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Nicholas Carr’s “Does IT Matter?” asks the question,
“Isn’t it enough for IT to enable companies to operate
more efficiently or deliver better services, to reduce
costs or heighten customer satisfaction?” [1]. This ques-
tion is the infrastructure question. Carr suggests the
investments in IT have “gone to waste” after the col-
lapse of the Internet bubble. Carr’s thesis is that IT has
become a commodity service and not the basis of a dif-
ferentiated strategic advantage. Like the railroads and
electric utilities, if IT is only a “utility,” it will have dif-
ficulty describing its differentiated advantage.
Instead of “Isn’t It Enough?” It Should Be “Is It Enough?”
If IT is a commodity, what strategic advantages can
a business achieve with it? IT has the capacity to pro-
vide intelligence about the business, to create new and
unique user experiences not available through a tradi-
tional sales force, and to project these capabilities onto
devices and into locations not envisioned when Carr
formulated his thesis. The notion of IT as a strategic
enabler presupposes the successful implementation of
IT as infrastructure.
CHOOSING BETWEEN OPERATIONAL EFFECTIVENESS
AND STRATEGY
As IT searches for its seat at the table, negotiating IT’s
value to the business and the business’s need for the
value IT provides reveals a visible gap in many organi-
zations. When the CIO acts like a CTO, he or she pro-
vides the technologies needed for the business but does
not engage in a conversation about the strategic needs
for these technologies. IT then continues to provide ser-
vices and focus on operational excellence. If the opera-
tions continue to function as the business expects, this
reinforces the notion that IT is providing all the needed
service — the “dial tone” — so why should it change
its approach?
A CORE CONVERSATION MUST TAKE PLACE BETWEEN
THE BUSINESS AND THE CIO
There is another set of questions the business must ask
IT and IT must ask the business. These questions are
the basis of the balanced scorecard approach described
here, but the answers do not depend on a specific
strategy-making method. They are at the root of the
business value of IT.
Is IT a strategic enabler of the business or simply an
operational expense?
Should IT focus on developing new services that sup-
port business operations and customers, or should
it focus on improving the infrastructure so that the
business units can stay focused on the customer?
How much responsibility should IT have in meeting
the business objectives?
What does IT need to do to ensure its place in the
business’s strategy?
Why is there a disconnect between what corporate
strategists want and what IT is actually doing?
One source of disconnect is the failure to realize that the
“value” IT offers is a negotiated entity — and this nego-
tiation of IT’s value must be completed before any dis-
cussion of IT strategy can take place. Any disconnect
between IT’s perception of its own value and the busi-
ness’s perception of IT’s value creates gaps between
strategy, governance, and delivery of the needed IT
services [3].
The CIO must responsibly govern all aspects of the busi-
ness’s information; the facilities that produce, manage,
consume, and protect this information; and the staff that
leads and operates these facilities. As the “I” in “CIO”
indicates, information should be the CIO’s primary job.
Many CIOs are actually CTOs and are focused far too
much on the technical aspects of their job.
25Get The Cutter Edge free: www.cutter.com Vol. 20, No. 7 CUTTER IT JOURNAL
Connecting IT and Business Value Through
the Balanced Scorecard
by Glen B. Alleman
DEFINING THE INTANGIBLES
©2007 Cutter Information LLCCUTTER IT JOURNAL July 200726
WHEN IT BECOMES JUST AN INFRASTRUCTURE PROVIDER
When IT provides infrastructure services, measuring
operational excellence is the means of negotiating a
shared definition of value. Establishing the needed
business value is the starting point for defining this
infrastructure. This operational excellence approach
must connect the provided services with some form of
a business case, a business strategy, or business outcome
measures. These measures must be in units of dollars.1
Measuring the business value of these services obvi-
ously requires understanding what the business sees
as valuable. Issues that must be negotiated include
the units of measure, what these units of measure are
attached to, and when the units of measure will be rec-
ognized by the customer as having value. Not only
must the business acknowledge the value of this infra-
structure, it must be able to connect the measure of
this value to its own performance measures in ways
that are meaningful. The operational aspects of the
infrastructure are not very interesting to the business.
