Demonstrating the business benefit of IT investments has posed a longstanding challenge for Chief Information Officers (CIOs). Today, executives have exponentially growing volumes of metrics and KPIs they can analyze. While this creates a potential opportunity to gain insight into how IT adds value, many managers are overwhelmed by the mountains of data at their disposal. Put simply, they don’t know where to look and they don’t know what to look for.
A well-defined approach to identifying linkages between IT drivers and business outcomes, coupled with digital tools and smart automation, can help find the needles in the haystacks.
Too Much Data
Thanks to constantly evolving and increasingly sophisticated tools, enterprises today are awash in data. Sources include audit trails, technical logs, predictive models and any number of operational metrics. But despite the quantity of data, businesses still struggle to find data that yields insights and significance in terms of increased revenues, profits and shareholder value.
Moreover, huge volumes of data from multiple sources can create confusion around integrity, traceability and validity. In other words, the more data you have, the more difficult it can be to determine where the real source of truth lies. Social media is a perfect example of how data can manipulate perceptions and reinforce conclusions that don’t align with reality.
Metrics – and Method – Matter
To address the problem of data overload, businesses need to separate the wheat of valuable indicators from the chaff of superfluous metrics. A start small approach can focus on identifying specific pain points by department or activity. From there, you can identify opportunities to improve and drill down into business objectives and relate KPIs to critical functions. Then connecting the dots between particular data points, actions and outcomes becomes feasible.
Once specific value chains are defined, governance tools and methodologies can be applied to scale the process across the enterprise. The result is a performance dashboard that monitors a variety of cause/effect linkages between IT activity and business outcomes.
Until recently, the process of building and maintaining such dashboards has required labor-intensive documentation, review and oversight. Today, the ability to digitize data collection and automate clearly defined processes creates an opportunity to take data analysis and insight to a new level. Specifically, once the right data is identified, smart tools can effectively and efficiently process more of that data, yielding increasingly valuable results.
Closing the IT/Business Gap
CIOs have traditionally focused on IT and operational issues, and have built strategies based on benchmarking, competitive analyses and traditional metrics around capacity management and service prioritization. Budgets, meanwhile, have been formulated and evaluated from the perspective of the IT value chain. While this has enabled CIOs to hone their ability to measure IT performance to a razor’s edge, the linkage between IT systems and business outcomes remains elusive.
Today, IT and business transformation are becoming increasingly intertwined, and information resides and travels through a wide range of internal and external platforms. This creates the opportunity to correlate IT measures to critical business functions.
Tracking Production Processes
For example, “product quality” is a critical-to-quality (CTQ) business measure for manufacturers. An issue that arises in the production process impacts goods that have already been packed and shipped to the warehouse, requiring re-checks to determine specifically when the issue in the production process arose.
An IT application that monitors inventory generates data that flags instances where packed and ready-to-ship products have to be re-checked. On its own, that metric has little value to the business. However, within the context of the overall production process and supply chain, the business can identify trends and patterns around the specific products and brands that are being impacted by re-checks, as well as the timing and frequency of issues. Through analysis of these variables, the IT/business value chain can be tracked.
A Specialized Business Perspective
To enable IT value contribution, communication between IT and business leaders is obviously imperative. Specifically, communication at the right levels is needed to ensure that the data points captured at the operational level make their way to middle management and are appropriately shared. So, for example, granular insights from the operations teams must go high enough up the ladder to ensure action is taken, while not entangling senior executives in the operational weeds.
To communicate effectively, IT leaders also need a deeper understanding of business issues. But a high-level grasp of strategy and revenue goals isn’t enough. To successfully “speak the language” of business, CIOs need to develop areas of specialization and identify specific business functions and areas within which they can build value chains. In the same way that a radiologist provides critical data and insight to a neurologist making a diagnosis, so too can a CIO provide a valuable perspective to business leaders.