Business Value and Benefit Assessment

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Business Value and Benefit Assessment

• A Peep into Benefit Management and a Business
  Value Toolkit

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Roger Hordley, Business Value Engagement
Manager,Outsourcing Support Team, Microsoft EMEA
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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 how this could contribute to improving
  implementations and accelerating deployments.

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Agenda

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

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Business, IS and IT Strategy
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The Relationship Between Business, IS IT
Strategies
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The Value Cost Debate
Source  Cranfield University School of
Management.
8
The Value Cost Debate
Source  Cranfield University School of
Management.
9
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?

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Benefits Management
'Good work but I think we need just a little
more detail right here'
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What Is Benefit Management?

• The process of organising and managing such
  that the potential benefits arising from the use
  of IT are actually realised

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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 . . . ?

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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)
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The Benefits Management Challenge
From
To
Technology delivery Value for MONEY - Low level
task monitoring Expenditure proposal - loose
linkage to business needs IT implementation plan
Business manager as on-looker
(victim?) Stakeholders 'subjected to' Trained
in technology Do technology and project audits
Benefits delivery VALUE for money- Benefits
tracking Business case - Integration with
business drivers Change management
plan Business manager involved and in
control Stakeholders 'involved in' Educated in
exploitation of technology Obtain business
benefits, then review with learning and leverage
more benefit
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Benefits Management - The Value of the Process
Management Cost
Benefit
Cost
Possibility of lower IT costs
Cost
Benefit
Without Benefits Management Process
With Benefits Management Process
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Stages of Benefit Management
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The Dimensions of Benefit Management
Basis for the Investment Proposal
Why do we want improvement?
Drivers Objectives
What improvement do we want/could we get?
Benefit Identification and Location
Can it be quantified?
Can it be measured?
Can a financial value be put on it?
Where will it occur?
Who is responsible for its delivery?
Stakeholder Management
What changes are needed?
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.
18
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
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Benefit Dependency Network
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Benefits Dependency Network
Source  Cranfield University School of
Management.
21
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.

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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.

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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
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Establishing Drivers and Objectives
Source  Cranfield University School of
Management.
25
Example
Source  Cranfield University School of
Management.
26
Objectives to Benefits
IS/IT Enablers
Reduced cost by avoiding waste on irrelevant
customers
To improve effectiveness of of AP spend
D R I V E R S
Increased response rate from AP campaigns
To increase sales volume from new customers
Increased rate of follow-up of leads
Increased conversion rate to sales
Enabling Changes
Business Changes
Business Benefits
Investment Objectives
Source  Cranfield University School of
Management.
27
The Basis of the Business Case
IS/IT
The benefits and why we want them
Enablers
Externally facing
D R I V E R S
Internally facing
Enabling
Business
Business
Investment
Benefits
Changes
Objectives
Changes
Source  Cranfield University School of
Management.
28
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
Business Benefits
Investment Objectives
IS/IT Enablers
Enabling Changes
Business Changes
Source  Cranfield University School of
Management.
29
Actually, This Is Where it Fits into Motion
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How to Get the Benefits
IS/IT Enablers
Project Managemt Package
Introduce Proj.Mgmt for AP Campaigns
Measure outcome of campaigns re objectives
Reduced cost by avoiding waste on irrelevant
customers
Redefine Customer Segments
Use database to improve targeting in segments
Customer/ Prospect DB
D R I V E R S
Reduce Marketing time on Admin
Campaign Response Tracking
Enabling Changes
Business Changes
Business Benefits
Investment Objectives
Source  Cranfield University School of
Management.
31
An Example So Far
Source  Cranfield University School of
Management.
32
Measures Responsibilities
D R I V E R S
Source  Cranfield University School of
Management.
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The Benefits and Why We Want Them
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How to Make the Benefits Happen
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The Picture Linking Business Drivers and IS/IT
Projects
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Structuring Benefits Measures
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Structuring Benefits
Source  Cranfield University School of
Management.
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Structuring Benefits Measures
MEASURE(S)
'VALUE'
BENEFIT
1. Reduced cost by avoiding waste
on irrelevant customers 2. Increased
response rate from campaigns (by better
targeting) 3. Increased rate of follow up of
leads 4. Increased conversion rate to
sales
a) less mailings per campaign b) response
rates maintained overall a) responses from
defined primary target group b) earlier
responses from target group Four categories
to measure a) Enquiry Quotations b) Mailings
(via Merchants) c) Samples d) Specifications (
of leads followed up in first n weeks) (Based
on sampling of new process) a) Enquiry
Quotations b) Mailings (via Merchants) c) Sample
s d) Specifications
a) Reduce cost by 250k p.a. New
(p.a.) (Old) 2000 (500) 15000 (lt5000) 5000 (2
000) 200 (100) Conversn Contributn Rate
Value
(p.a.) (10) 300K (1) 250K (3) 150K (
40) 20
Source  Cranfield University School of
Management.
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Improving the Business Case
Source  Cranfield University School of
Management.
40
The Investment Proposal
1 Drivers for change giving rise to 2
Investment Objectives which result in 3
Benefits by
4 Costs Development One-off Infrastructure Busi
ness Change On-going
Doing Things Better
and incur
Doing New Things
Stop Doing Things
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The Stakeholders
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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 - 'Whats
  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

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Stakeholder Analysis
Source  Cranfield University School of
Management.
44
Stakeholder Analysis
Based on a project to implement an expert system
for Product Configuration
Source  Cranfield University School of
Management.
45
Summary
?
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Driving the Debate
Identify Structure Benefits
Plan Benefits Realisation
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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
JW238