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WHITE PAPER VALUE OF IT FRAMEWORK Hans Gillior
2014-06-03
“Every business is a digital business. You cannot be the best in your industry by not being best at IT”
This White Paper has been produced by The Goodwind Company and focus on The Value of IT framework. The paper is describing the background, workings and unique selling points of the Value of IT framework. Note that the Value of IT framework is a generic framework to measure and development value between two parts in a value chain. The framework can work between any two units excluding IT. The framework is based is influenced and combining other management models. For further reading and inspiration, please read about SERVQUAL model developed in the mid-1980s by Zeithaml, Parasuraman & Berry. For further questions or comments, please do not hesitate to contact The Goodwind Company. Hans Gillior The Goodwind Company hans@thegoodwindcompany.se
WHITE PAPER VALUE OF IT FRAMEWORK : INTRODUCTION
© Property of The Goodwind Company – All rights reserved
WHITE PAPER VALUE OF IT FRAMEWORK : BACKGROUND
¢ Many IT organizations have difficulties to justify their position as Strategic Partner to business units without providing proof of value creation. The effect is a production role of IT and a potential “blame game” culture between IT and business.
¢ Traditionally, there is no model or method for measuring and developing IT value creation in business IT value chain.
¢ Many IT organization launch IT Strategic Initiatives without strategic context (creating value for business units) and hence IT is unable to create sustainable engagement.
¢ With a changing business environment, it is essential that the expectation are channeled through the value chain to all contributors.
Background
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WHITE PAPER VALUE OF IT FRAMEWORK : PURPOSE
© Property of The Goodwind Company – All rights reserved
¢ The purpose of the Value of IT framework is to measure and develop IT value creation in the Business IT value chain - based on a service orientated delivery format, and Plan/Do/Check/Act cycle.
¢ The Value of IT framework is a generic framework to measure and develop the value creation in any part of the corporate value chain.
Purpose
Unit X
Ser
vice
Pro
vide
r
Ser
vice
Rec
eive
r
Unit Y S
ervi
ce P
rovi
der
Ser
vice
Rec
eive
r
Unit Z
Ser
vice
Pro
vide
r
Ser
vice
Rec
eive
r
Coordination forum
Generic value chain model
Value creation & Cost
Expectations
• Common vision/strategy
• Coordination
“Value of IT is defined as IT’s ability to meet and exceed business expectations on IT role in value chain.” - The Goodwind Company
Guiding Principles: 1. The level of Service Value depends on the service receiver’s expectation
and how these expectations are fulfilled by the service provider. Expectations need to be mapped and tracked.
2. Different service provider contribute with value in different ways depending on their role in the chain. The role of IT is different from the role of a Product Responsible Units. A common generic model would not work (tested earlier).
3. The strategic initiatives must support the value creation in the value chain.
4. Key success factors for increasing value: learning, transparency and constructive dialogues.
WHITE PAPER VALUE OF IT FRAMEWORK: GUIDING PRINCIPLES
© Property of The Goodwind Company – All rights reserved
¢ The framework is based on a Performance Management cycle (Plan/Do/Check/Act) includes the following activities and functions:
1. Detailing the purpose and value-criteria of each role in the Business IT Value chain (PLAN)
2. Mapping expectations on across each intersection (service provider/receiver) in the business value chain (PLAN)
3. Discussing (business and IT) the fulfillment of the expectations (CHECK)
4. Defining activities to improve value creation based on outcome of business IT dialogue (ACT)
5. Enhance value creation by cultural learning based on excellent value creation/performance. (ACT)
Definition
Plan
Do
Check
Act
Con
tin
uou
s pr
oces
s
WHITE PAPER VALUE OF IT FRAMEWORK : FRAMEWORK
© Property of The Goodwind Company – All rights reserved
(Client example 2012)
Expectation Expectation
Expectation
Exp
ecta
tion
Exp
ecta
tion
A key success factor for implementing the Value of IT framework is to define the value chain, and the expectations
on each role in the chain
WHITE PAPER VALUE OF IT FRAMEWORK : CASE EXAMPLE GOVERNANCE STRUCTURE
Governance ¢ The IT governance structure plays a pivotal role in the
Value of IT framework – defining how IT creates value in the business IT value chain, roles and responsibilities, flow of cost and expectations.