It’s the capabilities created by these operational aspects
(100% availability, lowest-cost services, business intelli-
gence, lowest operational footprint, fastest time to mar-
ket, etc.) that are the basis of the value conversation.
WHEN IT PERFORMANCE BECOMES PART
OF CORPORATE PERFORMANCE
When corporate performance depends on IT, its contri-
bution starts by connecting IT strategy with the delivery
of business value that’s traceable to the balance sheet.
The corporate focus starts with connecting any activity
IT performs with a business element and a line on the
balance sheet. The units of measure of these connections
must be in dollars or percentages of dollars.
Asking and answering “why are we doing this?” is
next. Increasing discretionary spending and decreasing
nondiscretionary spending should be the goal of any
credible IT strategy built around supporting corporate
growth. Defining how to separate discretionary from
nondiscretionary requires the participants in both the
infrastructure and the business processes to arrive at a
shared vision of what should be done. Engaging the
participants starts with a conversation about the value
of the various approaches to IT operations, each of
which is based on the business’s products, architecture,
and the deployment of this architecture. This is the tech-
nical strategy that supports the business strategy. The
infrastructure processes must themselves have a strat-
egy, so there is really no separation between strategy
and infrastructure — one faces out and one faces in.
BOTH INFRASTRUCTURE AND BUSINESS ENABLEMENT
ARE NEEDED FOR SUSTAINABLE VALUE
When IT starts conveying its value in technical terms,
the business has a hard time “connecting the dots.” That
is because the currency of the business is dollars or per-
centages of dollars. Once this has been established, the
conversation can turn to how this monetary value can
be connected to the specific activities of IT.
This conversation is really a business negotiation: “I’ll
give you X dollars, and you’ll return Y value.” Or in
other words, “I’ll give you X dollars, and you’ll be
responsible for providing Y services of which I can
measure the value in dollars.” The critical success factor
of this approach is to not measure the technical perfor-
mance of the IT services, but rather to measure the IT
performance first in monetary value to the business.
The balanced scorecard can be used to communicate as
well as control the performance of IT. With a strategy
map, IT can answer the questions:
Why are we here?
What is our value?
What contribution are we making to the financial
performance goals of this business?”
Once visible goals, critical success factors (CSFs), and
key performance indicators (KPIs) can be identified, IT
and the business can negotiate their measures and agree
to the resulting description of “performance success.”
With this map, IT can then combine infrastructure and
business contribution in a single negotiated value
process, with both sides — IT and the business —
sharing in the vision and mission of IT.
CONNECTING INFRASTRUCTURE AND BUSINESS VALUE
WITH THE BALANCED SCORECARD
If the connection between IT and business is to be made,
it needs to be made with a way of measuring both the
value of the connection and the performance of the
efforts that deliver this value. The balanced scorecard is
one way to identify the value, state the benefits, and
guide the work efforts in delivery of this value.2
1
Or euros, or yen, or what have you. While I will refer to “dollars” in this article, my point is simply that the business measures value in
units of actual currency.
2
It is beyond the scope of this article to present the balanced scorecard. For more information, consult the References section.
27Get The Cutter Edge free: www.cutter.com Vol. 20, No. 7 CUTTER IT JOURNAL
Table 1 shows a notional example of a business strategy.
The next step of developing IT and business scorecards
and making the connections between them is not
always well developed. Table 1 replaces the well-known
balanced scorecard perspectives with four notional
balanced scorecard perspectives for an IT strategy:
Financial Perspective becomes User Orientation
Customer Perspective becomes Business Value
Internal Processes becomes Operational Excellence
Learnings and Growth becomes Future Orientation
CREATING THE STRATEGY MAP FOR CONNECTING IT’S
VALUE WITH THE BUSINESS
Connecting both infrastructure and business enable-
ment into a coherent strategy can be done by addressing
the contents of the balanced scorecard perspectives.
