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 Managed IT Infrastructure with limited automation Managed and consolidated IT Infrastructure with maximum automation Fully automated management, dynamic resource Usage , business linked SLAs

IS STRATEGY

Cost Center

More efficient Cost Center

Business Enabler

Strategic Asset

IT STRATEGY
Costs experienced in prior upgrade of Microsoft Office Costs for current upgrade anticipated to be the same

Costs per Desktop

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 how 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

IS STRATEGY

IT STRATEGY

The Relationship Between Business, IS & IT Strategies

BUSINESS STRATEGY
Business Decisions Objectives & Direction Change Supports business Direction for business Where is the business going and Why

IS STRATEGY
Business Based Demand Orientated Application Focused Infrastructure and services Needs and priorities What is required

IT STRATEGY
Activity Based Supply Orientated Technology Focused How it can be delivered

The Value & Cost Debate

BUSINESS STRATEGY
Business Decisions Objectives & Direction Change

VALUE added here IS STRATEGY

Business Based Demand Orientated Application Focused

COSTS incurred here IT STRATEGY

Activity Based Supply Orientated Technology Focused

Source: Cranfield University School of Management.

The Value & Cost Debate

BUSINESS STRATEGY
Business Decisions Objectives & Direction Change

VALUE added here IS STRATEGY

Business Based Demand Orientated Application Focused

COSTS incurred here IT STRATEGY

Activity Based Supply Orientated 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

OUT

'Good work but I think we need just a little more detail right here'

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? Do you adequately quantify the relevant benefits? Do you overstate the benefits in order to get investment approval? Do you conduct post-implementation reviews to determine whether benefits have been achieved

(21%) (19%) (45%)

(26%)

So, is there scope for improvement in the process for managing IS/IT benefits?

(76%)

The Benefits Management Challenge

From
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

To
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

Benefits Management - The Value of the Process

Management Cost

Cost

Benefit

Possibility of lower IT costs

Cost

Benefit

Without Benefits Management Process

With Benefits Management Process

Stages of Benefit Management

STAGE
1. Identify and Structure Benefits

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 - Finalise measurements of benefits and changes - Determine the Change Actions that will produce the improvements - with accountable stakeholders - Submit Investment Case for funding - Manage the Change Programmes - pursuing benefit delivery as well as technical implementation - Formally assess whether the Investment Objectives and Benefits were achieved - Initiate Action to gain outstanding benefits still achievable - Identify lessons for other projects

2.

Plan Benefits Realisation

3.

Execute Plan Evaluate and Review

4.

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?

Drivers & Objectives

Benefit Identification and Location
Can it be measured?

Where will it occur? Who is responsible for its delivery? What changes are needed? Who will be affected? How & when can changes be made?

Can it be quantified?

Can a financial value be put on it?

Stakeholder Management

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 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
External

Investment Objectives
External

Internal

Internal

Source: Cranfield University School of Management.

Example:

Organisational Issues (if any)

a) Lack of co-ordination between A&P campaigns and sales activity.

Business Drivers
External

Investment Objectives
External
To improve effectiveness of Advertising and Promotion (A&P) spend. To obtain better information about customer/market

Customer retention and

increase market share in high value market segments.

b)

Existing customer segmentation structure does not reflect the Maintain brand leadership despite

trends and buying patterns. To increase/sustain demand from existing customers by improved loyalty rewards.

market place.

increased marketing
by competitors.

c)

New Account Management Structure/ targeting required etc. Increase actual sales/ promotion expenditure ratio in key markets.
To increase sales value and
volume from new customers - by better targeting its sales activity.

Internal

Internal

Source: Cranfield University School of Management.

Objectives to Benefits

IS/IT Enablers
Reduced cost by avoiding waste on irrelevant customers

To improve effectiveness of of A&P spend

Increased response rate from A&P campaigns

To increase sales volume from new customers

Increased rate of follow-up of leads

Increased conversion rate to sales

D R I V E R S

Enabling Changes

Business Changes

Business Benefits

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 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 Changes

Business Benefits

Investment Objectives

Source: Cranfield University School of Management.

