Developing a compelling investment / business case

BasicsEvery project is a business initiative focused on a business outcome that produces improved business performance

Business owners can control costs when the factors that drive costs are made visible to us.

IT services and systems need to be measured in terms of business performance and business outcomes

There is nothing called IT Project (CJ’s Opinion)

3

Technology Investment Governance Structure

Enterprise Governance

Council

Technology Prioritization

Committee (Revenue Generators)

Technology Prioritization

Committee (Revenue Enablers)

80% 20%

Lic/SalesBiz Dev

Fin HR ITMktg/PR

Legal

4

Organizational Prioritization Model(Quantitative)

Type Field Weight Business Value Metrics

Alignment Score 25%

0: No strategic impacts2: Aligns with 1 corporate goal3: Aligns with 2 corporate goals4: Aligns with 3 or more corporate goals5: Aligns with most objectives

Annual Revenue Increase 25%

1 - Low - No or Indirectly impacts existing customer engagement2 - Med-Low - Directly impacts existing customer engagement3- Medium - Demonstrated expected revenue protection4 - Med High -- Demsontrated expected revenue growth5 - High - Demonstrated expected revenue protection and growth

Cost Savings 25%

1 - Low - No direct hard or soft cost savings2 - Med Low - Soft savings that are not quantifiable (e.g. risk reduction)3- Medium - Quantifiable soft savings (e.g. operational efficiency, cost avoidance)4 -Med High - Quantifiable hard savings <$150,0005 High - Quantifiable hard savings >$150,000

Data Quality & Integrity 25%1: Low - Improves data Quality or Integrity3: Medium - Improves both Data Quality and Integrity5: High - Significantly improves both Data Quality and Integrity

Enterprise Functions Impacted

25%1: Low – 1 BU3: Medium – Multiple BUs5: High - Enterprise Wide

Conformity to Stds 25%1: Low – Conforms to current stds3: Med – Conforms w/ exceptions5: High - Requires new standards

Organizational Readiness 25%1: High – Multiple prior projects3: Med – Limited experience5: High - Never done this before

Systems Impacted 25%

1: Low - 1 internal system2: Med Low – 1 external system3: Medium > 1 internal system4: Med High > 1 external system5: High – Significant % of systems

External Cost 33%

1: Low < $100,0002: Med Low $101K - $250K3: Medium $251K - $500K4: Med High $500K - $1M5: High > $1M

Duration 33%

1: Low < 1 Month2: Med Low < 3 Months3: Medium < 6 Months4: Med High < 12 Months5: High > 12 Months

Internal 33%

1: Low < 160 hrs2: Med Low 161 – 1000 hrs3: Medium 1,000 – 5,000 hrs4: Med High 5,001 – 10,000 hrs5: High > 10,000 hrs

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Prioritization Business Assumptions (Qualitative)

The second aspect of the framework involves the use of qualitative reasoning supported by team’s experience and understanding of organizational constraints to derive the right mix of projects within the portfolio. Things we analyze :  

• Business Owner understanding and articulation of the business problem to

be solved

• Organizational readiness for change as validated by charter and business

case

• Availability and readiness of solutions that address high-level business

requirements

• Executive/Business Sponsor representation and support of the business case

• Alignment of the project or initiative to the department’s strategic and

operating plan & goals

6

Technology Investment Framework

1) Organizational Prioritization Model

And

2) Prioritization Business Assumptions

1) Organizational Prioritization Model

And

2) Prioritization Business Assumptions

3) Forced Ranking

IT Investment Transparency

Run the Business

•Enable essential services

•Benefits are measured in reduced cost or risk

•E.g. : Exchange 2010 upgrade

Grow

the business

•Improvements in operations and performance related to existing markets and customer segments

•Benefits are measured in operational improvements like cycle time, increased revenue

•E.g.: Opening new channel of sales

Transform

the business

•New markets, new products, new horizons for the company or industry

•Benefits are measured in revenues in the new horizons, typically involve big rewards but also have high risk

•E.g.: New acquisition model, Angry birds game on the iPhone

IT Investments Metrics (Connect investments to P&L)

Financial Metrics

•IRR•Payba

ck•NPV

P&L Business Impact

•Gross Margin Revenue Increase

•Gross Expense Reduction

•Operating Expense Reduction

Compelling Investment Get the basics (of a business case) right

Build stories around compelling subjects: achieving rewards,

avoiding major losses, strengthening security, reducing risk

Translate the main investment payoffs into favorite senior exec

initiatives Choice of language. If promoting competitive advantage, consider words like conquer, crush or triumph. If urgency is the driver, speak of pressure, speed or stress Keep it truthful. Make sure any facts or quotes you use are accurate. If describing future situations, make it clear that they are projections

Evangelize the business value and business performance

Socialize your investment ideas before you present for “real”

approval

Know your “approval” audience and their needs

Identify “influencers” & “champions”

Use Industry Benchmarks (Gartner/Forrester/IDG) wherever

applicable

IT Value Traps(Beliefs & Habits that seem to be good but actually lead to trouble)

10

Visibility Trap

•We shouldn’t have to talk about our performance; it speaks for itself

•IT is the cost of doing business

•IT delivers great technology for the enterprise

Excuse

Trap

•Nothing is perfect especially something as complex as IT

•If you don’t follow our policy we can’t guarantee it will work

Role Trap

• “The business” is IT’s customer

•The customer should know their business processes really well

•The customer is always right

Q&A