Figure 1 is a notional example of a map in a different
arrangement than the traditional balanced scorecard,
one focused on IT instead of the general business func-
tions. This strategy map is a visible indicator of the con-
nection between strategic goals and execution. The CSFs
are the measures of performance for these goals. The
process of strategic thinking starts with this cause-and-
Strategies Key Performance Indicators
User
Orientation
Business
Value
Operational
Excellence
Future
Orientation
Be the supplier of choice for IT
products and services
Focus resources on attaining busi-
ness strategies through effective
IT services delivery
Deliver timely and effective services
at or under budget that meet the
value stream goals
Develop internal capabilities to learn
and innovate to exploit future oppor-
tunities using IT
• Customer satisfaction
• User survey score
• Percentage of projects delivered on time
• Total business impact
• IT budget as a percentage of revenue
• Cost impact for each release
• Percentage of budget allocated to new
development
• IT budget versus actual
• Staff utilization
• Staff turnover
• Historical availability
• Number of documented best practices
• Existence of product line architecture
• Total cost of ownership
Table 1 — A Notional Description of an IT Strategy that Includes Both Infrastructure and Business Value Delivery
Stakeholder Perspective
Internal Processes Perspective
Learnings & Growth Perspective
Budget Perspective
Application
Quality
Timely
Delivery
Business
Capabilities
Recognition of
Value
Stakeholder
Relations
Service Attributes Relationships Image
Operations
Management
Stakeholder
Management
Innovation
Processes
Regulatory
Processes
Human Capital
Information Capital
Organizational Capital
Project
Performance
Budget
Management
Resource
Management
Figure 1 — An example strategy map for an IT organization. The replacement of the financial perspective with a
stakeholder perspective is the first step in building the balanced scorecard for IT.
©2007 Cutter Information LLCCUTTER IT JOURNAL July 200728
effect map of strategies. Connecting CSFs with KPIs
provides traceability from execution at the project level
to fulfillment of strategic objectives.
IT’S ALL ABOUT MANAGING THE INFRASTRUCTURE
PERFORMANCE TO ENABLE STRATEGIC PERFORMANCE
A conceptual framework is needed for a performance
measurement and management system. Effective internal
and external communication is the key to successful per-
formance measurement. Accountability for results must
be clearly assigned and well understood. Performance
measurement systems must provide intelligence for deci-
sion makers, not just compiled data. Compensation,
rewards, and recognition may be linked to performance
measurements, and performance measure systems
should be positive, not punitive. Results and progress
toward program commitments should be openly shared
with employees, customers, and stakeholders [2].
Measurement of IT performance that is meaningful for
the business must start with strategy. Each measure is:
Derived from strategy — a way to operationalize
the vision of the business and move from an infra-
structure basis to a strategy-focused organization
Activity based — actions guided by performance
measures, each connected to an element of the
balanced scorecard
Customer focused — actions guided by customer
feedback, both internal and external
Dynamic — with new metrics developed as needed
Characterized by a participative development
approach — engagements between supplier and
consumer are the basis of the negotiated value of IT
CONNECTING STRATEGY WITH EXECUTION
Unless it begins by negotiating its value to the business,
IT cannot engage the business in a meaningful conver-
sation about its contribution to corporate performance.
This value negotiation can address both the strategic
and tactical capabilities of IT, thus avoiding the
dilemma found in many organizations.
To start this conversation, a shared vocabulary is
needed. Figure 2 provides a map for the strategy
“Increase Customer Retention,” but this map would fail
if the participants didn’t use the same definitions and
semantics. Most importantly, the “units of measure”
exchanged during this conversation must be in dollars
or percentages of dollars. Only when these units of
measure, the value they speak to, and the connections
between strategy and execution are in place, can IT start
to look at its operational excellence activities.
