These days, IT is a key driver of business success – IT is such a big part of what most modern businesses do. Despite this, pinpointing the specific value that IT adds to a business is surprisingly tricky. Too often, our IT-related measures focus on those KPIs (Key Performance Indicators) that are easy to measure (downtime and budget, for instance). What we should be doing instead is defining the real business contribution of IT, and then finding ways to measure that contribution.
Why traditional methods of measuring IT value no longer cut it
The challenge to overcome is that there are lots of existing IT indicators that companies focus on, and these tend to be the easily quantifiable measures. Sure, it’s easy to measure the quantitative, tangible value of IT – hardware, software, whether an IT project was delivered on budget and on time, how long a system is down each week, and so on – but these aren’t always the most useful things to measure if you want to really understand IT’s business contribution.
As well as the tangible measures, you also need to unearth the more intangible, qualitative ways IT adds value to the business. For example, if the company is rolling out a new app, it’s easy enough to measure whether that app was built on time and to budget. But isn’t it also helpful to understand how the new app affects customer satisfaction, customer loyalty, and the likelihood of customers purchasing future products? Therein lies the real contribution of that IT project to the business’s success.
Here’s another way to look at it. It’s common for organisations to use return on investment calculations for IT-related investments (such as a new app or interface system), which is all well and good. After all, it’s important to understand the ROI of projects and initiatives. But what about the everyday IT activity, the kind that keeps the systems working behind the scenes? We also need to understand the contribution IT makes in keeping the business wheels turning, day in and day out.
These more qualitative, intangible things are certainly harder to measure, but they have the potential to generate far more useful insights.
Really understanding the role of IT in the business
Our goal should be to effectively measure and map out IT’s contribution to the business as a whole, including the intangible ways IT adds value. I like to think of it as understanding how IT helps the company deliver its goals.
When you understand how IT adds real value to the business, you can then uncover insights that will help you maximise and better exploit that value in the future. In this way, measuring IT value generation helps to continually improve overall business performance. In my consulting engagements with clients I often develop one-page maps that outline how IT departments help to impact overall business goals of the organisation. These maps can then be used to identify the critical metrics.
Let’s look at some ideas for measuring the less obvious ways IT generates business value.
Using industry benchmarks
Often, IT metrics are completely internal. But looking outside the company is a great way to demonstrate IT value. For example, instead of just measuring the overall IT budget or spend on a new interface, why not compare those figures to averages in your industry? This is a useful way of understanding performance and value because it highlights where you’re getting great value for money compared to other similar companies, or where the IT team might be particularly excelling. Similarly, it can highlight areas for improvement, or where value could be maximised, such as areas where you are overspending compared to the rest of the industry.
Linking IT value to business processes
It can also help to measure IT using KPIs that are linked to overall quality and productivity measures – for example, where IT systems help to reduce delays in responding to customer queries, or optimise manufacturing processes, or create new custom products for clients. This helps to demonstrate how IT contributes value right across the business.
Demonstrating collaboration between IT and other business units
This is a really effective way to show how IT collaboration helps to support the company’s priorities. By demonstrating how IT connects with other departments, you can show how IT activity underpins overall business performance. Examples of this might include the IT team collaborating with the marketing team on a new product, or working with the finance team to improve financial planning.
Governance used to be the domain of the IT team alone. But with tightening regulation, such as the new GDPR data protection rules, teams right across the business need to play a role in designing, implementing and managing governance practises. Clearly, this requires a great deal of IT participation – input that adds real value to the business. How well IT governance is integrated and embedded across the business can therefore be a useful marker of IT’s value contribution.
These are just a few of the ways IT contributes to business success; there will be plenty of other examples that are specific to your business. The key is to define what value generation means for your business, and then design KPIs that can measure that contribution on an ongoing basis.
Where to go from here
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Bernard Marr is a bestselling author, keynote speaker, and advisor to companies and governments. He has worked with and advised many of the world's best-known organisations. LinkedIn has recently ranked Bernard as one of the top 10 Business Influencers in the world (in fact, No 5 - just behind Bill Gates and Richard Branson). He writes on the topics of intelligent business performance for various publications including Forbes, HuffPost, and LinkedIn Pulse. His blogs and SlideShare presentation have millions of readers.