Business Value and Benefit Assessment

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

2. BUSINESS STRATEGY Costs experiencedin prior upgrade of Microsoft Office Costs for current upgrade anticipatedto be the same Uncoordinated, manual infrastructure Fully automated management, dynamic resource Usage , business linked SLA’s Managed and consolidated IT Infrastructure with maximum automation Managed IT Infrastructure with limited automation Cost Center More efficient Cost Center Business Enabler Strategic Asset IS STRATEGY manual upgrade Significant drop in actual costs Costs per Desktop IT STRATEGY Actual current cost of manualupgrade Actual current cost of automatedupgrade 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. Roger Hordley, Business Value Engagement Manager,Outsourcing Support Team, Microsoft EMEA

3. 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.

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

5. BUSINESS STRATEGY IS STRATEGY IT STRATEGY Business, IS and IT Strategy

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

7. 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 The Value & Cost Debate Source:  Cranfield University School of Management.

8. 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 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?

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

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

12. 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 . . . ?

13. 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%)

14. 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

15. 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

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

17. 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

19. Benefit Dependency Network

20. IS/IT Enablers Externally facing D R I V E R S Internally facing Enabling Changes Business Changes Business Benefits Investment Objectives 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.

22. 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.

23. 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

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

25. Example: Organisational Issues (if any) Business Drivers Investment Objectives External External a) Lack of co-ordination between A&P campaigns and sales activity. b) Existing customer segmentation structure does not reflect the market place. c) New Account Management Structure/ targeting required etc. To improve effectiveness of Advertising and Promotion (A&P) spend. To obtain better information about customer/market trends and buying patterns. To increase/sustain demand from existing customers by improved loyalty rewards. To increase sales value and volume from new customers - by better targeting its sales activity. Customer retention and increase market share in high value market segments. Maintain brand leadership despite increased marketing by competitors. Increase actual sales/ promotion expenditure ratio in key markets. Internal Internal 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 A&P spend D R I V E R S 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 Enabling Changes Business Benefits Business Changes 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. Motion Change management plan: How new ways of working can deliver the benefits - and how to make that happen. Business case: What needs to be delivered and why Externally facing Project Enabling changes Benefits New ways of working Investment IS as a strategic asset D R I V E R S Running IS as business Internally facing IS/IT Enablers Enabling Changes Business Benefits Business Changes Investment Objectives DELIVERY………………………..…………………..INVESTMENT Actually, This Is Where it Fits into Motion

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

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

33. Poor More efficient use of To improve collaboration People’s time collaboration across the between people, organisation teams , depts and orgs Speedier completion Inappropriate of business and business admin processes admin processes To improve Improved staff /streamline satisfaction Need to improve business performance – work administration processes smarter not harder Improved, speedier decision making Poor access to, and poor ability to create documents & To improve information use, sharing and People working interchange of effectively across information and org. boundaries Poor sharing of documents knowledge and best practice Improved organisational knowledge and Provide best practices Treat facilities for information as people to work a valuable more effectively Access to all with less product effort documents Commercially and information exploit required by role intellectual capital and Cut administration Reduction in online information costs document storage products costs Provide access to documents Admin costs and information cut by 5% pa on a 24x7 basis rd Increase 3 stream income Reduce admin rd 3 stream revenue support costs increased to 30% The Benefits and Why We Want Them

34. How to Make the Benefits Happen

35. Poor More efficient use of To improve collaboration people ’ s time collaboration across the between people, organisation teams , depts. and orgs Speedier completion Inappropriate of business and business admin processes admin processes To improve Improved staff /streamline satisfaction Need to improve business performance – work administration processes smarter not harder Improved, speedier decision making Poor access to, and poor ability to create documents & To improve information use, sharing and People working interchange of effectively across information and org. boundaries Poor sharing of documents knowledge and best practice Improved organisational knowledge and Provide best practices Treat facilities for information as people to work more effectively a valuable Access to all with less product effort documents Commercially and information exploit required by role intellectual capital and Cut administration Reduction in online information costs document storage products costs Provide access to documents Admin costs and information cut by 5% pa on a 24x7 basis rd Increase 3 stream income Reduce admin rd 3 stream revenue support costs increased to 30% The Picture Linking Business Drivers and IS/IT Projects

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

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

38. 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) Samples d) Specifications a) Reduce cost by £250k p.a. New (p.a.) (Old) 2000 (500) 15000 (<5000) 5000 (2000) 200 (100) ConversnContributn RateValue (p.a.) (10%) £300K (1%) £250K (3%) £150K (40%) £20 Source:  Cranfield University School of Management.

39. Degree of Explicitness Do New Things Do Things Better Stop Doing Things Financial Jane Cutforth (Fin) Next Wednesday Marketing Manager -> value of new orders. End May Projection of value ex campaign plans Quantifiable London Office Sales Manager -> Likely No. of orders. End May Model on spreadsheet with accountant Projection of figures ex small trial Measurable Increase conversion rate of leads into orders ex campaigns Improved Cash Flow Observable 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 Business Change On-going … Doing Things Better and incur Doing New Things Stop Doing Things

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

42. 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

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

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

45. Summary ∑

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

47. … 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