impossible for ideas to compete in the marketplace if no forum for
ROI as it
applies to eCommerce or IT Projects
Author: Tim Rohde
A Note on �Strategy�
Using the word
�strategy� could have shortened the title of this article.
Unfortunately, the word started with several meanings and now, thanks to its
constant misapplication, has none. If you want your IT projects to
sell up the chain easily and to achieve measurable business results, you�re
going to have to hear the word �strategy� more often than your own name.
Here is a definition of strategy that will cut through miles of dust for
anyone in a for-profit business:
Strategy: A plan
with identified short, medium and long-term goals related to revenue growth,
cost reduction, company value, market evaluation and opportunity cost.
For the plan to be a strategy it must balance the natural antagonism between
short, medium and long term needs and be prepared to generate a relatively
positive result under all reasonable circumstances.
The herd of cats will immediate yowl over this definition. It lacks a reference to competition, price leadership, differentiation, and focus; there are no stars or cows or dogs or question marks; it lumps functional, business and corporate strategy into one big bucket�. The cats are all correct in their criticism. Please lambaste me via email ([email protected]). Feel free to blame me for everything that is wrong with this definition. Just make sure the discussion eventually comes back around to making money, saving money and building the company.
Finding the Goals
IT is concerned with
systems. These systems share one common trait; they all have inputs and
outputs. A company or division has a similar structure. Its inputs
and outputs are in the form of monies, goods, services and waste.
Theoretically the company or division adds some value to the inputs that is
reflected in some of the outputs. Like any system, the interface
constraints, throughput and capacities of the system limit its capacity to add
value. Time and culture are major factors in this because today�s
values and needs may not be the same tomorrow. This caveat holds true
for a place or group of people as well.
So the questions for
the IT decision maker are, �What business inputs and outputs will be changed
by this new system or by maintenance of an existing system? What will it
cost to make that difference? When will those changes produce a net
benefit greater than other alternatives? Will the users recognize and
accept the path to benefit? What is the impact in the short, medium and
long term?� Oh, and I almost forgot, �Does this support the company�s
strategic objectives and, more importantly, its strategic maneuverability?�
There goes that word again.
Hopefully, your executive leadership is considering several dimensions (including time) in their strategic process. Unless something is very wrong, the process will produce a return at some point. If you find that revenue growth, cost reduction or company value aren�t among today�s priorities, you�ll need to find out what today�s priorities are and how they relate to those goals in the future. Without this insight it will not be possible to assign priority and value to any proactive IT spending. Strength of will, reference to competitive trends and FUD (fear, uncertainty and doubt) campaigns will work to get a project through but it�s a bumpy ride with dangerous turns and an unfamiliar destination. Most effective people like a clean win when they can get it.
Aiming for the Goal
Once you have an idea of where your company wants to be at what points in time, you can establish the benefits that a system or systems can deliver toward that goal. The trouble you�ll run into is that identifying, establishing trace-ability for, and quantifying these benefits in detail is often a gigantic job. It gets more complex when you add time and change to the equation. This is the point that makes most IT shops choose to be excellent at reactive development rather than confront the job of taming the beast. This is also a good time to scream the word, �POLITICS� at the top of your lungs.
Go to the Center of Danger and There You Will Find Safety
measurement of your systems from the point of view of strategic and financial
decision-makers. Present your plans in a form they can use (with your
help). Team with them in structuring the internal value proposition of
IT efforts and support them in presenting it in their language.
These questions and
ideas all boil down to the same pattern: leverage the core competencies of
other departments and decision-makers whenever possible.
1) Did you find a strategy when you went looking for one? (See the above definition of strategy � that�s the one I�m talking about).
2) Does your accounting department use the FASB 86 rules for GAAP:
3) Does your leadership use NPV (Net Present Value) analysis to make decisions about internal investments such as IT projects?
4) Does your company have detailed knowledge of its processes and their costs and benefits?
5) Does your company use any metrics (measures) that are already associated with financial assumptions?
Paint a Picture of the Goal Achieved
What do you do when a
number of constituents with varying levels of power need to commit to a
coordinated approach to a potentially chaotic situation that might win them
major benefits and will cost them serious effort? For the last 17,000
years you had to paint them a picture on a wall. Who are you to buck
System Context Diagrams consistent with the work of Tom DeMarco and James and Suzanne Robertson are an excellent way to get people with varying levels of technical sophistication on the same page. The great thing about their methods is that anything that flows in a direction can be modeled as a system. This level of flexibility is necessary if you�re going to define the flow of information, monies and goods between your company or division and others.
These flows can be modeled in increasing detail through departments and/or enterprise systems right down to a piece of stored data. Color coding or other methods can be used to depict changes through time. Anything not requiring immediate attention can be left at a higher level of detail without losing a sense of its connection to more detailed matters.
Everything that flows between two objects has a cost and a benefit to the company. Even receiving funds has costs and benefits associated with it such as systems, labor, and more particular issues like float. Having a clear idea of the net value of each of these flows gives you several immediate benefits:
Hit the Target & Measure how close you are to the Bull�s-Eye
Most planners are
obsessed with whatever facts they can get their hands on about their domain of
inquiry. Build the measurement of a given system�s value into the
system if at all possible. If not, find ways of collecting credible and
useful data on its value. When you discuss these ideas with strategic,
accounting and finance people, look into what data they will need to validate
the assumptions you will make to create the model. This factual data
will be vital to the future use of these types of methods.
Regular delivery of this type of information will train your organization to think of IT as a source of measurable benefits. IT costs will be seen in a new light. Objective measures will alter the political landscape in a way that, at least, provides a common view of a system�s value.
Start Where You Can
These methods are only one means of many to map IT projects to the top and bottom line. The most important step is to discuss measurable value with the people who measure it. The most important message to take from this article is that it is possible to connect IT projects to making and saving money for your company without going crazy trying.
Tim Rohde is an instructor for DCI�s eCRM and eB2B Universities � the only national accreditation program for these disciplines. As a board member and instructor, he is also assisting Cal State Fullerton in designing and implementing an eCRM accreditation program. Tim leads a team of business consultants responsible for operational strategy, business analysis, systems analysis, change management and project cost justification for leading clients in entertainment, travel, commercial real estate, healthcare and technology.
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