Benefits Identification Assessment Validation and Realisation

Benefits Identification, Assessment, Validation and Realisation for Information Technology Projects:

Benefits Identification, Assessment, Validation and Realisation for Information Technology Projects Alan McSweeney

Objectives:

January 9, 2011 2 Objectives Discuss approaches to understanding, evaluating and achieving benefits identification, assessment, validation and realisation Define approach to achieving benefits identification, assessment, validation and realisation maturity Implementing a benefits identification, assessment, validation and realisation framework

IT and Benefits Realisation and Business Value:

January 9, 2011 3 IT and Benefits Realisation and Business Value Most organisations focus on the implementation of technology associated with information technology investments and not on the realisation of expected business benefits and value IT is commonly seen as failing to deliver value for money Benefits are not being achieved despite a project being considered a technical success One source of this failure to realise benefits and value is the use of approaches and methods that focus on improving the supply-side of IT delivery There is a need to engage business managers in such a way as to enables them to apply their collective knowledge to creating business benefits and value from IT-facilitated changes Realising and assessing business benefits from IT-enabled investments involves more than simply assessing Total Cost of Ownership for IT-related projects and managing the IT budget

Disconnect Between IT Investments and Business Value and Benefits:

January 9, 2011 4 Disconnect Between IT Investments and Business Value and Benefits 62% of organisations say they find it difficult to calculate ROI for IT investments 45% of organisations say their business value metrics do not accurately capture the value of IT investments 52% of organisations say that business executives are sceptical of efforts to measure business value of IT Only 41% of organisations perform an ROI assessment for IT budget Poor picture of IT investments and disconnect between expenditure and business benefits

Ensuring Strategic Project Alignment to Projects:

January 9, 2011 5 Ensuring Strategic Project Alignment to Projects Managing the IT Budget Managing IT Like a Business Managing and Delivering IT Capability Managing IT for Realising and Assessing Value Closing the Loop Between Cost and Value Business Strategy IT Strategy and Delivery Link Projects to Business Benefits and Business Value Demonstrate Achievement of Business Benefits and Business Value

Benefits Management :

January 9, 2011 6 Benefits Management Benefits management is the process of organising and managing so that the potential and identified benefits arising from the use of IT are actually achieved Need a comprehensive framework to embed business benefit and business value achievement Need to ensure maturity of business value and benefit identification, assessment, validation and realisation practices and structures

Benefits of a Structured Approach to Benefits Identification, Assessment, Validation and Realisation :

January 9, 2011 7 Benefits of a Structured Approach to Benefits Identification, Assessment, Validation and Realisation Enables organisations to clearly and consistently articulate IT’s contribution to achievement of business objectives Increases confidence in IT’s ability to forecast and achieve business value from IT investments through consistent and objective benefits processes including tracking and control Addresses management culture required to make decisions, take corrective actions and communicate results to increase management confidence in IT’s ability to deliver

Realising Benefits from IT Investments:

January 9, 2011 8 Realising Benefits from IT Investments Fundamental principles of realising benefits from IT investments Just having information technology does not automatically generate any business benefits or create business value IT projects can generate negative outcomes that must be actively avoided and IT must work to ensure that positive outcomes are converted to deliver real business benefits and value Benefits and value are not the automatic outcomes of IT projects and must be actively managed for throughout the life of the solution Benefits arise when IT enables people to perform their work more efficiently or effectively or do new work or enable new ways of working Only business managers and users can generate business benefits by making changes so the business must accept this responsibility and become involved in projects with an IT components These principles must underlie benefits a benefits identification, assessment, validation and realisation framework

Benefits Identification, Assessment, Validation and Realisation Framework:

January 9, 2011 9 Benefits Identification, Assessment, Validation and Realisation Framework Identify Potential Benefits and Associated Value Assess Identified Benefits and Associated Value Validate Benefits and Associated Value Ensure Realisation Benefits and Associated Value

Effective Benefits Identification, Assessment, Validation and Realisation Within the IT Function:

