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IT portfolio planning (ITPP) is yet another example of a well-intentioned,
high-promise management method which often falls short in practice.To
harvest ITPP’s promise, TAC urges your IT management to place more emphasis on
two under-managed critical success factors: 1) the reliability of the business
value calculations attached to each project candidate, and 2) overcoming
resistance to the “structured” aspects of ITPP, which is perceived as replacing
more personalized decision making.A
“real-time” approach to ITPP the process offers assistance in overcoming both
of these challenges.
A. Reliability problems with project business value payoff assumptions
Because the entire IT investment decision process is no better than the accuracy
of the business value assigned to each project candidate, TAC urges placing
more ITPP management focus on getting the business case “right”.
TAC estimates that over 50% of all
business cases used in the ITPP process contain significant errors that can
skew ITPP decisions in the wrong direction. Thus, the seemingly tactical aspect
of assuring business cases are trustworthy at the project level, in fact has
major strategic implications for the reliability of the ITPP output overall.
1. Common weak points of business cases
Three of the most common business cases weakness that TAC finds in ITPP
implementations are:
a) Over/under stated value: Assertions about cost savings, revenue
improvements, and/or risk reduction are flawed. For example, “labor savings of
10%” may look good on the surface, but withers when subjected to further
scrutiny. Common sources of these errors are invalid assumptions (e.g. labor
savings is not for all labor types, but just a small sub-set), metric
comparisons accepted at face value (just because Globally Reliable Analyst Firm
says the “average is 10%” doesn’t mean their assumptions are relevant to
this business case), and faulty cause-and-effect logic (reduction in errors
using a new system may not reduce any labor overall because the complexity of
the new system may offset any labor savings in error reduction).
b) Missing value: More often than not important value is not even present
in the business case. A typical cause of these oversights: business case
creators are not sufficiently trained to look in the right places and ask the
right questions. Common overlooked payoff areas for proposed IT projects
include: elimination of wasted time spent looking for data a new system
provides, value of empowering end-users to make better decisions that in turn
financially reward the enterprise, uncovering hidden assets, (such as capital
equipment unaccounted for, or employees’ hidden talents unused), and
underestimating the cost of misusing senior management’s time (arguably the
most scarce resource in the entire enterprise).
c) Mis-handling of intangible payoffs: Increasingly the value of capital
investments, as well as the entire enterprise, is expressed in terms of
“intangibles”, i.e. factors not quantified). Examples include: brands,
marketplace position, and image. One of the most important skills of managers
is their ability to make decisions based on factors in the face of much
uncertainty and ambiguity. Thus, trustworthy business cases must thoughtfully
present all relevant intangible factors impacted by the proposed IT investment.
The ITPP process should include weighted scoring that accounts for both
intangible and tangible factors.
2. Solutions
a) Determine extent of the problem: To quickly determine if the types of
business case shortcomings are common in a specific ITPP environment, apply the
“Quick-Audit: Seven C’s Content Audit Tool of Business Cases” (attached to the original
Personal Advisory Report) to a cross section of existing business cases. If the
selected documents come up short, then improving the process of creating
trustworthy business cases should be high on ITPP management’s “to do” list.
b) Upgrade stakeholders’ knowledge: Fortunately, abundant knowledge
exists related to best practices for building and using more reliable business
cases.References, such as cited below,
can help ITPP decision-makers, as well as project managers and business
analysts responsible for creating and “certifying” business cases, to
strengthen the “trustworthy ROI” foundation of good ITPP-based decision making.
B. Overcoming resistance to the “structured decision-making” aspects
of ITPP
Few skills are as treasured and closely held as a manager’s perception of
her/his personal decision-making abilities. Because many managers have built
their career on other people trusting their judgment, they are inherently
suspicious of any method which (a) strips away their ability to decide based on
their own private, often hidden, decision criteria, and (b) relies on a
semi-analytical, consensus-oriented process which they may not even understand.
It is from these roots that resistance to an ITPP process thrives.
Since these concerns are rarely voiced in the open, it is helpful to look for
overt symptoms that suggest the existence of these buried objections. Warning
signs include: failure to pro-actively allocate resources to pilot or ongoing
ITPP initiatives, poor attendance at ITPP-sponsored awareness and education
sessions, and giving lip service to ITPP output, rather than making decisions
that reflect carefully crafted ITPP guidance.
Solutions for helping melt this emotional resistance to ITPP include: pilot
implementations of ITPP, sponsored by politically popular executives; personal
involvement by senior executives whose departments exhibit resistance; and
offline conversations with selected “resisters” pointing out how a good ITPP
method might help increase the likelihood that some of their favorite projects
would be approved, rather than rejected due to political plays by internal
competitors for the same budget.
C. Real-time ITPP
The October 2005 issue of Harvard Business Review presents a
ground-breaking article related to the superiority of a continuous (rather than
annual) process of strategy management. Entitled “The Office of Strategy
Management” and authored by balanced scorecard creators Robert S. Kaplan and
David P. Norton, this penetrating paper, incorporating the experiences of such
diverse enterprises as the Chrysler Group, the U.S. Army, and Canadian Blood
Services. The principles outlined in this paper have good applicability to the
world of “real-time” (i.e. continuous) IT Project Planning. Kaplan and Norton
argue that by establishing a small, full-time group of dedicated advisors and
consultants to business units, an on-going process of strategy
development and execution can (a) be more responsive to market changes and (b)
better attract the involvement and support of executives and managers
throughout the enterprise. OSM principles readily adaptable to ITPP include:
providing SME consultants to business units in order to help assure ITPP
success, having an in-place mechanism for regularly communicating and educating
stakeholders on the issues and outcomes of the ITPP process, and establishing
prioritizing and reprioritizing as a several-times-a-year method.
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