Stakeholder/Customer/Partners
Partnership provides channels to direct and indirect revenue
Vision
Strategic Objective Performance Goal Critical Success
Factor (CSF)
Key Performance
Indicator (KPI)
Grow through
existing customer
engagements
Increase
customer
retention
Provide synergistic
offerings
Maintain customer
satisfaction
Be a high touch firm
Increase core
offerings
Customer service
metrics defined
Applicable
customer profiles
defined
Contract profiles
defined
Customer
responsiveness
understood
Increase target
Number of current
offerings
Metrics connected
to customer satisfaction
Specific metrics
defined
Figure 2 — Mapping strategy to execution. Once corporate strategies have been defined, connecting these strategies with the
IT strategies and defining their contributed value takes place through a map of the performance goals, CSFs, and KPIs.
29Get The Cutter Edge free: www.cutter.com Vol. 20, No. 7 CUTTER IT JOURNAL
ANSWERING THE QUESTION “WHAT IS IT’S ROLE?”
We can now answer the questions asked at the begin-
ning of this article in the context of a balanced scorecard:
REFERENCES
1. Carr, Nicholas G. Does IT Matter? Information Technology and
the Corrosion of Competitive Advantage. Harvard Business School
Press, 2004.
2. Guide to a Balanced Scorecard Performance Management
Methodology. National Partnership for Reinventing Government,
US Department of Commerce, 1999.
3. Weill, Peter. “Don’t Just Lead, Govern: How Top-Performing
Firms Govern IT.” MIS Quarterly, Vol. 3, No. 1, March 2004.
Glen B. Alleman is the Practice Director, Strategy and Performance
Management, for Lewis & Fowler of Denver, Colorado, USA. Mr.
Alleman’s role is to define, develop, deploy, and assess the benefit of
strategy and performance management processes for IT and business
clients using Lewis & Fowler’s balanced scorecard, project portfolio
management, enterprise project management, and program manage-
ment office offerings. Mr. Alleman can be reached at Lewis & Fowler,
8310 South Valley Highway, Suite 300, Englewood, CO 80112, USA;
Tel: +1 303 241 9633; E-mail: galleman@lewisandfowler.com; Web
site: www.lewisandfowler.com.
Questions about the Role of IT Answers Using the Balanced Scorecard
Is IT a strategic enabler of the business or simply an operational
expense?
Operational excellence and its associated cost are needed to fulfill
strategy. Strategy is not needed as the basis of operational excellence.
Should IT focus on developing new services that support business
operations and customers, or should it focus on improving the
infrastructure so that the business units can stay focused on the
customer?
This is the difference between strategy and operational excellence.
Without the latter, the former is not possible. If IT is to contribute to
corporate growth, it needs to do both.
How much responsibility should IT have in meeting the business
objectives?
This is the outcome of the negotiation between IT and the business.
What does IT need to do to ensure its place in the business’s
strategy?
IT needs to negotiate its role with the business. IT should participate
in the business performance measurement process, connecting IT’s
performance to the business performance in the units of measure
meaningful to the business (i.e., dollars).
The language used to communicate strategy needs to be in units of
measure meaningful to the business.
It does this by connecting the requests with the enterprise architecture
(EA) through a portfolio management process. This approach should
make use of real options in the decision-making process for each
request, considering its impact on the business benefits of the EA.
Connecting EA and balanced scorecard is well established in the
literature.
By following the strategy from mission, to vision, to the performance
goals, IT should be able to speak to what applications are needed for
the successful fulfillment of the strategy.
Statements about strategy must include future activities — the “out
years” of the strategy. These future-oriented strategies are the ground-
work for the IT technological road map.
The strategic tradeoff discussion starts with the “line of sight”
connection between financial performance, through Customer
Perspective, to Internal Processes, and then to Learnings and Growth.
Along this path, the alternatives — in their monetized measures —
can be discussed between the business and IT.
The organization of IT makes a key contribution to the business. The
conversation starts with determining how IT can best fulfill the short-,
medium-, and long-term strategic initiatives of the business.
If IT is have a “seat at the table,” then business management and IT
management must be seen as peers. The role of the CIO must be
equivalent to the CFO and the COO.