January 9, 2011 10 Effective Benefits Identification, Assessment, Validation and Realisation Within the IT Function Benefits Identification, Assessment, Validation and Realisation IT Leadership and Governance Strategic Planning Programmme and Project Management Total Cost of Ownership Risk Management Budget Management Funding and Financing Portfolio Planning and Prioritisation and Management Structures, processes and ability to make decisions to review and adjust benefits realisation plans Definition of organisation’s strategic objectives as basis for IT demand Capabilities to develop and update benefits realisation plan for programmes and projects Definition of organisation’s strategic objectives as basis for IT demand Practices to support the organisation in assessing and monitoring the risk throughout the IT function Benefits from IT projects are important to budget creation and management Ability to evaluate benefits of opportunities is important to decisions on IT funding Making effective portfolio planning and prioritisation decisions requires benefits valuation

Achieving Benefits:

January 9, 2011 11 Achieving Benefits To increase the likelihood of success from IT investments, organisations must identify the different causes of benefits before developing any project implementation plan Types of IT projects with very different approaches to benefits management Fixing or improving something that exists Resolve problem Improve integration Implementing a new initiative New system New processes Need to focus on the changes needed to achieve results and take full advantage of new facilities offered rather than on IT features Effective change management is crucial to achieving benefits

Achieving Benefits – Some Questions to Ask:

January 9, 2011 12 Achieving Benefits – Some Questions to Ask Why is there a need to improve? What improvements are needed? What improvements are possible or achievable? Have the improvements been agreed by all stakeholders? What benefits will be realised by each stakeholder if the business objectives are achieved? How can each benefit be measured? Who owns each of the benefits and will be accountable for its delivery? What business changes are needed to achieve each benefit? Have the explicit links between each benefits and required business changes been identified? Who will be responsible for ensuring the business changes are made successfully? How and when can the changes be made? Who will make the changes? Does the business have the ability and capacity to make the changes?

Benefits Dependency Network:

January 9, 2011 13 Benefits Dependency Network Benefits Dependency Network (BDN) is an approach to linking: Information Technology Enablers, Changes and New Capabilities – enabling technologies and functions and facilities needed to support the realisation of the identified benefits and to allow the necessary changes to be undertaken Business Changes – business activities and new ways of working that are required to ensure that the desired benefits are realised Enabling Changes - prerequisites for achieving the business changes or that are essential to bring the new system into effective operation Business Objectives - high level priorities in relation to the drivers, outcomes and improvements to be delivered on completion of the project Business Benefits - outcomes of a change that are deemed to be positive by a stakeholder and that are valuable to the organisation and are measureable Stakeholders - individuals or groups who will benefit from the project and are either affected by or directly involved in making the changes needed to realise the benefits

Types of Changes:

January 9, 2011 14 Types of Changes Business Changes - Permanent changes to working practices, processes, procedures, interactions and relationships that will cause the benefits to be delivered Generally need new IT system to be in place May require enabling changes to be implemented Enabling Changes - Typically one-time changes that are pre-requisites for making the business changes or are necessary to bring the new system into effective operation Can be made in advance of system implementation Training Processes redesign New work practices Changes to job roles and responsibilities

Benefits Dependency Network:

January 9, 2011 15 Benefits Dependency Network Information Technology Enablers, Changes and New Capabilities Enabling Changes Business Changes Business Benefits Business Objectives Require Allow Enable Provide for Delivery of BDN provides a framework for explicitly linking the overall investment objectives and the requisite benefits with the business changes which are necessary to deliver those benefits and the essential IT functionality to both drive and enable these changes to be made. BDN forms part of the benefits realisation plan Helps keep the focus on benefits realisation during the program execution Allows variations of the project or program to be assessed for their impact on benefits realisation

Benefits Dependency Network:

January 9, 2011 16 Benefits Dependency Network Information Technology Enablers, Changes and New Capabilities Enabling Changes Business Changes Business Benefits Business Objectives Means to Achieve Changes Ways to Achieve Changes Results of Changes

