Investment in IT has grown 20 to 30 per cent in the last two decades, yet rarely does anyone responsible for such investments know whether they achieved the promised benefits, says John Thorp.
The author of The Information Paradox and vice-president of DMR’s Strategic Consulting Practice in Victoria, B.C., visited Toronto recently to discuss why businesses are not seeing a return on IT investments.
“The information paradox is that organizations are continuing to spend more and more money on information technology and yet at the same time they are increasingly questioning the value of that money…not that technology isn’t valuable but are we really getting the money for what we are spending?”
According to Thorp, when businesses first began to implement technology it was applied to the automation of work. With the passing of time, however, “we have moved from implementing technology to implementing change which technology enables, but of which technology is only a small part.”
Implementing change is still a challenge, however. Technology and the application of technology have evolved, even though the management mind-set to apply it has failed to keep pace.
Thorp refers to this industrial-age mind-set as “silver bullet thinking,” where organizations purchase IT silver bullets in the form of customized business solutions and enterprise application packages. This is a blind belief, Thorp said, because it implies that all one needs to do is “plug in the technology and the benefits will flow.”
Unfortunately, this thinking fails to take into account some very important questions: How do we adopt this technology? How do we manage the adoption of these technologies? How do we manage the change in our business?
To help put these questions in perspective and form a possible solution, it is necessary to move beyond project management and accept “what we call Benefits Realization,” Thorp said. This client-tested approach from DMR Consulting Group introduces a benefits-focused mind-set, replacing technology-based projects and initiatives with business program management.
According to Thorp, many organizations fall short in their ability to place technology in the context of a business program.
“I think a lot of people today feel that technology is a bit of a runaway train and to some extent it’s running away because business isn’t in the driver’s seat,” Thorp said.
“That’s when you take the Benefits Realization Approach and you say ‘OK, wait a minute, let me understand the capability of this technology, let me understand if and how that could contribute to my business objectives.'”
Providing a context in which to make decisions, the Benefits Realization Approach has three fundamental components: program management, portfolio management and full cycle governance.
Program Management monitors projects from “concept to cash,” allowing well-designed programs to extend beyond the delivery of technology. Thorp said benefits are realized because the process is continually managed from end to end.
Portfolio Management enables an organization to move away from the “free-for-all competition for resources” and blend investment programs as part of a portfolio that produces “a stream of benefits, similar to investment returns.”
The challenge of this, Thorp said, is getting individuals to think organizationally rather than individually, “to get individuals to think ‘what is best for the organization rather than ‘how do I get my program through.'”
The third component, Full Cycle Governance, involves defined “stage gates” or points at which the decision is made on whether to continue, change or cancel programs altogether.
According to Thorp, knowing when to call it quits is just as important as seeing a project through and should not necessarily be seen as a failure. “Stopping a project is generally regarded as a failure whereas, in fact, we would argue that spending more and more money on something you shouldn’t be doing is a failure. Stopping it is in fact, success,” he said, adding that it may take a change of culture for organizations to accept this fact.
To be effective, however, the Business Realization Approach relies on three conditions: activist accountability, relevant measurement and proactive management of change. One technique for assessing the value of this approach is the DMR Results Chain.
According to Thorp, developing this chain depends on asking four important “Ares”:
Are we doing the right things? Are we doing them the right way? Are we getting them done well? and Are we getting the benefits?
However, it also depends on identifying risk. “Assumptions are really, in many cases, the largest source of risks.”
That is not to say that risk should be avoided, though, because you don’t get reward without risk, Thorp said. “You’ve got to assess how big is this risk compared to the potential value and can we live with it.”
The ultimate question and bottom line, however, is “What is the overall risk of the value not being achieved?”
The greatest danger for organizations is to adopt a business strategy without considering the implications on technology and vice versa.
“It’s natural for human thinking to look for simple solutions. Unfortunately, there aren’t any simple solutions today,” Thorp said. “Technology is not a silver bullet.”
Despite this, organizations have been presented with a timely opportunity as the year 2000 approaches. In Thorp’s view, companies need to “take the time to implement a Benefits Realization Approach so that as they come out of this they are picking the winners and managing them through for value.”