senior management move beyond awareness and understanding of the issue to commitment to action – beyond “talking the talk” to “walking the talk”. This is illustrated in the figure below (figure and text below is adapted from The Information Paradox). Slide1At the thinking, or cognitive level, we recognize and become aware of a need to change. This often translates itself fairly rapidly into talk: “We at Thorp Inc. have to make fundamental changes to our organization.” All too often, the nature of those changes is not understood, and the definition of them is delegated, or more accurately abdicated. The reaction to this is often “This too will pass,” and all too often, it does. It is only when we wake up at three in the morning, reaching for the antacid, as we feel our stomach churning with the realization of the implications of the change and the breadth and depth of what has to change, that we begin to reach understanding. This is the precursor to commitment. The bottom line here is that we can only “walk our talk” when we fully understand what we are saying. Treating the implementation or improvement of value management practices as an organizational change programme – which it is – the use of some form of benefits modeling, which is discussed later, can bring you to an earlier awakening. When we have the understanding necessary to build commitment, to understand the full extent of what we are committing to, then, and only then, are we ready to act. Even then, we can act only if we have the resource capability and capacity to do so.
  3. Those enterprises that have passed this “tipping point” have been able to effectively apply value management practices to guide informed and intelligent decision-making during the current economic crisis – those that haven’t generally fell back to “old ways” with often across the board cost cuts.
  4. Value management practices are most effective when they are closely integrated with, and part of the business planning process. Going beyond this, they are most effective when they are integrated with overall enterprise governance.
  5. Incremental approaches to implementing and improving value management practices are more successful than  “big bang” ones.
  6. The areas of value management that appear to provide the greatest improvement in value management practices and outcomes are:
    1. Improving the business case process; and
    2. Taking the portfolio view.
  7. The factors that continue to constrain effective adoption of value management practices include:
    1. Failing to define, accept or put rigour into accountability for performance; and
    2. Clearly related to the above, failure to align the reward system such that there are consequences – both positive and negative.
  8. The interventions that appear to have been the most successful in changing behaviours, and helping enterprises move beyond awareness and understanding to commitment and action include:
    1. Inclusive engagement of all the stakeholders through workshops (for more on engagement, see The Challenge of Business Engagement);
    2. Use of benefits modeling techniques in workshops to get everyone “on the same page” – building a broader base of understanding of, and support for value management, including the need for business cases with clear accountability, relevant metrics and an aligned reward system;
    3. One-on-one coaching, and
    4. Active and on-going executive and senior management involvement where they are seen to be “walking the talk”.

In preparation for a workshop with one of the groups I am working with, I put together a short survey with the objective of:

  • Understanding the current and target levels of maturity related to value management (based on  the Value Governance [VG] domain high-level maturity model in ISACA‘s Val IT™ Framework 2.0.);
  • Understanding how long it has taken to reach the current level of maturity, and how long it is anticipated to take to reach the target level;
  • Identifying the factors that have either supported or constrained adoption, and to what extent they have done so;
  • Identifying interventions and the extent to which they have enabled adoption; and
  • Understanding the organizational context of the responding enterprise (optional).

Again, in the interests of broadening the dialogue, I would like to extend this survey to a broader audience. The survey is targeted at individuals who are involved in improving value management practices, including, but not limited to some or all of: leadership behaviour; process implementation and adoption (including business cases, portfolio, programme management and project management); roles, responsibilities and accountabilities (for both supply and demand); organizational structure (including Investment Decision Boards, and Value / Portfolio / Programme / Project Management Offices); information requirements (including metrics and reporting); and supporting tools (data collection, analysis and reporting).

You can access the survey here. The survey should not take much more than 10 mins to complete. The survey has 3 pages, and contains 10 questions.  Questions regarding “Current and target maturity levels”, and “Constraints to adoption and interventions to address” must be answered, but answers to “Organizational Context” questions are optional. Assuming that I get enough responses to yield a meaningful result, I will post results on this site in a later post. All information will be aggregated, and specific information about your organization, if provided, will be treated as confidential and will not be published without your express permission.

One of the challenges that we all have in trying to implement or improve value management practices is the perceived – and indeed real – enormity of the task. As per one of my observations above, this is why an incremental – and often pragmatic and opportunistic – approach is required. The business case, as discussed in an earlier post Lies, Damn Lies, and Business Cases, is the foundation on which all else is built, and, as such, sows the seeds of success or failure. Portfolio management is a powerful tool but if it is populated with “toxic” business cases, it will only give the illusion of progress. This is leading me to focus my attention on the business case and think about how, through workshops and benefits modeling, supported by one-on- one coaching we can change the view of business cases as a bureaucratic hurdle to be got over and then forgotten to being one of the most powerful tools available – turning it from an enemy to a valuable friend! If we can do this, we will have a solid foundation on which to further improve value management practices.