Benefits Dependency Network:

January 9, 2011 17 Benefits Dependency Network What Information Technology Capabilities and Features Offer What Users Do With Information Technology Capabilities What Information Technology Capabilities Achieve What the Business Gains From Information Technology Capabilities Why the Business Uses The Information Technology Capabilities Understand Why the Business Will Use the Information Technology System What Information Technology Capabilities Are Required What the Business Has to Do What the Business Needs to Provide What the Business Needs To See What the Business Wants Understand What Information Technology System is Needed to Deliver on Requirements

Benefits Dependency Network:

January 9, 2011 18 Benefits Dependency Network Shows the link from the solution, through business activities, outcomes and benefits to the organisation's overall drivers Used to confirm that the solution being introduced will actually provide the results you are seeking Any function within the proposed solution that is not linked to a benefit is potentially of doubtful value Functions with many link or links to key benefits can be identified and given extra attention BDN is a complex approach that requires benefit identification, assessment, validation and realisation maturity within the organisation Imposes a rigour on the organisation in analysing benefits from projects

Constructing a Benefits Dependency Network:

January 9, 2011 19 Constructing a Benefits Dependency Network Create registers for: Business Objectives Business Changes Business Benefits Information Technology Capabilities Enabling Changes Stakeholders Define, validate and create linkages

Constructing a Benefits Dependency Network:

January 9, 2011 20 Constructing a Benefits Dependency Network IT Capability 1 Enabling Change 1 Business Change 1 Business Benefit 1 Business Objective 1 IT Capability 2 Enabling Change 2 Business Change 2 Business Benefit 2 Business Objective 2 IT Capability 3 Enabling Change 3 Business Change 3 Business Benefit 3 Business Objective 3 IT Capability 4 Enabling Change 4 Business Change 4 Business Benefit 4 Business Objective 4 IT Capability 5 Enabling Change 5 Business Change 5 Business Benefit 5 Business Objective 5

Key Building Blocks of Benefits Identification, Assessment, Validation and Realisation Framework:

January 9, 2011 21 Key Building Blocks of Benefits Identification, Assessment, Validation and Realisation Framework Benefits Planning Establishing a common language for business value and benefits between IT and the business Using objective, consistent and accepted benefits and value evaluation methods Enabling better investment decisions through robust business cases and comparable data across programmes and projects Benefits Process Tracking benefits between baseline / forecast and post-deployment to ensure that benefits are delivered proves the value IT investments deliver to the bottom line Adopting objective and reliable value measurement methods and validated data to ensure consistent reporting across all investments to demonstrate that IT can enable the delivery of business value Benefits Culture Embedding benefits management and realisation processes in wider management and decision-making processes Engaging with stakeholders to improve management confidence in the ability of IT enables investments to deliver measurable business value

Structure of a Comprehensive Benefits Identification, Assessment, Validation and Realisation Framework and Associated Organisational Skills:

January 9, 2011 22 Structure of a Comprehensive Benefits Identification, Assessment, Validation and Realisation Framework and Associated Organisational Skills

Benefits Identification, Assessment, Validation and Realisation Organisational Skills:

January 9, 2011 23 Benefits Identification, Assessment, Validation and Realisation Organisational Skills Establishing a Business Value Language Adopting a business benefits metrics as common language of describing business value between business and IT to consistently capture business benefit is important for alignment of objectives Creating Benefits Templates and Guidance Creating and then using standard templates to ensure consistent and objective benefits evaluation and measurement is important to allow comparison of investments in prioritisation decisions and organisation-wide consistent value reporting Establishing a Benefits Forecasting Capability Establishing a capability to support benefits forecasts with reliable business value data including a capacity for calculation of intangibles and benefit risks is important in the benefits planning process Establishing a Benefits Realisation Capability Establishing a capability to identify benefits dependencies and assign clear accountabilities for value realisation, measurement and reporting is important in the benefits planning process Business Value Tracking and Reporting Establishing a capability to measure benefits over lifecycle of investment, review results and adjust if required within dynamic of business environment is important in the benefits planning process Implementing and Using Standard Benefits Process Implementing and embedding the use of a standard benefits realisation process and uses benefits realisation data in other processes, e.g. budgeting and portfolio management is important for achieving a sustainable benefits culture Using Business Value Data in Decision Making Ensuring the use of business value results in investment decision making and ensuring investment decisions are based on solid business cases is important for achieving a sustainable benefits culture

