Business Value and Benefit Assessment A Peep into

Business Value and Benefit Assessment A Peep into Benefit Management and a Business Value Toolkit

Roger Hordley, Business Value Engagement Manager, Outsourcing Support Team, Microsoft EMEA BUSINESS STRATEGY Uncoordinate d, manual infrastructure Cost Center IS STRATEGY Managed IT Infrastructure with limited automation Managed and consolidated IT Infrastructure with maximum automation Fully automated management, dynamic resource Usage , business linked SLA’s More efficient Cost Center Business Enabler Strategic Asset IT STRATEGY Costs per Desktop Costs experienced in prior upgrade of Microsoft Office Costs for current upgrade anticipated to be the same manual upgrade Significant drop in actual costs Actual current cost of manual upgrade Actual current cost of automated upgrade Previous Upgrade Office 2003 Relative cost reductions shown reflect actual costs per seat, as reported by various Microsoft deployment partners. Individual customer experiences may vary depending on level of automation and testing.

Objectives • To provide an insight into how you could develop a strengthened capability to engage with your senior business and IT decision makers in business terms • To indicate how you could make the connection between solutions (i. e. product, technologies and services) and achieving improved business results • To show this could contribute to improving implementations and accelerating deployments.

Agenda • Business, IS and IT strategy • Benefits management • Benefit Dependency Network and structuring benefits • Structuring benefits and measures • Summary

Business, IS and IT Strategy BUSINESS STRATEGY IT STRATEGY

The Relationship Between Business, IS & IT Strategies BUSINESS STRATEGY l Business Decisions l Objectives & Direction l Change Where is the business going and Why Direction for business Supports business IS STRATEGY l Business Based l Demand Orientated l Application Focused Infrastructure and services What is required Needs and priorities IT STRATEGY l Activity Based l Supply Orientated l Technology Focused How it can be delivered

The Value & Cost Debate BUSINESS STRATEGY l Business Decisions l Objectives & Direction l Change VALUE added here IS STRATEGY l Business Based l Demand Orientated l Application Focused COSTS incurred here IT STRATEGY l Activity Based l Supply Orientated l Technology Focused Source: Cranfield University School of Management.

So What do We Mean by a Strategy? An integrated set of actions that will over the long term provide benefits to enterprise stakeholders Therefore strategy is about two questions: • What benefits do we wish to provide to whom? • How are we going to deliver them?

Benefits Management IN Then a miracle occurs 'Good work … but I think we need just a little more detail right here' OUT

What Is Benefit Management? The process of organising and managing such that the potential benefits arising from the use of IT are actually realised

There is a Bit of a Problem • '83% of IT directors admit that the cost/benefit analysis supporting proposals to invest in IT are a fiction. ' • 'A conspiracy of lies' which leads to. . . ?

Effectiveness of Investment Appraisal Processes Do you ensure all available benefits from an investment are identified? (21%) Do you adequately quantify the relevant benefits? (19%) Do you overstate the benefits in order to get investment approval? (45%) Do you conduct post-implementation reviews to determine whether benefits have been achieved (26%) So, is there scope for improvement in the process for managing IS/IT benefits? (76%)

The Benefits Management Challenge From To Technology delivery Benefits delivery Value for MONEY - Low level task monitoring VALUE for money- Benefits tracking Expenditure proposal - loose linkage to business needs Business case - Integration with business drivers IT implementation plan Change management plan Business manager as on-looker (victim? ) Business manager involved and in control Stakeholders 'subjected to' Stakeholders 'involved in' Trained in technology Educated in exploitation of technology Do technology and project audits Obtain business benefits, then review with learning and leverage more benefit

Benefits Management - The Value of the Process Management Cost Benefit Possibility of lower IT costs Without Benefits Management Process Cost Benefit With Benefits Management Process