Get With The Programme!

Technology is today embedded in almost everything that we do as individuals, societies and organizations. We have come a long way from the early days – yes, I was there – when the primary use of technology was automating operational tasks such as payroll, where benefits – largely cost savings – were clear and relatively easy to achieve. Today, applications of IT enable increasingly strategic and transformational business outcomes. While these outcomes would not be possible without the technology, the technology is only a small part of the total investment that organizations must make to achieve their desired outcome, often only 5% to 20%. The reality is that these are no longer IT projects – they are investments in IT-enabled business change – investments in which IT is an essential, but often small part.

Unfortunately, our approach to managing IT continues to lag in recognizing this shift. We still exhibit “silver bullet thinking” when it comes to IT. We focus on the technology, and delegate – more often abdicate – responsibility for realizing value from the technology to the IT function. In a recent post, IT Value Remains Elusive, I discussed a recent ISACA survey in which 49 percent of respondents stated that the CIO or IT managers are responsible for ensuring that stakeholder returns on such investments are optimized – with 8 percent saying no one was responsible. Technology in and of itself does not create value – it is how enterprises use technology that creates value. With the evolution of how we use IT, a different approach to the management of investments involving IT has become a business imperative if we are to fully realize the potential value of these investments.

Realizing this value requires broadening our thinking to take many more interrelating activities into account – moving beyond stand-alone IT project management to business programme management. Managing programmes of business change where technology initiatives contribute to business results in concert with initiatives to change other elements of the overall business system, including the business model, business processes, people skills, and organizational structure. It also means that accountability now must be shared between the business and the IT function – while the IT function is accountable for delivering the required technology capabilities, it is the business that must be accountable for realizing value from the use of the technology. This includes: deciding which programmes to undertake; ownership of the overall programme – including all the necessary  initiatives ; and ensuring that expected business value is realized over the full life cycle of the investment decision. Further, to support this, the business case for any proposed investment should be: at the programme level; complete and comprehensive – including the full scope of change initiatives required to achieve the desired outcomes; and a “living”, operational document that is kept up to date and used to manage the programme through its full economic life cycle.

We originally introduced programme management as one of the cornerstones of the Benefits Realization Approach in The Information Paradox. With Val IT™, we included it as part of the Investment Management domain (IM). OGC has also introduced Managing Successful Programmes (MSP) and, more recently, Portfolio, Programme and Project Offices (P3O), and the Project Management Institute (PMI) have extended their PMBOK to include Programme Management. The good news is that there is certainly no shortage of resources for those who want to implement Programmme Management. The bad news is that, while many organizations across the world have significantly increased value through their use of Programme Management, they are the “early adopters” with the majority of enterprises still lagging.

One of the reasons for this is that there is a common tendency to view programmes  as large, complex beasts – only applicable to large enterprises – and a mistaken belief that using the term will over-complicate things. Nothing could be further from the truth – certainly not when programme management is intelligently applied. Enterprise Resource Planning, Customer Relationship Management, Supply Chain Management, Business Intelligence, Social Networking, etc. are extremely complex programs of business change. Denying complexity – taking a simplistic view of change – only increases complexity. Only when complexity is understood can it be simplified, and then only so far. As Albert Einstein once said “Everything should be as simple as possible but no simpler.” The line between simple and simplistic is a dangerous one. Implementing organisational change requires changing our “traditional” approaches to governance – it requires that we “change how we change”!   Effective Programme Management is an important part of that change.

Taking the programme view can still however be a very daunting prospect – there can be just too much to take in all at once – unless an appropriate technique is used – one designed specifically for this purpose. In an earlier post, A Fool’s Errand, I discussed the need for a benefits mapping process (using Fujitsu’s Results ChainCranfield’s Benefits Dependency Modelling, The State of Victoria’s Investment Logic Mapping, or some other similar technique) to develop “road maps” that support understanding and proactive management of a programme throughout its full economic life cycle. Using Fujitsu’s Results Chain terminology – the one I am most familiar with – the process is used to build simple yet rigorous models of the linkages among four core elements of a programme: outcomes, initiatives, contributions, and assumptions. With the right stakeholders involved, and supported by strong facilitation, such a process can, in a relatively short time frame, result in clearly defined business outcomes and contributions, enabling management to ensure alignment with business strategy, define clear and relevant measurements, and assign clear and unambiguous accountability. They help to “connect the dots” and facilitate understanding and “buy in” of the those who will ultimately receive the benefits.