¢ The IT organization is divided between different roles that collaborate to optimize business value
© Property of The Goodwind Company – All rights reserved
Hans Gillior • 26/01/2012
8 •
© Property of The Goodwind Company – All rights reserved
WHITE PAPER VALUE OF IT FRAMEWORK: CASE EXAMPLE (ROLE OF IT)
Focus Area Question Definition Rational
Cost & Risk Transparency & Levels
Cost Transparency & Levels BCIO’s ability to explain, in business vocabulary, the deviation in activity cost (RFF/CPR) according to set targets. Ability to facilitate discussion to reduce demand driven cost
• Many comments in survey relate to BCIO’s inability to explain cost/risk levels and deviations.
• IT/Business cooperation and common understand of cost levels are needed to drive reduction of risk and cost.
Risk Transparency & Levels BCIO’s ability to explain, in business vocabulary, the deviation in risk (audit log) according to set targets. Ability to jointly facilitate discussion to decrease risk.
IT Service Quality & Responsiveness
IT Service Quality The operative service quality based on agreed SLA/OLA: • Application availability • Incidents & Disturbances • Customer impact • Responsiveness to sever incidents or errors • BCA analysis • Efficiency trends
• Operative dimension of Business/IT cooperation.
• Important for business and IT have the same view and expectations regarding the service quality delivery.
• Based on ITIL Operational Services processes
IT Service Reliability & Responsiveness
BCIO’s willingness and ability to support business • The willingness to help business and
provide prompt service • Effort and knowledge to understand
business needs • Level of communication and cooperation
Focus Areas: Defines the role of Solution Provider role in IT. Each Focus Areas is broken down into questions and definitions that further defines the Solution Provider role.
Hans Gillior • 26/01/2012
9 • Note: Based on extensive research in client organization
© Property of The Goodwind Company – All rights reserved
WHITE PAPER VALUE OF IT FRAMEWORK: CASE EXAMPLE (ROLE OF IT)
Focus Area Question Definition Rational
Value of IT Advice and Support
Value of IT Advice & Support BCIO’s ability to support business with advice on: • IT/Business Strategy • IT Investment Portfolio, • IT Project Portfolio Management • IT Resource Optimization • IT Pro-activeness
• A forward looking dimension based on the collaboration between IT and business to define how to get the best possible “value for money”.
• Based on the expected behavior of a BCIO.
IT Contribution to Business Value Chain Objectives
IT contribution to business value chain objectives
Defining how well IT deliveries contribute to the business objectives (to be defined). • How well the benefits of the business cases
have been achieved? • Have IT contributed to business strategy
(operational excellence, customer intimacy, project innovation)?
• To agree on the value that IT has delivered through the IT/Business strategy.
• Based on the expected behavior of a BCIO and Business Representative
Business understanding to IT pre-requisites for fulfilling business value chain objectives
Business representative’s ability to understand IT’s ability and prerequisites for contributing to business value chain objectives
Manager name: BCIO X Unit name: Retail Segment Household (L3) Division name: IT Retail Gov. category: IT Solution Provider Period: 2013 Q3
Basic information
Value of IT results
Cost & Risk Mgmt.
IT Service Quality
Value of IT Advice
IT Business Value
AVERAGE
Inte
rvie
wee
A
Inte
rvie
wee
B
Inte
rvie
wee
C
Inte
rvie
wee
D
Inte
rvie
wee
E
4 5 4 5 5 4,6
4 3 5 3 2 3,4
5 6 4 6 7 5,6
4 3 6 5 3 4,2
4,5
Key comments 2013 Q3
Gra
de
2013
Q2
2013
Q1
4,2 4,0
3,5 3,4
4,8 4,6
4,4 4,2
4,2 4,1
2012
Q4
2013
Q3
4,3 4,2
3,8 4,2
4,4 4,3
4,3 4,4
4,3 4,3
Div
isio
n Av
g.
IT A
vg.
4,8 4,9
4,2 4,7
4,8 4,4
4,8 4,6
4,7 4,7
Trend analysis Benchmark Unit scores (2013 Q3)
Ann
ual t
rend
(%
)
+10
-19
+30
-4
+5
Interviewee A
Interviewee B
Interviewee C
Interviewee D
Interviewee E
Need help to reduce cost by 15%
Need better and faster response when application failure occurs.
Overall happy with collaboration
Not happy with service delivery!
Awful service quality! Action plan needed.
