Delivering Value from IT:
a prime requirement is a shared language
Professor Chris Edwards - Professor of Management Information Systems
Rob Lambert - Senior Lecturer in Management Information Systems
The causes of IT failure are often not connected with the technology nor, as often reported, the
execution of the project. Rather, it is the issues that surround the early scoping, development of
the business case and subsequent approval of the project, that will be critical to success. Here, the
authors explore the effectiveness of the IT investment appraisal process and offer insights which,
they suggest, will lead to better practice in the bid to deliver value from IT investments.
W
e are all familiar
with the frustrations
of IT failing to
deliver business
value: certainly the press contains
examples most weeks of the failings
of IT programmes. Our research
(involving over 100 managers)
indicates that the seeds of failure
are planted very early in the life
cycle of the programme: 56% of
our respondents believe the IT
investment approval group are
either ineffective or only slightly
effective. In fact 36% believed
that the approval group did not
even understand the business
cases presented. Surprisingly 47%
believed the assessment of business
benefits was poor or worse and 65%
indicate a poor or worse assessment
of business change.
The early stages in the life cycle of
an IT enabled change programme
require effective communication
capabilities on the part of both
business managers and IT specialists.
This is critical as most major IT
interventions are specific examples
of business improvement involving
changes in roles, responsibilities,
business practice and skills.
However, IT interventions are more
complicated than the norm, as
they contain the added ingredients
of mysterious technology and
specialist technical staff. Such
major change programmes should
involve directors, senior managers,
line staff, process owners, and a
collection of IT specialists ranging
from the business aware to the
barely business literate. This wide
range of stakeholders originate
8
from differing backgrounds, hold
different values, have different
motivations and as a consequence
speak ‘different languages’. This can
result in the IT steering committee
resembling the ill-fated Tower of
Babel.
Effective Communication
The communication required in the
early stages of a change programme
should provide a shared vision,
coordinate the stakeholders’ efforts
and motivate these individuals to
work towards an agreed common
goal. Lack of such effective
communication leads to a variety of
symptoms, each of which provide
much potential for heated discussion
and recrimination. These symptoms
include: business individuals
not attending programme
workshops, IT staff retrenching
into a technical vocabulary, time
delays, overspending, continual
changes to requirements, and much
defensiveness from all involved.
Typically organisations attempt to
address these symptoms with ‘bandaid’ solutions without focussing
upon the fundamental issue: a
lack of real communication! Such
communication involves much more
than ‘newsletters’, the occasional
‘message from our leader’ and the
appointment of junior staff to act as
‘go betweens’. It should not merely
be positioned as ‘informational’
which often acts a substitute for real
‘involvement’. Observations of the
IT industry would suggest that many
key players are presently striving
to develop such a communication
language to address these very
issues.
To enable effective communication
the prime requirement is for a
shared language, encapsulated
in jointly owned frameworks
understood by all, which enables
a way of working together. Such
an approach begins with a joint
understanding of the vision of
the intended programme which is
demonstrably aligned to business
objectives. It is critical directors drive
this stage but equally it is important
that all other stakeholders
understand this articulated strategic
intent. This vision should provide
the boundary to all subsequent
activities and should not be
extended without reference to
the directors, otherwise projects
just ‘grow and grow’ to satisfy the
whims of individual stakeholders.
Benefits Definition
This vision forms the basis for
the definition of the benefits of
the projected change. Visionary
statements tend to be somewhat
general whereas the benefits need
to be specific and quantifiable,
providing a precise focus for the
programme. Typically these will be
aligned to the key performance
indicators of the business and
require to include current and
target performance metrics. This
definition of benefits can be a time
consuming and painful task but how
on earth can the developers of the
programme ever develop a solution
without knowing the precise
benefits sought? This task will
involve members of the programme
team and affected line managers.
MANAGEMENT FOCUS
Diagram 1: A process for developing a shared understanding
What infrastructure
changes are required to
support the IT?
Infrastructure
IT
Applications
What are the required
projects to improve the
processes?
Business
Redesign
What IT support will be
required of these revised
processes?
Process
/Function
What are the precise
benefits we are
seeking?
Quantified
Benefits
Visionary
Purpose
Which parts of the
organisation will be
involved in delivering
identified benefits?
An indicative causal linked
network
Multiple iterations are required
Each benefit should only be
included if someone agrees to take
responsibility for the delivery of that
benefit: benefits without owners
will never be delivered anyway!
Having specified all the intended
benefits, the programme
team focus upon selecting the
business processes that will
need to change to deliver each
benefit. This will lead to a brief
statement, for each process, of
the improvements required to
deliver the identified benefits. This
activity will significantly involve line
management in formulating and
agreeing revised working practices.
Taking each process in turn a
number of business redesign
projects (revisions to governance,
role and responsibility changes,
cultural interventions etc) will be
scoped to deliver the identified
change. In some cases such change
will necessitate IT support for which
an IT application project is added.