What Does Benefits Identification, Assessment, Validation and Realisation Maturity Look Like?:

January 9, 2011 24 What Does Benefits Identification, Assessment, Validation and Realisation Maturity Look Like? Using consistent set of business benefit metrics and templates to both develop effective business cases that can be compared for risk/value/cost decision making Creating and using a common value language, metrics and guidance for business case and realisation plan development and execution Be able to create and execute benefit realisation plans, from which delivered value can be tracked, measured and reported on Implementing benefits identification, assessment, validation and realisation across the organisation Leveraging performance results and reporting feedback to maintain consistency, reduce risk and drive overall realised business value Provide a business value function that can help drive best practice, readiness and consolidate and report both business and benefit realisation maturity investment results, to help embed benefit realisation as part of normal business operations

Benefits Management Maturity Levels:

January 9, 2011 25 Benefits Management Maturity Levels 1 Ad Hoc 2 Basic 3 Intermediate 4 Advanced 5 Optimising Increasing Business Value

What Does Benefits Identification, Assessment, Validation and Realisation Maturity Levels:

January 9, 2011 26 What Does Benefits Identification, Assessment, Validation and Realisation Maturity Levels Benefits Planning Benefits Process Benefits Culture Establishing a Business Value Language Creating Benefits Templates and Guidance Implementing and Using Standard Benefits Process Using Business Value Data in Decision Making Establishing a Benefits Forecasting Capability Establishing a Benefits Realisation Capability Business Value Tracking and Reporting Isolated and sparse use of business value language No templates or guidance in use Few consistent measures available for investment value assessment or quality checks Limited benefits from benefits realisation assessment No benefits forecasting capability No consistent encouragement for value focus nor training provided Basic business cases with no real value tracking or reporting Business value language agree but in limited use Ad hoc use of business case templates/ guidance Templates used for investment assessment with inconsistent application Limited tracking of benefits and project reporting and communications Linking IT to business benefits is limited Limited informal training and isolated adoption Investment decisions are functionally driven to secure budgets Business value language linked to business unit goals Business case templates/ guidance used in IT and business units Organisation has an improving capability in benefits planning Business value validated by stakeholders with investments, assessed on financial and non financial performance IT and business alignment is reinforced with formal training IT and business alignment is reinforced with formal training Defined business value guidance, templates and processes Business value language are aligned to enterprise goals Business case templates are aligned to enterprise goals and are now mandatory for enterprise investments Defined processes across business and IT domains Business value claims are consistently validated and forecasting allowing ease of comparison Organisation ensures formal benefits training and use of value assessment, Organisation ensures formal benefits training and tracking and reporting of realised value Business cases and investment reviews support decision-making and delivery of stakeholder benefits Business value vocabulary and language pro-actively enhanced to maintain alignment to extended strategic objectives. Templates pro-actively enhanced to maintain alignment to extended enterprise strategic objectives# Defined processes with clear ability to adapt and extend Collaboration with extended enterprise Benefits management used and adopted across the extended enterprise Business cases and stakeholders optimise value from investments and experience from investment reviews Very high confidence in benefits process and results from senior management Level 1 Level 2 Level 3 Level 4 Level 5

Improving Benefits Identification, Assessment, Validation and Realisation Maturity:

January 9, 2011 27 Improving Benefits Identification, Assessment, Validation and Realisation Maturity 1 Ad Hoc 2 Basic 3 Intermediate 4 Advanced 5 Optimising What Are the Benefits Set up common business benefit metrics Set up standard business case template and consistent benefits valuation process What to Do Allows alignment of business and it objectives with performance criteria Enables like-for-like comparison of competing investment decisions Set up standard business realisation plan Create alignment process for business realisation plan with all stakeholders and business objectives Measure business benefits metrics pre- and post- implementation Implement control system to constantly measure business benefits over project lifetime Define project adjustment process Implement IT business value reporting system Set up system to analyse and simulate business value effects of it projects Install process to continuously review and update bar process Exploit benefits realisation data to improve other IT capabilities Ensures accountability for business benefits realisation on IT and business stakeholders Demonstrates business benefits delivered and enabled from IT investments Allows adjustments of IT investments with changing business or IT situation Increases overall confidence in business benefits measurement Allows reliable reporting of IT’s business value contribution to the business Allows proactive adjustment of IT investments based on business needs or new capabilities available Allows detection of business benefits Creates basis for business value indicated improvements of other processes

Types of Project:

January 9, 2011 28 Types of Project Fixing or improving something that exists Resolve problem Remove constraint Improve integration Implementing a new initiative New system New processes Each types of IT projects has a different approach to benefits management

Project – Fix an Existing Problem:

January 9, 2011 29 Project – Fix an Existing Problem Information Technology Enablers, Changes and New Capabilities Enabling Changes Business Changes Business Benefits Business Objectives Means to Achieve Changes Ways to Achieve Changes Results of Changes Define the improvement targets and potential business benefits Identify the combinations of IT facilities, business changes and enabling that can contribute to achieving each of the benefits Design and agree on solution that combines the most cost effective and low risk mix of IT and business changes to achieve the key benefits 1 2 3 1 2 3

Project – Implement a New Solution:

January 9, 2011 30 Project – Implement a New Solution Information Technology Enablers, Changes and New Capabilities Enabling Changes Business Changes Business Benefits Business Objectives Means to Achieve Changes Ways to Achieve Changes Results of Changes Create an overall vision for the new solution Describe the new ways of working and the benefits these will deliver Assess the feasibility of making each of the changes and of achieving each of the benefits 1 1 2 3 4 2 3 Define IT solution that enable the changes

Business Case and Benefits Management:

January 9, 2011 31 Business Case and Benefits Management An appropriate business case is needed to support a decision to make an investment in a project, programme or change Preparing the business case so it can be presented for agreement requires a clear understanding of the proposition in terms of scope, objectives, options, implementation and investment and return Purpose of a business case is to capture the reason and justification for initiating a project Business cases should be appropriate to the size and scope of the project as well as the needs of the organisation Key elements of any business case should be the background of the project, the expected business benefits, the options considered (with reasons for rejecting or carrying forward each option, including the option of doing nothing with the costs and risks of inactivity), the expected costs of the project, the tangible savings, a gap analysis and the assumptions and expected risks Business case represents the apex of an analysis, design and planning exercise

Business Case Generation Process:

January 9, 2011 32 Business Case Generation Process Confirm scope and requirements outputs and scheduled Identify, analyse and document business, functional, technical and implementation requirements and analyse existing processes and systems impacted by the proposed investment Design a logical solution to meet the defined and agreed requirements Analyse the options for implementing the solution – package acquisition and customisation, existing system upgrade, system development Create a realistic plan to implement the solution, incorporating resource requirements and constraints and includes risk, assumptions and dependencies Quantified the full costs to implement and operate the solution and identify the tangible savings Scope Definition and Agreement Requirements Analysis, Definition and Agreement Solution Architecture Specification and Design Solution Implementation Options and Selection Implementation Plan Roadmap Financial Analysis Business Case

Elements of Business Case:

