White paper - Value of IT

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 [email protected]

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


WHITE PAPER VALUE OF IT FRAMEWORK : PURPOSE


¢  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


¢  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


(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


Hans Gillior • 26/01/2012

8 •


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.


9 • Note: Based on extensive research in client organization


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


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



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)



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



16 •

Hans Gillior Founder & CEO Email: [email protected] Telephone: +46 768 643778 Blog: hansgillior.wordpress.com Web: www.thegoodwindcompany.se