Some IT applications will require
infrastructural change and, if so,
an infrastructure project is similarly
added.
A process for developing a
shared understanding
This approach is creating a causal
linked network relating all
elements of the projected change
with each group focussing upon
their areas of expertise. All this is
achieved through a joint language
encapsulated in an approach linking
IT and the business.
Our evidence suggests that
this approach enables effective
communication between diverse
professions. It also provides a
visualisation to enhance
communication to a wider audience.
Further, as a bonus, it provides the
foundation for benefits tracking!
(infrastructure, IT application
and business redesign) with the
intended benefits and vision. As
each step progresses the degree
of involvement of individual
stakeholders change. For example,
directors set the ‘vision’ and IT
infrastructure staff listen but the
infrastructure staff are the prime
movers when considering their
specialism. However the end
product reflects the effort of all the
interested parties: truly a joint effort
However some cynics suggest that
management barely have enough
time to do their day job, let alone
thinking about issues such as these.
Of course, in some organisations
these cynics are correct, but do
such organisations have any future
at all, if they neglect the issues of
tomorrow! Others suggest that
addressing future issues is vital to
organisational success but that it
is a very challenging task involving
considerable time and effort. In
reality, having a common language
and frameworks upon which to
base discussions, reduces the
amount of time taken to develop an
investment business case. Further, it
(continued on page 12)
Diagram 2: An indicative causal linked network
Infrastructure
IT
Applications
Business
Redesign
Design & implement a
performance related
pay program
Integrated payroll
system
Extended bandwidth
on the Wide Area
Network
Computer based
training module
Create a staff
training program
Develop a staff
appraisal scheme
Process
/Function
Quantified
Benefits
Business
growth
Senior staff tasking
& development
Manage customer
relationships
Improved customer
service
Improved staff
retention
Interactive store link
network
Integrated HR
management system
Create a store
learning & sharing
program
Improve customer
service initiative
Implement best
practice recruitment
procedures
Increased sales
per store
Staff
remuneration
Reduced HR
costs
Update selected store
Local Area Network
Visionary
Purpose
Convert more sales
into profit
Product range
and pricing
Store environment
management
Product
logistics
Increased employee
efficiency
Increase the number
of stores
Improved staff and
customer safety
Back of house
safety
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Delivering Value from IT - A prime requirement is a shared language
Respondents’ views on the IT Investment Appraisal Process
Acceptable status quo?
Of those sampled 37% believed that the quality of
IT appraisal in the UK is either ‘poor’ or ‘very poor’.
This figure was 32% when considering their own
organisation.
A separate question indicated that 76% believed that
more than 20% of their IT investments failed to deliver
the initial benefits or more, at the initial cost or less.
So the sampled organisations believed they were failing
with regard to IT investment appraisal and nearly 40%
also indicated that the quality of the process was low.
Initial suspicions were confirmed.
Applying the process?
43% thought the whole IT investment process was too
bureaucratic, 47% thought it was inconsistently applied
and a staggering 85% thought it was often influenced
by personal or political aspirations. This picture suggests
that the IT investment appraisal process is ineffectively
applied and managers just want to ‘get on with their
own thing’. When projects are initiated on this basis is
it any wonder that they subsequently fail to deliver the
promised benefits? The IT investment appraisal process
is just something management feel they need to do to
justify what they want to do anyway.
Cost/benefit analysis a mockery?
Amazingly, 47% believed that the assessment of
business benefits was ‘poor’ or even worse. Is it any
real wonder that businesses complain of not harvesting
the benefits when they are poorly assessed at the very
beginning of the project. Surely every project should
have a clear definition of benefits. Costs are barely
better defined, with 37% of respondents reporting a
‘poor’ assessment of project costs.
The combination of these two points indicates that
cost/benefit analysis is a mockery! Indeed 57%
indicated that they have ‘poor’ or worse criteria
for assessing project success or failure. No wonder,
given that they were unsure of the original costs and
benefits.
10
How would you describe the quality of IT
investment appraisal in the:
UK
Organisation
Very Good
Good
Reasonable
Poor
Very Poor
0
10
20
30
40
50
The process is often influenced by personal/political aspirations
The IT investment appraisal process is consistently applied
There is little bureaucracy in the IT investment appraisal process
Strongly agree
Generally agree
Slightly agree
Disagree
Strongly disagree
0
10
Assessment of
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business
benefits
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20
30
40
50
Assessment of
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all costs
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MANAGEMENT FOCUS
Respondents’ views on the IT Investment Appraisal Process
Business implications?
65% indicated a ‘poor’ or worse assessment of the
implications of business change upon the organisation.
If the organisation does not assess the changes required
within its working practices the project just becomes
a means to deliver a chunk of technology: again
suggesting reasons why organisations do not gain
benefits from IT.
