Value: The most used and most abused word in business
- Posted on December 14, 2018
- Estimated reading time 4 minutes
The term “value” is all around us – in business literature, meetings, proposals, etc. Some think of return on investment (ROI), some of payback period and the list goes on. For example, Gartner cites that worldwide investment in technology may grow by 3.2% in 2019, to $3.8 trillion. How much of an investment is your company making in technology—and what are you getting for it? Almost all executives are dealing with this important question.
“Value” may truly be the most used and abused word in business. Getting your C-suite colleagues to agree on the net business value of your technology first requires some clarity around what “value” really means. At the highest level, business value is the cash you generate, factoring in the amount of time it takes and the risk inherent in doing so.
But “the highest level” only gets you so far in understanding the business value of technology. C-suite executives and their stakeholders tend to see “business value” in very different ways—a lot depends on their functional role in the organization. For example, the CEO is typically focused on overall shareholder value and on using technology to deliver that value and advance the business strategy. Meanwhile, the COO sees business value in technology that boosts operational efficiency and organizational effectiveness, reduces costs and offers new capabilities. And the CFO has yet another view of business value, looking for technology to deliver the highest ROI with the smallest technology footprint.
How the CIO looks at value is a bit different
Today’s CIO has the responsibility to look at technology’s value for the entire enterprise—from operations and finance to marketing and manufacturing and all the rest—because the CIO is ultimately charged with delivering this enterprise-wide value. That’s an expanding mission as a company’s technology use grows to include IoT, natural language processing, biometrics, intelligent automation, video analytics, big data, cloud and more. For many companies, use of these technologies can deliver tremendous business value. But the CIO and the organization will only know how much of this value they’ve gained if they identify the right metrics and measure them correctly. For example, to measure the business value of investment in workplace experience, researchers at MIT CISR looked at innovation, customer satisfaction, and profitability as measured by net profit margin and return on assets.
To develop their measures, business executives should separate the value of technology from other factors (e.g., organizational, process redesign) that are also part of a technology initiative. They should devise a holistic value that takes into account the various measures that go into metrics of disparate views of the C-suite executives. And they should build an ongoing monitoring process into the launch of the technology initiative; companies often think of this as an unimportant overhead item—but it’s not.
Monitoring is crucial to understanding the value of technology
Benefits realization is a function to track value as it is being created so companies can re-calibrate in response to changing external or internal conditions. Enterprise PMO (Program Management Office) functions should do this -- even if there is a lean focus on tracking this, it instills discipline in the execution. Even as projects move to more product management focus, tracking features and the value based on what the market fit analyses shows and tying this to the business case is key.
Value should be measured against business capability measures. For example, a commercial bank that’s moving into retail banking should consider measures around customer interaction and service, which become more important to it in its new market. The capability needs to be tied to a value driver such as product mix and configurations or channel effectiveness. The key activities to accomplish this are:
- Value Identification of the sources of business benefit from technology. In a data center consolidation project, for example, key values would be cost reduction, better risk management and faster time to market. IT and Finance should work together to align on how to value these issues.
- Value Delivery that formalizes the vehicle in which the value is delivered in an initiative – whether it’s modern software engineering, process redesign, etc.
- Value Measurement that defines how success will be measured. For example, for a digital servicing initiative, measurements might include “automating 80% of customer interactions and reducing call-handling time by 50% by 2020.”
As you chart your course to business value realization of your technology investment, keep these five tips in mind:
- Incorporate benefits realization as a workstream that includes checkpoints for monitoring value throughout the project lifecycle.
- Consider behavior-modification metrics that align employees with your technology goals in ways that motivate them to adopt the technology.
- Hold managers accountable for results that increase value.
- Ensure employees understand both baseline performance measures and goals.
- Use measures that help shift your employees’ focus from reactive to proactive management to see where the product/project focus needs to shift.