The organizations often struggle to quantify and show business value derived from technology. One of the ways to do it is by following a set of rules
I. Focus on Processes– The value achieved from technology should always be measured by its ability to enable intermediate processes of an organization. A business process in an organization fall under any of the following two categories –
- Operational – A operational process is an organized set of activities or tasks that produce a specific service or product. These are usually repetitive steps emanating from core-competencies of an organization with a key objective of attaining economy of scale, efficiency, effectiveness, excellence, and sustaining what organization does best towards meeting customers needs through its products and services.
- Management – Management processes are the methods that aid the structuring, investigation, analysis, decision-making, and communication of business issues. Examples include the strategic planning process, talent planning, expense and capital budgeting, performance management systems, product planning, and management cost accounting. The principal objectives of management processes are to explore new opportunities, continue to create core competencies, and enable competitive advantage for an organization while maintaining appropriate org. Structure and culture.
It’s important to remember the above distinction to have a clear understanding of the objectives and expectations of each process type. The two essential things to remember –
- mere application of technology never creates value
- within corporate boundaries, technology only enables value realization towards achieving organization’s objectives, and it’s always within the context of organizational processes – “technology is an enabler and not a creator of value.
II. Treat technology as one, among many other enablers, of the business strategy in an organization – The value realized by applying technology towards intermediate processes, or to a step in a process, usually fall under one of the following –
Once its clear what’s expected from technology in a process, i.e., automation, information, or transformation it becomes easier to quantify business value enabled by the application of technology
For example –
- level of automation enabled and hours freed up for other value-added tasks
- ease of access to new information, for decision making and innovation, e.g., it takes now 5 minutes to explore scientific journals compared to 2 days it used to take before
- Data; existing information; or new knowledge transformed into further consumerization for better products and services – How much technology contributed towards enabling the knowledge-based economy within your organizational boundaries? How much it pushed towards digitization or, as a simple benchmark, moved your organization a bit closer to exponential growth?
III. Be realistic about what technology can and can’t do -It’s an unrealistic expectation to believe that technology solely is capable of improving organizations bottom-line like revenue, market share, etc. It’s a factor of many different attributes, including a selection of business strategy. Any outcome at the overall organizational level like increased revenue, market share, etc. is a sum of the value obtained from all business functions in an organization like Marketing, HR, Finance, Supply Chain, Sales, R&D, Manufacturing, Manufacturing, Technology Services, etc.
A few examples of business value metrics –
|Dimension of Technology Business Value Metrics|
|Business Process Category||Automation||Information||Transformation|
|Operational||e.g. increase reliability, throughput||e.g. improved quality, waste reduction, agility in issue resolution||e.g. better customer relationships, faster adoption of innovative ideas towards execution|
|Management||e.g. reduce administrative expenses,||e.g. quality of decisions, enhanced organizational intelligence||e.g. competitive advantage, near real time decision making, new competencies, ability to realize and explore blue oceans (more on this in next blog)|
IV. Consult Value Pyramid below to map out appropriate value element(s) enabled
V. Run Value Element(s) through following Business-Value Hypothesis – (pay close attention to realistically measurable KPIs and how you are going to capture those to prove or disprove value-hypothesis)
We believe that <this (SOLUTION)> will result in <this outcome (VALUE)> for <this CUSTOMER> we will know we have succeeded when <we see a measurable signal> (SUCCESS CRITERIA)