Why is there a disconnect between what corporate strategists want
and what IT is actually doing?
If the correct role for IT is that of a shared service bureau, how can
IT best ensure the requests it receives align with company strategy?
What IT applications should be deployed to yield competitive
advantage?
What technological opportunities should be considered?
Which IT capabilities should be nurtured and which should be
acquired from outside sources?
How should IT activities be organized, and what is the role of the IT
function?
What is management’s role in the IT domain, and what IT
capabilities are required for today’s managers?

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Connecting IT and Business Value Through Balanced Scorecard

  • 1. Nicholas Carr’s “Does IT Matter?” asks the question, “Isn’t it enough for IT to enable companies to operate more efficiently or deliver better services, to reduce costs or heighten customer satisfaction?” [1]. This ques- tion is the infrastructure question. Carr suggests the investments in IT have “gone to waste” after the col- lapse of the Internet bubble. Carr’s thesis is that IT has become a commodity service and not the basis of a dif- ferentiated strategic advantage. Like the railroads and electric utilities, if IT is only a “utility,” it will have dif- ficulty describing its differentiated advantage. Instead of “Isn’t It Enough?” It Should Be “Is It Enough?” If IT is a commodity, what strategic advantages can a business achieve with it? IT has the capacity to pro- vide intelligence about the business, to create new and unique user experiences not available through a tradi- tional sales force, and to project these capabilities onto devices and into locations not envisioned when Carr formulated his thesis. The notion of IT as a strategic enabler presupposes the successful implementation of IT as infrastructure. CHOOSING BETWEEN OPERATIONAL EFFECTIVENESS AND STRATEGY As IT searches for its seat at the table, negotiating IT’s value to the business and the business’s need for the value IT provides reveals a visible gap in many organi- zations. When the CIO acts like a CTO, he or she pro- vides the technologies needed for the business but does not engage in a conversation about the strategic needs for these technologies. IT then continues to provide ser- vices and focus on operational excellence. If the opera- tions continue to function as the business expects, this reinforces the notion that IT is providing all the needed service — the “dial tone” — so why should it change its approach? A CORE CONVERSATION MUST TAKE PLACE BETWEEN THE BUSINESS AND THE CIO There is another set of questions the business must ask IT and IT must ask the business. These questions are the basis of the balanced scorecard approach described here, but the answers do not depend on a specific strategy-making method. They are at the root of the business value of IT. Is IT a strategic enabler of the business or simply an operational expense? Should IT focus on developing new services that sup- port business operations and customers, or should it focus on improving the infrastructure so that the business units can stay focused on the customer? How much responsibility should IT have in meeting the business objectives? What does IT need to do to ensure its place in the business’s strategy? Why is there a disconnect between what corporate strategists want and what IT is actually doing? One source of disconnect is the failure to realize that the “value” IT offers is a negotiated entity — and this nego- tiation of IT’s value must be completed before any dis- cussion of IT strategy can take place. Any disconnect between IT’s perception of its own value and the busi- ness’s perception of IT’s value creates gaps between strategy, governance, and delivery of the needed IT services [3]. The CIO must responsibly govern all aspects of the busi- ness’s information; the facilities that produce, manage, consume, and protect this information; and the staff that leads and operates these facilities. As the “I” in “CIO” indicates, information should be the CIO’s primary job. Many CIOs are actually CTOs and are focused far too much on the technical aspects of their job. 25Get The Cutter Edge free: www.cutter.com Vol. 20, No. 7 CUTTER IT JOURNAL Connecting IT and Business Value Through the Balanced Scorecard by Glen B. Alleman DEFINING THE INTANGIBLES