The challenge facing enterprises today is not implementing technology, although this is certainly not becoming any easier, but implementing IT-enabled organisational change such that value is created and sustained, and risk is known, mitigated or contained. This is where Programme Management, supported by benefits mapping can and must play a key role. The OGC states that: “The fundamental reason for beginning a programme is to realise the benefits through change.” In a March, 2008 Research Note, Gartner said that “We believe [strategic program management] is the management construct best suited to enable better business engagement, value delivery and risk”. Enterprises who want to enable such outcomes would do well to take a serious look at Programme Management.

A Fool’s Errand

I referenced Stephen Jenner, the UK Government’s “rottweiler of benefits management” in an earlier post, Lies, Damn Lies and Business Cases. Stephen is also the author of a new book, Realising Benefits from Government ICT Investment – a fool’s errand, a copy of which he graciously sent me. It arrived just as I was heading off on a couple of weeks vacation which gave me the opportunity to read it without the usual interruptions. In reading the book, I can only agree with Donald Marchand’s testimonial in which he says: “Jenner provides very credible guidance and  methods on ICT project value realisation in the public sector. The book is timely, practical and a very good primer on contemporary “best practice” thinking in both the public and for-profit sectors.” Indeed, as I read it, I thought of it as a “field book” for benefits management, and certainly not one limited to the public sector.

Without giving away too much of the content of Stephen’s book, he starts with identifying three key elements that are required to manage value on an active basis – these are:

  • Planning effectively for benefits realisation by ensuring the benefits claimed in business cases are robust and realisable – eliminating “delusional optimism” and deception (“benefits fraud”) by:
    • classifying benefits;
    • validating benefits;
    • connecting benefits to organizational strategies/objectives;
    • ensuring a clear and shared understanding among all stakeholders of the benefits they will be accountable for, and the business changes they will have to make to realise the benefits; and
    • ensuring benefits are translated into real business value.
  • Identifying and capturing all forms of value created, including:
    • financial/economic, social, and political value;
    • value arising from cross departmental benefits;
    • the value of avoiding “things gone wrong”; and
    • the opportunity value of infrastructure investments.
  • Realising the benefits, and going beyond benefits realisation to value creation by:
    • ensuring clearly defined, understood and accepted accountabilities;
    • tying benefits to departmental and individual targets and incentives;
    • regularly reviewing performance throughout the full life cycle – encompassing the project and beyond;
    • going beyond reviewing to actively looking for additional benefits; and
    • continually optimising the overall portfolio of investments in IT and IT-enabled change.

The book is organised around these three elements, within which it provides many valuable  insights, and a wealth of practical methods and techniques, illustrated with examples, and peppered with some great quotes. (You’ll have to read it yourself to understand the “fool’s errand” bit.)

While the book covers a broad range of topics, what reading it really reinforced in my mind is the fundamental importance of having a complete, comprehensive and credible business case – one that:

  • operates at the program level – including not just the technology but all the business, process, people,organizational and other changes  required to achieve the desired business outcomes;
  • is supported by a benefits mapping process (be it Fujitsu’s Results Chain, Cranfield’s Benefits Dependency Modelling, or some other) to “connect the dots” and facilitate understanding and “buy in” of the those who will ultimately receive the benefits;
  • contains clear and relevant benefits metrics, both lead metrics for intermediate benefits and lag benefits for end or business benefits/value;
  • includes consequences by tying performance against metrics to the incentive/reward system;
  • is not a one time “grab the money and run” document but a living, operational document – updated and used throughout  the full life cycle of the investment decision; and
  • is regularly reviewed for completeness, credibility and comparability by an independent body, such as a Value Management Office (VMO), who can challenge assumptions, assure the quality of individual business cases, and ensure consistency between business cases.

As I have said before, it is the business case that lays the foundation for success or failure. A well developed business case, intelligently used and updated throughout the full life cycle of an investment decision, has an enormous impact on whether value is created, sustained, eroded or destroyed. The current view of business cases as a”bureaucratic hurdle” that has to be got through in order to get required financial and other resources, after which it can be ignored, other than possibly at the post-implementation review – often more akin to an autopsy than a health check –  pretty well guarantees significant challenges, if not outright failure. As long as this view prevails, we will continue to have trouble getting out of the starting gate when it comes to realizing the full potential of IT-enabled change.