Stages of Benefit Management STAGE ACTIVITIES - Analyse the Drivers to determine the Objectives for the investment - Determine the types of Benefits that will result by achieving the Objectives and how they will be measured - Establish Ownership of the benefits - Identify Changes required and Stakeholder implications - Develop outline Investment Case 1. Identify and Structure Benefits 2. Plan Benefits Realisation - Finalise measurements of benefits and changes - Determine the Change Actions that will produce the improvements - with accountable stakeholders - Submit Investment Case for funding 3. Execute Plan - Manage the Change Programmes - pursuing benefit delivery as well as technical implementation 4. Evaluate and Review - Formally assess whether the Investment Objectives and Benefits were achieved - Initiate Action to gain outstanding benefits still achievable - Identify lessons for other projects 5. Potential for Further Benefit - Use the project team and other key stakeholders to identify any new Benefits and initiate action to realise them

The Dimensions of Benefit Management Basis for the Investment Proposal Why do we want improvement? What improvement do we want/could we get? Where will it occur? Drivers & Objectives Benefit Identification and Location Can it be measured? Can it be quantified? Can a financial value be put on it? Who is responsible for its delivery? What changes are needed? Stakeholder Management Who will be affected? How & when can changes be made? BENEFIT DELIVERY PLAN Benefits Achieved? More Benefits Possible? Further Actions? Source: Cranfield University School of Management.

Benefits Management - Some Essential Principles Ownership Every benefit stream must have a benefit owner Measurement Unless a benefit can at least be observed it does not exist Improvement Performance only improves when people do things differently

Benefit Dependency Network

Benefits Dependency Network IS/IT Enablers Externally facing D R I V E R S Internally facing Enabling Changes Business Benefits Investment Objectives Source: Cranfield University School of Management.

Definitions Business Driver A view held by senior manager(s) about what is important in the business over a given timescale - such that changes must occur. Investment Objective Organisational target for achievement agreed for the project in relation to the drivers and envisaged changes. Benefit 'An advantage on behalf of. . . ' an individual stakeholder or stakeholder group.

Business Driver Analysis Aims at finding out: The rationale behind the desired changes and the degree of dissatisfaction with the current situation The strength and nature of ownership of the change initiative At a high level what will constitute success, who will determine success, and how it will be measured The output: Agreed objectives for the project which clearly define what the organisation intends to achieve.

So … a Driver is. . . A Driver is a view held by senior management as to what is important for the business - in some given timescale - such that changes must occur Stop Something - Remove a Problem Incremental, Targeted Improvement Innovation/Radical Change

Establishing Drivers and Objectives Organisational Issues (if any) Business Drivers Investment Objectives External Internal Source: Cranfield University School of Management.

Example: Organisational Issues (if any) Business Drivers Investment Objectives External a) Lack of co-ordination between A&P campaigns and sales activity. To improve effectiveness Customer retention and of Advertising and Promotion increase market share (A&P) spend. in high value market segments. b) To obtain better information Existing customer about customer/market segmentation structure Maintain brand does not reflect the leadership despite market place. increased marketing trends and buying patterns. To increase/sustain demand from existing customers by by competitors. c) External improved loyalty rewards. New Account Management Structure/ targeting required etc. Increase actual sales/ To increase sales value and promotion expenditure volume from new customers ratio in key markets. - by better targeting its sales activity. Internal Source: Cranfield University School of Management.

Objectives to Benefits IS/IT Enablers Reduced cost by avoiding waste on irrelevant customers Increased response rate from A&P campaigns To improve effectiveness of of A&P spend To increase sales volume from new customers Increased rate of follow-up of leads Increased conversion rate to sales Enabling Changes Business Benefits D R I V E R S Investment Objectives Source: Cranfield University School of Management.

The Basis of the Business Case … IS/IT Enablers The benefits and why we want them Externally facing D R I V E R S Internally facing Enabling Changes Business Benefits Investment Objectives Source: Cranfield University School of Management.

… and the Change Management Plan How new ways of working can deliver the benefits - and how to make that happen. Externally facing D R I V E R S Internally facing IS/IT Enablers Enabling Changes Business Benefits Investment Objectives Source: Cranfield University School of Management.