  • 2. ©2007 Cutter Information LLCCUTTER IT JOURNAL July 200726 WHEN IT BECOMES JUST AN INFRASTRUCTURE PROVIDER When IT provides infrastructure services, measuring operational excellence is the means of negotiating a shared definition of value. Establishing the needed business value is the starting point for defining this infrastructure. This operational excellence approach must connect the provided services with some form of a business case, a business strategy, or business outcome measures. These measures must be in units of dollars.1 Measuring the business value of these services obvi- ously requires understanding what the business sees as valuable. Issues that must be negotiated include the units of measure, what these units of measure are attached to, and when the units of measure will be rec- ognized by the customer as having value. Not only must the business acknowledge the value of this infra- structure, it must be able to connect the measure of this value to its own performance measures in ways that are meaningful. The operational aspects of the infrastructure are not very interesting to the business. It’s the capabilities created by these operational aspects (100% availability, lowest-cost services, business intelli- gence, lowest operational footprint, fastest time to mar- ket, etc.) that are the basis of the value conversation. WHEN IT PERFORMANCE BECOMES PART OF CORPORATE PERFORMANCE When corporate performance depends on IT, its contri- bution starts by connecting IT strategy with the delivery of business value that’s traceable to the balance sheet. The corporate focus starts with connecting any activity IT performs with a business element and a line on the balance sheet. The units of measure of these connections must be in dollars or percentages of dollars. Asking and answering “why are we doing this?” is next. Increasing discretionary spending and decreasing nondiscretionary spending should be the goal of any credible IT strategy built around supporting corporate growth. Defining how to separate discretionary from nondiscretionary requires the participants in both the infrastructure and the business processes to arrive at a shared vision of what should be done. Engaging the participants starts with a conversation about the value of the various approaches to IT operations, each of which is based on the business’s products, architecture, and the deployment of this architecture. This is the tech- nical strategy that supports the business strategy. The infrastructure processes must themselves have a strat- egy, so there is really no separation between strategy and infrastructure — one faces out and one faces in. BOTH INFRASTRUCTURE AND BUSINESS ENABLEMENT ARE NEEDED FOR SUSTAINABLE VALUE When IT starts conveying its value in technical terms, the business has a hard time “connecting the dots.” That is because the currency of the business is dollars or per- centages of dollars. Once this has been established, the conversation can turn to how this monetary value can be connected to the specific activities of IT. This conversation is really a business negotiation: “I’ll give you X dollars, and you’ll return Y value.” Or in other words, “I’ll give you X dollars, and you’ll be responsible for providing Y services of which I can measure the value in dollars.” The critical success factor of this approach is to not measure the technical perfor- mance of the IT services, but rather to measure the IT performance first in monetary value to the business. The balanced scorecard can be used to communicate as well as control the performance of IT. With a strategy map, IT can answer the questions: Why are we here? What is our value? What contribution are we making to the financial performance goals of this business?” Once visible goals, critical success factors (CSFs), and key performance indicators (KPIs) can be identified, IT and the business can negotiate their measures and agree to the resulting description of “performance success.” With this map, IT can then combine infrastructure and business contribution in a single negotiated value process, with both sides — IT and the business — sharing in the vision and mission of IT. CONNECTING INFRASTRUCTURE AND BUSINESS VALUE WITH THE BALANCED SCORECARD If the connection between IT and business is to be made, it needs to be made with a way of measuring both the value of the connection and the performance of the efforts that deliver this value. The balanced scorecard is one way to identify the value, state the benefits, and guide the work efforts in delivery of this value.2 1 Or euros, or yen, or what have you. While I will refer to “dollars” in this article, my point is simply that the business measures value in units of actual currency. 2 It is beyond the scope of this article to present the balanced scorecard. For more information, consult the References section.