Actually, This Is Where it Fits into Motion

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

Internally facing

IS/IT Enablers

Enabling Changes

Business Changes

Business Benefits

Investment Objectives

DELIVERY....INVESTMENT

Running IS as business

D R I V E R S

IS as a strategic asset

Motion

How to Get the Benefits

IS/IT Enablers
Project Managemt Package Introduce Proj.Mgmt for A&P Campaigns Redefine Customer Segments Reduce Marketing time on Admin Measure outcome of campaigns re objectives Use database to improve targeting in segments Reduced cost by avoiding waste on irrelevant customers

Customer/ Prospect DB Campaign Response Tracking

D R I V E R S

Enabling Changes

Business 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 Reduce marketing staff time on admin activities Measure outcome of campaigns re objectives

Identify most appropriate communication medium for target customers

Reduced cost by avoiding waste on irrelevant customers To improve the effectiveness of advertising & promotion (A&P) spend

Customer Prospect Database

Use database to improve targeting in segments

Co-ordinate sales and marketing activity in follow-up

Increased response rate from A&P campaigns

Contact Management System

Redefine customer segments

Realign sales activity with new customer segments Allocate sales time to potential high value leads Increased rate of follow-up of leads

Enquiry Quotation & Response Tracking System

Introduce new account management processes Release sales time from post sales activity to pre sales

New sales staff incentives

To increase sales value and volume from new customers

Portable PCs for Sales Staff

Use system to target sales activity/contact time

Increase sales time with customers

Increased conversion rate of leads to orders

Enabling Changes

Business Changes

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 BC: New process on all new campaigns O: Brand Managers BC: DB in use and Data clean up complete O: Asst Marketing Director M : Reduced costs of campaign mailings : Maintain response rate BO:Brand Managers

D R I V E R S

Enabling Changes

Business Changes

Business Benefits

Investment Objectives

Source: Cranfield University School of Management.

The Benefits and Why We Want Them

More efficient use of Peoples time

Speedier completion of business and admin processes Improved staff satisfaction Improved, speedier decision making

To improve collaboration between people, teams , depts and orgs

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

To improve /streamline business administration processes

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 Admin costs cut by 5% pa

To improve use, sharing and interchange of information and documents

Provide facilities for people to work more effectively with less effort

Treat information as a valuable product

Commercially exploit intellectual capital and information products Provide access to documents and information on a 24x7 basis Reduce admin support costs

Cut administration costs

Increase 3 rd stream income 3 rd stream revenue increased to 30%

How to Make the Benefits Happen

Develop a Data and Information Architecture Develop an Infrastructure Architecture Develop robust security, authorisation, and access procedures Introduce Document management and sharing facilities Portal Development Functions Develop a consolidated structured information store Develop Portal functionality for information/document access Develop a strategy and plans to manage the growth of structured information Develop culture to work across organisational boundaries Develop information sharing culture More efficient use of peoples time

Document repositories

Speedier completion of business and admin processes Improved staff satisfaction

Document Workflow/Rights management

Delegation of approval processes Develop a self-service personal admin culture Manage information as a valuable resource Develop a document sharing, rather than a document copying, culture Use intellectual capital commercially

Improved, speedier decision making

People working effectively across org. boundaries Improved organisational knowledge and best practices

Office Automation tools

DBMS

Introduce easy to use/ change web based admin applications Introduce UKU wide document workflow management facilities Develop a knowledge and intellectual capital management strategy and architecture

Access to all documents and information required by role Reduction in online document storage costs

Web Based Applications

Adopt a self-service pull approach, rather than push approach, to the use of documents and information

Admin costs cut by 5% pa

3rd stream revenue increased to 30%

The Picture Linking Business Drivers and IS/IT Projects

Document repositories

Develop a Data and Information Architecture Develop an Infrastructure Architecture Develop robust security, authorisation, and access procedures Introduce Document management and sharing facilities

Develop culture to work across organisational boundaries Develop information sharing culture

More efficient efficient use More useof of people s time time people s

Speedier completion Speedier completion of business business and of and admin processes processes admin Improved staff Improved staff satisfaction satisfaction

To improve collaboration between people, teams ,depts. and orgs

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 24x7 basis Reduce admin support costs

Document Workflow/Rights management

Delegation of approval processes Develop a self-service personal admin culture Manage information as a valuable resource Develop a document sharing, rather than a document copying, culture Use intellectual capital commercially