Change management plan: How new ways of working can deliver the benefits - and how to make that happen. Project Enabling changes New ways of working Business case: What needs to be delivered and why Externally facing Benefits Investment D R I V E R S Internally facing IS/IT Enablers Enabling Changes Business Benefits Investment Objectives DELIVERY……………. . …………………. . INVESTMENT Running IS as business Motion IS as a strategic asset Actually, This Is Where it Fits into Motion

How to Get the Benefits … IS/IT Enablers Project Managemt Package Customer/ Prospect DB Campaign Response Tracking Introduce Proj. Mgmt for A&P Campaigns Measure outcome of campaigns re objectives Redefine Customer Segments Use database to improve targeting in segments Reduced cost by avoiding waste on irrelevant customers D R I V E R S Reduce Marketing time on Admin Enabling Changes Business Benefits Investment Objectives Source: Cranfield University School of Management.

An Example … So Far IS/IT Enablers Campaign Planning & Management System Introduce project management for all A&P campaigns Measure outcome of campaigns re objectives Customer Prospect Database Reduce marketing staff time on admin activities Use database to improve targeting in segments Redefine customer segments Realign sales activity with new customer segments Contact Management System Enquiry Quotation & Response Tracking System Portable PCs for Sales Staff Introduce new account management processes New sales staff incentives Release sales time from post sales activity to pre sales Identify most appropriate communication medium for target customers Co-ordinate sales and marketing activity in follow-up Increased response rate from A&P campaigns Allocate sales time to potential high value leads Increased rate of follow-up of leads Use system to target sales activity/contact time Enabling Changes Reduced cost by avoiding waste on irrelevant customers Increase sales time with customers Business Changes To improve the effectiveness of advertising & promotion (A&P) spend To increase sales value and volume from new customers Increased conversion rate of leads to orders Business Benefits Investment Objectives Source: Cranfield University School of Management.

Measures & Responsibilities IS/IT Enablers EC: In use on all new campaigns R: Br Mgrs EC: New structure R: Mktg Director EC: Measure by time sheets R: Asst Mkg Director Enabling Changes BC: New process on all new campaigns O: Brand Managers M : Reduced costs of campaign mailings : Maintain response rate BO: Brand Managers BC: DB in use and Data clean up complete O: Asst Marketing Director Business Changes D R I V E R S Business Benefits Investment Objectives Source: Cranfield University School of Management.

The Benefits and Why We Want Them More efficient use of People’s time Speedier completion of business and admin processes Improved staff satisfaction Improved, speedier decision making People working effectively across org. boundaries Improved organisational knowledge and best practices Access to all documents and information required by role Reduction in online document storage costs To improve collaboration between people, teams , depts and orgs To improve /streamline business administration processes To improve use, sharing and interchange of information and documents Provide facilities for people to work more effectively with less effort Cut administration costs Admin costs cut by 5% pa Increase 3 rd stream income 3 rd stream revenue increased to 30% Poor collaboration across the organisation Inappropriate business admin processes Need to improve performance – work smarter not harder Poor access to, and poor ability to create documents & information Poor sharing of knowledge and best practice Treat information as a valuable product Commercially exploit intellectual capital and information products Provide access to documents and information on a 24 x 7 basis Reduce admin support costs

How to Make the Benefits Happen

The Picture Linking Business Drivers and IS/IT Projects More efficient use of people ’s time Speedier completion of business and admin processes Improved staff satisfaction Improved, speedier decision making People working effectively across org. boundaries Improved organisational knowledge and best practices Access to all documents and information required by role Reduction in online document storage costs To improve collaboration between people, teams , depts. and orgs To improve /streamline business administration processes To improve use, sharing and interchange of information and documents Provide facilities for people to work more effectively with less effort Cut administration costs Admin costs cut by 5% pa Increase 3 rd stream income 3 rd stream revenue increased to 30% Poor collaboration across the organisation Inappropriate business admin processes Need to improve performance – work smarter not harder Poor access to, and poor ability to create documents & information Poor sharing of knowledge and best practice Treat information as a valuable product Commercially exploit intellectual capital and information products Provide access to documents and information on a 24 x 7 basis Reduce admin support costs

Structuring Benefits & Measures Degree of Explicitness Financial Quantifiable Measurable Observable Do New Things Do Things Better Stop Doing Things

Structuring Benefits Degree of Explicitness Do New Things Do Things Better Stop Doing Things Financial Quantifiable Measurable Observable Source: Cranfield University School of Management.