  • 3. 27Get The Cutter Edge free: www.cutter.com Vol. 20, No. 7 CUTTER IT JOURNAL Table 1 shows a notional example of a business strategy. The next step of developing IT and business scorecards and making the connections between them is not always well developed. Table 1 replaces the well-known balanced scorecard perspectives with four notional balanced scorecard perspectives for an IT strategy: Financial Perspective becomes User Orientation Customer Perspective becomes Business Value Internal Processes becomes Operational Excellence Learnings and Growth becomes Future Orientation CREATING THE STRATEGY MAP FOR CONNECTING IT’S VALUE WITH THE BUSINESS Connecting both infrastructure and business enable- ment into a coherent strategy can be done by addressing the contents of the balanced scorecard perspectives. Figure 1 is a notional example of a map in a different arrangement than the traditional balanced scorecard, one focused on IT instead of the general business func- tions. This strategy map is a visible indicator of the con- nection between strategic goals and execution. The CSFs are the measures of performance for these goals. The process of strategic thinking starts with this cause-and- Strategies Key Performance Indicators User Orientation Business Value Operational Excellence Future Orientation Be the supplier of choice for IT products and services Focus resources on attaining busi- ness strategies through effective IT services delivery Deliver timely and effective services at or under budget that meet the value stream goals Develop internal capabilities to learn and innovate to exploit future oppor- tunities using IT • Customer satisfaction • User survey score • Percentage of projects delivered on time • Total business impact • IT budget as a percentage of revenue • Cost impact for each release • Percentage of budget allocated to new development • IT budget versus actual • Staff utilization • Staff turnover • Historical availability • Number of documented best practices • Existence of product line architecture • Total cost of ownership Table 1 — A Notional Description of an IT Strategy that Includes Both Infrastructure and Business Value Delivery Stakeholder Perspective Internal Processes Perspective Learnings & Growth Perspective Budget Perspective Application Quality Timely Delivery Business Capabilities Recognition of Value Stakeholder Relations Service Attributes Relationships Image Operations Management Stakeholder Management Innovation Processes Regulatory Processes Human Capital Information Capital Organizational Capital Project Performance Budget Management Resource Management Figure 1 — An example strategy map for an IT organization. The replacement of the financial perspective with a stakeholder perspective is the first step in building the balanced scorecard for IT.
  • 4. ©2007 Cutter Information LLCCUTTER IT JOURNAL July 200728 effect map of strategies. Connecting CSFs with KPIs provides traceability from execution at the project level to fulfillment of strategic objectives. IT’S ALL ABOUT MANAGING THE INFRASTRUCTURE PERFORMANCE TO ENABLE STRATEGIC PERFORMANCE A conceptual framework is needed for a performance measurement and management system. Effective internal and external communication is the key to successful per- formance measurement. Accountability for results must be clearly assigned and well understood. Performance measurement systems must provide intelligence for deci- sion makers, not just compiled data. Compensation, rewards, and recognition may be linked to performance measurements, and performance measure systems should be positive, not punitive. Results and progress toward program commitments should be openly shared with employees, customers, and stakeholders [2]. Measurement of IT performance that is meaningful for the business must start with strategy. Each measure is: Derived from strategy — a way to operationalize the vision of the business and move from an infra- structure basis to a strategy-focused organization Activity based — actions guided by performance measures, each connected to an element of the balanced scorecard Customer focused — actions guided by customer feedback, both internal and external Dynamic — with new metrics developed as needed Characterized by a participative development approach — engagements between supplier and consumer are the basis of the negotiated value of IT CONNECTING STRATEGY WITH EXECUTION Unless it begins by negotiating its value to the business, IT cannot engage the business in a meaningful conver- sation about its contribution to corporate performance. This value negotiation can address both the strategic and tactical capabilities of IT, thus avoiding the dilemma found in many organizations. To start this conversation, a shared vocabulary is needed. Figure 2 provides a map for the strategy “Increase Customer Retention,” but this map would fail if the participants didn’t use the same definitions and semantics. Most importantly, the “units of measure” exchanged during this conversation must be in dollars or percentages of dollars. Only when these units of measure, the value they speak to, and the connections between strategy and execution are in place, can IT start to look at its operational excellence activities. Stakeholder/Customer/Partners Partnership provides channels to direct and indirect revenue Vision Strategic Objective Performance Goal Critical Success Factor (CSF) Key Performance Indicator (KPI) Grow through existing customer engagements Increase customer retention Provide synergistic offerings Maintain customer satisfaction Be a high touch firm Increase core offerings Customer service metrics defined Applicable customer profiles defined Contract profiles defined Customer responsiveness understood Increase target Number of current offerings Metrics connected to customer satisfaction Specific metrics defined Figure 2 — Mapping strategy to execution. Once corporate strategies have been defined, connecting these strategies with the IT strategies and defining their contributed value takes place through a map of the performance goals, CSFs, and KPIs.
