IT has no value for the business

The reader may not agree with the title, but if we specify a little more and say that IT has no intrinsic value for the business, we will surely agree more. IT is there to help the business meet its objectives, but the business will not be better just for having better computers, or for having licenses for one or another software, nor will it be better for perfectly implementing that expensive system that everyone is talking about; no, the value will come when the business makes use of these systems, computers and software, in other words, similar to data, computer software or hardware does not provide benefits for the business if it is not used in a way that brings benefits to the value chain.

In papers such as that of Peppard, Ward and Daniel, the causes that lead to the success of IT investments are analyzed and offer mechanisms to improve the impact of such investments on the benefit provided to the organization.

In a Gartner survey, it showed that only 52% of IT projects were a strategic advantage for the business, but even more shocking is that in the same survey it was commented that only 25% of companies measured and tracked the value of IT investments for the business. The best way for us to ascertain and even quantify the success of an IT project and its investment, is to measure the impact on the business. Before going ahead with an investment, we should ask ourselves the following questions:

Why do we do it? what is the connection with the business strategy? If we make an investment, it is because we want to achieve an objective (or several) and this has to be clearly identified and aligned with the business.

What exactly do we want to do? Detailing the objective and the way to achieve it. To do this, we can use the project charter, so that all the people involved know what we want to achieve with the project and how we want to do it.

What is the benefit of the project? To do this, we usually rely on a business case to calculate the costs and benefits of the project and obtain the ROI to help us make the decision on the investment. One issue to bear in mind is that the business case should not only help us to see whether or not to go ahead with an investment, but it should also help us to monitor the achievement of the plan indicated in it.

How are we going to ensure the achievement of the benefits expressed in the business case? What levers are we going to enable to make the plan successful? We cannot expect to make a business case, and have it magically come true, we must enable all possible levers and follow up on them to make it true.

As we will see below, to help us align the needs of the organization with the investments in projects and thus achieve the strategic business objectives, we have the so-called Benefits Management Frameworks, but I would like to focus on the principles set out in the mentioned paper, as they are very revealing:

IT has no inherent value: It is what we have commented above, there is no intrinsic value of IT, not just by putting a software you are already providing value to the business.

The value of an IT investment will arise because the business can do new things or differently, in a way that brings benefits. In this case, we have multiple examples in which supposed digital transformations ended up being simply “doing the same thing” but with computers, cases in which business usually does not get any benefit but the cost of the investment.

Profit comes from business people. This is important, IT people do not get business benefits from the investments made, they are the ones who make them possible, but the business benefit comes from the business people. The benefits come from changes in the way the organization works and the interactions with customers and suppliers, and it is the business people and users who make it possible. This is key in terms of accountability, as we cannot hold IT people accountable if the benefits from IT investments fail, and I commented that this point was important, because it makes clear the absolute alignment that there must be between business and IT for investments to have an impact on the value chain, and that business must be more involved in the so-called “IT projects”.

All projects have outcomes, but outcomes are not always benefits, there can also be bad outcomes, and we must manage for the outcomes to be positive and also enable benefits for the business.

There must be an active management to obtain benefits, we cannot pretend that the results become benefits by magic, once the implementation is finished, we must ensure that benefits are generated in the business, reviewing the business case and enabling the necessary levers to achieve it.

As we introduced earlier, in order to align business benefits and technology investments, we have different Benefits Management Frameworks developed by universities and organizations, which basically offer us simple methods to connect the change process with the expected business benefits and with the technology that enables such change in the process.

In the example shown above, we see from left to right, the IT enablers that will create a change in the process, this change will in turn create a change in the business, from which it is expected that benefits will be obtained, and these will be aligned with the strategic objectives of the organization. Although it is painted in this way, the way to work this framework is from right to left, looking at the objectives we have to meet, what benefits we need to meet these objectives, knowing the levers of change that are needed in the business, analyzing the changes that need to be made in the processes to achieve the change in the business and, finally, what technologies I can use to achieve this change I need in the process. In this way, we can ensure that IT investments will be aligned with the organization’s objectives, since they are made with their achievement in mind.

Another way to work this alignment can be through the framework shown above, where we work in a more similar way to a user story, asking ourselves about the problem we have, how we would change it, to achieve certain benefits. Through this framework, we also have in a very clear way, the expected benefits, so we can quantify the success of the investment.

To classify and compare benefits obtained by different investments or projects, we can ask ourselves three questions that will help us:

Can it be measured?

Can it be quantified?

Can we put an economic value on it?

Not all benefits are equal or equally comparable and measurable. For example, if we consider their level of explicitness, we could classify them as follows:

Financial: the financial value can be calculated by applying a cost or a price, or another valid financial formula. If I produce 1000 screws and sell them at 5 monetary units, if I obtain a production of 1200 screws, I will have an economic profit of 1000 more economic units (of course we must see what this profit costs us, but we have it quantified in a financial way).

Quantifiable: when we have evidence that there will be improvements in some of the metrics currently measured by the organization, and that will possibly translate into a financial value; for example, adding a routing system to travel fewer kilometers in transportation systems, will offer a future benefit by reducing computed kilometers (lower fuel costs and less wear and tear on vehicles).

Measurable: when benefits are more difficult to measure. We can measure or we are calculating a measure, but we do not know how much we can improve it by implementing a technology; we assume that there will be improvement, but we do not know how to quantify it.

Observable: will be the benefit that we cannot measure or that is not measured, but that we can observe an improvement; for example, a change in the interface of a portal, we can notice that people complain less or that complaints are softer, but it is difficult to give a financial value to it.

Thus, if we are clear about the metrics, we want to impact in a way that adds value to the business, we can set the process of change in these metrics, and define the technology projects that make it possible, this offers several advantages:

We have a better understanding of where the value of an initiative will be focused.

This helps to better communicate the impact of the initiative to stakeholders.

It also enables a consensus to be reached on control measures during testing and at the production stage.

Finally, it makes it easier to assign accountability for the creation of profits for the business, since we know where the profits are supposed to come from and who is in charge of those areas.