Structuring Benefits & Measures MEASURE(S) BENEFIT 'VALUE' 1. Reduced cost by avoiding waste on irrelevant customers a) less mailings per campaign b) response rates maintained overall 2. Increased response rate from campaigns (by better targeting) a) responses from defined primary target group b) earlier responses from target group 3. Increased rate of follow up of leads Four categories to measure: a) Enquiry & Quotations b) Mailings (via Merchants) c) Samples d) Specifications (% of leads followed up in first n weeks) New (p. a. ) (Based on sampling of new process) Conversn Rate 4. Increased conversion rate to sales a) b) c) d) Enquiry & Quotations Mailings (via Merchants) Samples Specifications a) Reduce cost by £ 250 k p. a. (Old) 2000 (500) 15000 (<5000) 5000 (2000) 200 (100) Contributn Value (p. a. ) (10%) £ 300 K (1%) £ 250 K (3%) £ 150 K (40%) £ 20 Source: Cranfield University School of Management.

Improving the Business Case Degree of Explicitness Do New Things Financial Marketing Manager -> value of new orders. End May Quantifiable Measurable London Office Sales Manager -> Likely No. of orders. End May Increase conversion rate of leads into orders ex campaigns Do Things Better Stop Doing Things Jane Cutforth (Fin) Next Wednesday Projection of value ex campaign plans Model on spreadsheet with accountant Projection of figures ex small trial Improved Cash Flow Observable Source: Cranfield University School of Management.

The Investment Proposal 1 Drivers for change giving rise to 2 Investment Objectives which result in 3 Benefits by Doing New Things Doing Things Better Stop Doing Things and incur 4 Costs Development One-off Infrastructure Business Change On-going …

The Stakeholders Stakeholder Group Perceived Benefits (Disbenefits ) Changes Needed Perceived Resistance Commitment (Current& Required) Anti None Allow it to happen Help it Make it happen

Purpose of Stakeholder Analysis - To identify stakeholders whose commitment/action is needed to achieve each benefit - To determine the view/perspective each stakeholder (or stakeholder group) has - 'What’s in it for them' and possible ‘disbenefits’ - To align the necessary change activities to particular stakeholders and understand their motivation to achieve or resist the changes - To understand the action required to gain the required involvement/commitment of all stakeholders - To develop action plans to deliver the appropriate level of involvement of the stakeholders

Stakeholder Analysis Stakeholder Group Perceived Benefits (Disbenefits ) Changes Needed Perceived Resistance Commitment Anti None (Current & Required ) Allow it Help it to happen Make it happen (after Benjamin & Levinson) Source: Cranfield University School of Management.

Stakeholder Analysis Stakeholder Group Perceived Benefits (Disbenefits) Changes Needed Perceived Resistance Customers Configuration tailored exactly to needs - no testing / reject None Improved customer service and product quality image New incentives to get Sales Reps to use system with customers (Extra work in preparing requirements and quotes) To use system and improve quality/accuracy of quotes No time available to use/ learn system. Loss of autonomy Manufacturing / Logistics Removes need for configuration checking. Less returns/queries Stop current checks to put onus on Reps to get it right Do not trust Sales Reps’ accuracy in requirements/ quote IT Developers New advanced system - remove old difficult to maintain system Skills in Expert System Development None Allow it Help it Make it to happen Reluctance to change Reps reward systems Sales Reps Anti (Current & Required) None Sales & Marketing Managers Commitment None Action required? Based on a project to implement an expert system for Product Configuration Source: Cranfield University School of Management.

Summary ∑

Driving the Debate Identify & Structure Benefits Why Where What Do NEW Things Do Things BETTER Financial Quantifiable Measurable Observable Measures STAKEHOLDER ANALYSIS Plan Benefits Realisation Stakeholder Group Perceived Benefits (Disbenefits) Changes Needed Perceived Resistance Accountabilities Who Commitment Current & Required) Anti None Allow it to happen Help it happen Make it happen STOP Doing Things

… and the Key Messages? Business Value from IT demands a management process focused on value delivery IT by itself has no value performance only improves when people do things differently JW 238