  • 5. 29Get The Cutter Edge free: www.cutter.com Vol. 20, No. 7 CUTTER IT JOURNAL ANSWERING THE QUESTION “WHAT IS IT’S ROLE?” We can now answer the questions asked at the begin- ning of this article in the context of a balanced scorecard: REFERENCES 1. Carr, Nicholas G. Does IT Matter? Information Technology and the Corrosion of Competitive Advantage. Harvard Business School Press, 2004. 2. Guide to a Balanced Scorecard Performance Management Methodology. National Partnership for Reinventing Government, US Department of Commerce, 1999. 3. Weill, Peter. “Don’t Just Lead, Govern: How Top-Performing Firms Govern IT.” MIS Quarterly, Vol. 3, No. 1, March 2004. Glen B. Alleman is the Practice Director, Strategy and Performance Management, for Lewis & Fowler of Denver, Colorado, USA. Mr. Alleman’s role is to define, develop, deploy, and assess the benefit of strategy and performance management processes for IT and business clients using Lewis & Fowler’s balanced scorecard, project portfolio management, enterprise project management, and program manage- ment office offerings. Mr. Alleman can be reached at Lewis & Fowler, 8310 South Valley Highway, Suite 300, Englewood, CO 80112, USA; Tel: +1 303 241 9633; E-mail: galleman@lewisandfowler.com; Web site: www.lewisandfowler.com. Questions about the Role of IT Answers Using the Balanced Scorecard Is IT a strategic enabler of the business or simply an operational expense? Operational excellence and its associated cost are needed to fulfill strategy. Strategy is not needed as the basis of operational excellence. Should IT focus on developing new services that support business operations and customers, or should it focus on improving the infrastructure so that the business units can stay focused on the customer? This is the difference between strategy and operational excellence. Without the latter, the former is not possible. If IT is to contribute to corporate growth, it needs to do both. How much responsibility should IT have in meeting the business objectives? This is the outcome of the negotiation between IT and the business. What does IT need to do to ensure its place in the business’s strategy? IT needs to negotiate its role with the business. IT should participate in the business performance measurement process, connecting IT’s performance to the business performance in the units of measure meaningful to the business (i.e., dollars). The language used to communicate strategy needs to be in units of measure meaningful to the business. It does this by connecting the requests with the enterprise architecture (EA) through a portfolio management process. This approach should make use of real options in the decision-making process for each request, considering its impact on the business benefits of the EA. Connecting EA and balanced scorecard is well established in the literature. By following the strategy from mission, to vision, to the performance goals, IT should be able to speak to what applications are needed for the successful fulfillment of the strategy. Statements about strategy must include future activities — the “out years” of the strategy. These future-oriented strategies are the ground- work for the IT technological road map. The strategic tradeoff discussion starts with the “line of sight” connection between financial performance, through Customer Perspective, to Internal Processes, and then to Learnings and Growth. Along this path, the alternatives — in their monetized measures — can be discussed between the business and IT. The organization of IT makes a key contribution to the business. The conversation starts with determining how IT can best fulfill the short-, medium-, and long-term strategic initiatives of the business. If IT is have a “seat at the table,” then business management and IT management must be seen as peers. The role of the CIO must be equivalent to the CFO and the COO. Why is there a disconnect between what corporate strategists want and what IT is actually doing? If the correct role for IT is that of a shared service bureau, how can IT best ensure the requests it receives align with company strategy? What IT applications should be deployed to yield competitive advantage? What technological opportunities should be considered? Which IT capabilities should be nurtured and which should be acquired from outside sources? How should IT activities be organized, and what is the role of the IT function? What is management’s role in the IT domain, and what IT capabilities are required for today’s managers?