The 65% contrasts significantly with the 18%
understanding of IT implications. If management do not
become involved then projects drift into becoming IT
projects and the benefits element becomes lost.
Effective appraisal?
The assessment of IT implications
The assessment of business change implications
Very Good
Good
Reasonable
Poor
Very Poor
0
10
20
30
40
50
60
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The approval group is perceived as effective
56% of the respondents believe the approval group is
ineffective or only slightly effective and 29% believed
that the group was not good at establishing businessaligned priorities. Maybe this occurs as the business
case under consideration is so inadequate or maybe
politics just take over again!
Whatever the case, the most critical decision point is
undertaken by a group that are perceived to be not
very effective.
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Understand the business case?
36% of those responding believed the approval group
did not understand the business case presented to
them. Maybe this is a reflection of the quality of
the business case, or maybe it reflects the quality of
management undertaking this task, or then again
maybe management just do not want to understand
and continue to pursue personal agendas. Whatever
the case, the fact remains that the most significant
hurdle in the life of the project is based upon an
inadequate degree of understanding.
The approval group display a deep understanding
of the business case
Strongly agree
Generally agree
Slightly agree
Disagree
Strongly disagree
0
10
20
30
40
50
11
Delivering Value from IT - A prime requirement is a shared language
Stopping an 8 million dollar investment
One of the world’s largest pharmaceutical
organisations was beginning to prepare a business
case for creating a ‘database’ of learning. This
learning had been acquired from product
manufacturing in many factories across the
globe. Initial enthusiasm was enormous and the
‘benefits’ mentioned dwarfed the ‘expected’ costs
of 8 million dollars; although it was not possible
to ‘precisely quantify’ the benefits nor, to be
confident that the $8 million cost was complete
and comprehensive.
As the programme group progressed in developing
the causal linked network it became apparent
that each of the key stakeholders had significantly
different views of the purpose of this ‘database’.
It became obvious that many aspects of the
programme were unclear; not least of which
was the misunderstanding concerning the very
significant degree of business effort required in
the operational phase.
Eventually a causal linked network was produced
including all the projected benefits and costs. This
was very different from the initial statements, and
when benefits without an ‘owner’ were removed
the whole programme became non-viable.
The programme was stopped by the sponsor
resulting in a substantial ‘saving’ for the
organisation. More importantly it released much
needed business and IT resources to be applied to
other more beneficial programmes.
(continued from page 9)
reduces the time taken in addressing
problems that subsequently appear,
due to an inadequate business case.
Thankfully, few would openly argue
to progress an investment without
an adequate business case.
The biggest single issue to overcome
in applying such an approach is
cultural, in that individuals resist
responsibility for benefits delivery
as it highlights non-delivery.
Some managers understand this
and attempt to move attention
away from developing a clear
specification of benefits. In
contrast, finance directors and chief
executives usually enthusiastically
welcome clear accountability for
benefits delivery.
12
Quickly preparing a business proposal to
exploit a developing opportunity
A large international employment agency with
numerous branches throughout the world saw an
opportunity to gain benefits for their contractors
by offering additional tax submission services.
Initial comments from the business suggested
that it was only an ‘IT programme’ and even such
IT changes would be minimal. They decided to
quickly develop a causal link network and move
forward with haste if this ‘proved’ the idea.
Workshops were organised and the network grew
quickly. It became clear that the IT effort was
not substantial, as envisaged, however it became
equally clear that the required effort on behalf
of the ‘branches’ and the ‘contractors’ would be
enormous. When the branch managers saw the
24,000 man hours of effort required from the
business they began to take a very significant
interest!
The programme moved forward with all the
stakeholders having a much clearer view of the
implications of exploiting this opportunity. Above
all the network was developed very quickly, with
very efficient use of management time.
Previous approaches used in the organisation
would not have so significantly brought
together the various interested parties and the
huge business effort required would not have
communicated to the business so clearly until
capital expenditure had been committed.
A second issue is that those easily
seduced by sexy technological
advances will portray this approach
as bureaucratic- attempting to delay
speedy advancement. However, the
last forty-five years of IT application
have constantly pointed out the
pitfalls of blindly embracing each
wave of technology unless it is
driven by real and tangible business
benefits.
The key to success with an approach
such as this is to link it to a
structured and clear governance
process that demands accountability
and tangible justification.
Given the scale and criticality of
IT investment many organisations
need to improve their return from
IT investment. This is not intrinsically
an easy task as many will testify,
but not having a shared language
in which the key stakeholders can
converse makes the task all but
impossible. As you will see from our
examples, some organisations are
striving to improve matters (88%
in our survey). The best practice is
available for all to exploit if they
have the will!
For more information contact the
authors at:
c.edwards@cranfield.ac.uk
r.lambert@cranfield.ac.uk
A copy of this survey: “IT
investments: Effectiveness of the
appraisal process” is available from
sherry.davison@cranfield.ac.uk