Comments
Suggestions on cost reduction
Improve responsiveness
Implement strategic planning
Improve service quality in area X
Improve service quality in area Y
Actions
BCIO / August 31st
Manager Y / September 15th
Manager Z / October 1st
BCIO / September 1st
Manager Y / September 31st
Responsible/Due date
Scorecard
Value of IT Score
4,4 Value of IT trend
WHITE PAPER VALUE OF IT FRAMEWORK: VALUE OF IT DASHBOARD (UNIT PERFORMANCE)
The Value of IT scores can be aggregated to different hierarchy levels in the IT organization
© Property of The Goodwind Company – All rights reserved
Benchmarking: Comparing Value Creation between different IT roles and IT units
Trend analysis: Displaying unit trends on unit performance.
Score sheet: Scores per focus
area and interviewees
(business partners)
Action plan: Detailed action
plan agreed in IT Business dialogue.
IT Learning: Units with high scores are interviewed for organizational learning..
WHITE PAPER VALUE OF IT FRAMEWORK: VALUE OF IT DASHBOARD (VALUE FLOW)
Value Creation
Score: 5,6 Trend:
Value Creation
Score: 2,8 Trend:
Value Creation
Score: 3,9 Trend:
Value Creation
Score: 4,7 Trend:
The Value of IT framework allows the CIO to understand the strengths and weaknesses in value creation and flow in the IT organization
Time
Value
Value of IT trend
Cooperation
Business IT Cooperation
Value of IT trends (%/year)* High Performers +23% Low Performers +/- 0% AVERAGE +15%
The Value of IT Framework is a unique framework provided by The Goodwind Company
Value chain Silos
High
Valu
e Cre
atio
n
Low
+25%
Business Growth
Political Blame game
Approval rate* High IT Performers High Low IT Performers Medium Business Rep. High
*) Based on Client assignments
WHITE PAPER VALUE OF IT FRAMEWORK: EFFECTS OF THE VALUE OF IT FRAMEWORK
© Property of The Goodwind Company – All rights reserved
© Property of The Goodwind Company – All rights reserved
WHITE PAPER VALUE OF IT FRAMEWORK: IMPLEMENTATION OPTIONS
Designed Implementation
(analysis, design, and implementation with client)
8-10 weeks of work
Designed Managed Service
(Analysis, design,
implementation and running of framework)
Continuous
Quick implementation
(Implementing standard framework with clients)
5 weeks of work
Basic Managed Service
(Implementing standard framework and running process incl reporting)
Continuous
Full service Own resource
Gen
eric
C
usto
miz
ed
There are different implementation approaches depending on client needs.
Initiation Role of IT Validation Implement Report
Understanding situation: • Research
(external) • Studying
strategy documents
• Brainstorming and discussions
3 weeks 1 weeks
Role of IT: • Defining IT
Business Value chain
• Defining purpose of each role in Business IT Value Chain
• In-depth interviews
Validation: • Discussing the
Value of IT set-up with key stakeholders from IT and Business
• Principles • Workshop
Implementation: • Designing
process and templates to support Value of IT framework
• Roll-out of framework
• Interview structure
Assessment: • Presentation of
deliveries • Assessment of
project • Planning next
step (assistance)
3 weeks 2 weeks 1 weeks
After implementation follows a continues coaching/support and annual review of Role of IT
WHITE PAPER VALUE OF IT FRAMEWORK: PROJECT PLAN (CUSTOMIZED OPTION)
© Property of The Goodwind Company – All rights reserved
Hans Gillior • 25/02/2013
15 •
WHITE PAPER VALUE OF IT FRAMEWORK: UNIQUE SELLING POINT
¢ The Value of IT framework is the only framework in the market that measures the IT Value Creation (or effectiveness) in the Business IT Value Chain
¢ Proven effect of the Value of IT framework with increase of 15% value creation per year at flat cost and risk levels
¢ The CIO can easily understand quickly through graphical dashboard the effectiveness of the IT organization and its strength and weaknesses
¢ Improves the culture and collaboration between business and IT by having the right dialogue, right actions and learning.
¢ It is possible to measure IT Productivity by calculating the ratio between Value of IT and IT cost levels. Excellent complement to cost reduction programs!
USP
© Property of The Goodwind Company – All rights reserved
Hans Gillior • 13/05/2013
16 •
Hans Gillior Founder & CEO Email: hans@thegoodwindcompany.se Telephone: +46 768 643778 Blog: hansgillior.wordpress.com Web: www.thegoodwindcompany.se
© Property of The Goodwind Company – All rights reserved
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