Improved, speedier Improved, speedier decision making decision making

To improve /streamline business administration processes

Portal Development Functions

Develop a consolidated structured information store Develop Portal functionality for information/document access Develop a strategy and plans to manage the growth of structured information

People working working People effectively across effectively across org. boundaries boundaries org. Improved organisational Improved organisational knowledge and knowledge and best practices practices best

To improve use, sharing and interchange of information and documents

Office Automation tools

DBMS

Introduce easy to use/ change web based admin applications Introduce UKU wide document workflow management facilities Develop a knowledge and intellectual capital management strategy and architecture

Access to all Access to all documents documents and andinformation information required by role required by role Reduction inin online Reduction online document storage document storage costs costs

Provide facilities for people to work more effectively with less effort

Cut administration costs

Web Based Applications

Adopt a self-service pull approach, rather than push approach, to the use of documents and information

Admin costs Admin costs cut 5% pa cutby by 5% pa Increase 3rd stream income
rdstream rd stream revenue 33 revenue

increased to 30% increased to 30%

Structuring Benefits & Measures

Degree of Explicitness Financial Quantifiable Measurable Observable

Do New Things

Do Things Better

Stop Doing Things

Structuring Benefits

Degree of Explicitness Financial Quantifiable Measurable Observable

Do New Things

Do Things Better

Stop Doing Things

Source: Cranfield University School of Management.

Structuring Benefits & Measures

BENEFIT
1. Reduced cost by avoiding waste on irrelevant customers a) b) a) b)

MEASURE(S)
less mailings per campaign response rates maintained overall responses from defined primary target group earlier responses from target group New (p.a.) 2000 15000 5000 200

'VALUE'
a) Reduce cost by 250k p.a.

2. Increased response rate from campaigns (by better targeting)

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)

(Old) (500) (<5000) (2000) (100)

4. Increased conversion rate to sales

(Based on sampling of new process) a) b) c) d) Enquiry & Quotations Mailings (via Merchants) Samples Specifications

Conversn Rate (10%) (1%) (3%) (40%)

Contributn Value (p.a.) 300K 250K 150K 20

Source: Cranfield University School of Management.

Improving the Business Case

Degree of Explicitness Financial

Do New Things
Marketing Manager -> value of new orders. End May

Do Things Better
Jane Cutforth (Fin) Next Wednesday Projection of value ex campaign plans

Stop Doing Things

Quantifiable

London Office Sales Manager -> Likely No. of orders. End May
Increase conversion rate of leads into orders ex campaigns

Projection of figures ex small trial Improved Cash Flow

Model on spreadsheet with accountant

Measurable

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 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 - '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

Stakeholder Analysis

Stakeholder Group

Perceived Benefits (Disbenefits )

Changes Needed

Perceived Resistance

Commitment
Anti None

(Current & Required )

Allow it Help it
to happen happen

Make it happen

(after Benjamin & Levinson)

Source: Cranfield University School of Management.

Stakeholder Analysis

Stakeholder Group
Customers

Perceived Benefits (Disbenefits)

Configuration tailored exactly to needs - no testing / reject Improved customer service and product quality image (Extra work in preparing requirements and quotes)

Changes Needed
None

Perceived Resistance
None

Commitment
Anti None

(Current & Required)

Allow it Help it Make it to happen happen happen

Sales & Marketing Managers Sales Reps

New incentives to get Sales Reps to use system with customers To use system and improve quality/accuracy of quotes

Reluctance to change Reps reward systems No time available to use/ learn system. Loss of autonomy

Action required? Action required?

Manufacturing / Logistics

Removes need for configuration checking. Less returns/queries

New advanced system - remove old difficult to maintain system

Stop current checks to put onus on Reps to get it right

Skills in Expert System Development

Do not trust Sales Reps accuracy in requirements/ quote

None

Action required?

IT Developers

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 What
Do NEW Things Financial Quantifiable Measurable Observable Do Things BETTER

Where
STOP Doing Things

Measures
STAKEHOLDER ANALYSIS

Who
None Allow it to happen Help it happen Make it happen

Plan Benefits Realisation

Stakeholder Group

Perceived Benefits (Disbenefits)

Changes Needed

Perceived Resistance

Commitment Current & Required)

Anti

Accountabilities

 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