As Donald Marchand concluded in his testimonial to the book: “The big question is will public sector managers and executives have the “will” to put the book’s prescriptions and methods into everyday practice with ICT projects?” History would suggest that we still have much work to do before this happens – and not just in the public sector. Much of what I and others have been espousing over the last 10 – 20 years, and what Stephen presents in his book, is common sense – unfortunately, common sense is still far from being common practice!

Lies, Damn Lies and Business Cases

A 2006 Cranfield University School of Management study[1] found that while 96 percent of respondents developed business cases for most investments involving IT, 69 percent were not satisfied with the effectiveness of the practice. Specifically, they found that while 96% of respondents indicated that a business case was required for IT enabled investments:

  • 69% were not satisfied with the business case development process;
  • 68% were not satisfied with the identification and structuring of benefits;
  • 81% were not satisfied with the evaluation and review of results; and
  • 38% admitted that benefits claims were exaggerated to get the business

Stephen Jenner, described by John Suffolk, the UK Gov’t CIO as the “rotweiller of benefits management”, is quoted in the June edition of CIPFA‘s Pinpoint asking “Why is it that, if the rationale for projects and programmes is to realize benefits, they are so poorly articulated in business cases, and so few projects are able to demonstrate those benefits in practice?” His answer – “…that it’s not perceived in anyone’s interest.” Unfortunately, this is sad but true! Supporting the Cranfield research above, Stephen goes on to quote Bent Flyvbjerg – now BT Professor and Chair of Major Programme Management at Said Business School, who argues that the result is “the planned, systematic, deliberate misstatement of costs and benefits to get projects approved.” Now, when I was at school, this was called lying! Given the dismal track record of IT projects, specifically their failure to create or sustain value while incurring huge costs, we as taxpayers and/or shareholders should be demanding action. Why aren’t we? Because we assume, or have been conditioned to believe that this is “just the way it is”. It doesn’t have to be so! One key to fixing this malaise is an effective business case process.

Unfortunately, in most enterprises today, the business case is generally seen as a necessary evil, or a bureaucratic “hurdle” that has to be got through in order to get required financial and other resources. The focus is on the technology project, and the costs of the technology, with only a cursory discussion of benefits, or of the other changes that the business might have to make – as part of an overall business change programme – to actually create or sustain value from the use of the technology – changes that could impact the business model, processes, people’s competencies, technology, organizational structure etc. Business cases are also all too often treated as ‘one-off’ documents that are rarely looked at again once the required resources have been obtained other than, possibly, at a “post-implementation review”. I worked with one organization who were undertaking a $USM350+ implementation of an ERP. The business case was nine Powerpoint slides – not one statement in which was correct soon into the project. It was never reviewed or revisited. The results – well, you can guess! And, no, there was not even a post implementation review!

This current approach to business cases pretty well guarantees failure. A well developed and intelligently used business case  is actually one of the most valuable tools available to management – the quality of the business case and the processes involved in its creation and use throughout the economic life cycle of an investment has an enormous impact on creating and sustaining value. It describes a proposed journey from initial ideas through to maximising expected outcomes for beneficiaries (i.e. those whose money is being invested and for whom the return should be secured) and other affected stakeholders.

In the case of IT investments – or, more accurately, investments in IT-enabled change  – the responsibility for business cases, and the accountability for the promised return, cannot be abdicated to the CIO and the IT function. Boards, Executive and Business Management have to “step up to the plate” and take ownership. After all, it’s not technology itself that delivers value, it’s how the business – directed by the Board, Executive and Business Management – uses the technology that delivers value and they must be held accountable. I’m certainly not letting the IT function off the hook here – they must also be held accountable for delivering the required technology services reliably, securely and cost-effectively but they cannot be held accountable for how they are used or the results of their use/misuse.

The failure of enterprises to step up to this challenge is disturbing. The consequences are often catastrophic, with the costs being borne by taxpayers and shareholders, and the opportunity cost – the value not being delivered – having huge economic and social impacts on all of us. Again, it doesn’t have to be way – fixing the business case process would be a good start  – it’s time we made our voices heard!


[1] Ward, John; ‘Delivering Value From Information Systems and Technology Investments:  Learning From Success’, Forum (the monthly newsletter of Cranfield School of Management), August 2006