January 9, 2011 33 Elements of Business Case Strategic Fit Business need and its contribution to the organisation's business strategy Key benefits to be realised Critical success factors and how they will be measured Options Evaluation and Identification Cost/benefit analysis of realistic options for meeting the business need Statement of possible soft benefits that cannot be quantified in financial terms Identify preferred option and any trade-offs Procurement and Implementation Proposed sourcing option with reasons Key features of proposed commercial arrangements Procurement approach/strategy with supporting details Whole-Life Costs Statement of available funding and details of projected whole-life cost of project (acquisition and operation), including all relevant costs Expected financial benefits Plan for Achievement Plan for achieving the desired outcome with key milestones and dependencies Contingency plans Risks identified and mitigation plan External supplier plans Resources, skills and experience required

Implementing Benefits Identification, Assessment, Validation and Realisation :

January 9, 2011 34 Implementing Benefits Identification, Assessment, Validation and Realisation Key requirements Ability to get lifetime costs right Ability to define benefits correctly and effectively Ability to manage the benefits management process Ability to increase and sustain benefits management maturity Use existing methodologies and frameworks to implement key requirements quickly ITIM Benefits Dependency Network ValIT Organisational change and commitment Create customised integrated approach to suit the needs of your organisation Adapt and simplify as required – take the best and most suitable elements

Ability to Get Lifetime Costs Right:

January 9, 2011 35 Ability to Get Lifetime Costs Right Key requirement – no point in having effective benefits management framework if project costs are not accurate and realistic Use ITIM methodology – strong focus on cost management

Characteristics of Credible Cost Estimates:

January 9, 2011 36 Characteristics of Credible Cost Estimates Clear identification of requirements of the ultimate deliverable Broad participation in preparing estimates Availability of valid data for performing estimates – historical, experience, benchmarks Standardised and comprehensive estimate structure that includes all possible sources of cost Provision for uncertainties – include known costs explicitly and allow for unknown costs Recognition of inflation Recognition of excluded costs Independent review of estimates for completeness and realism Revision of estimates for significant changes in requirements

Challenges of Developing Good Cost Estimates:

January 9, 2011 37 Challenges of Developing Good Cost Estimates Requires detailed, stable, agreed requirements Agreed assumptions Access to detailed documentation and historical data for comparison Trained and experienced analysts Risk and uncertainty analysis Identification of a range of confidence levels Adequate contingency and management reserves

Reasons for Good and Bad Cost Estimates:

January 9, 2011 38 Reasons for Good and Bad Cost Estimates Detailed, Stable, Agreed Requirements Agreed Assumptions Detailed Documentation and Historical Data Effective Risk and Uncertainty Analysis Trained and Experienced Analysts Identification of a Range of Confidence Levels Adequate Contingency and Management Reserves Complex Project or Technology Unrealistic Project Savings New Processes Untrained and Inexperienced Analysts No or Limited Comparison Data Available Project Instability Unrealistic Assumptions Overoptimism Unrealistic or Unreliable Data Unfamiliar Technology or First-Time Use Problems Getting Access to Data Unreasonable Project Baseline Ineffective Risk and Uncertainty Analysis Lost of reasons for and causes of inaccurate cost estimates

Sources of Risk and Uncertainty in Estimating Costs:

January 9, 2011 39 Sources of Risk and Uncertainty in Estimating Costs Lack of understanding of the project requirements Shortcomings of human language and differing interpretations of meaning of project Behaviour of parties involved in the cost estimation process Haste Deception Poor cost estimating and pricing practices

Ability to Define Benefits Correctly and Effectively:

January 9, 2011 40 Ability to Define Benefits Correctly and Effectively Use an approach such as Benefits Dependency Network

Ability to Manage the Benefits Management Process:

January 9, 2011 41 Ability to Manage the Benefits Management Process Use elements of ValIT framework IT-enabled investments are managed as a portfolio IT-enabled investments include the full scope of activities that are needed to achieve business value IT-enabled investments will be managed through their full life cycle Value delivery practices recognises that there are different categories of investments that will be evaluated and managed differently Value delivery practices define and monitor key metrics to enable quick response to any changes or deviations Value delivery practices engage all stakeholders and assign appropriate accountability for the delivery of capabilities and the realisation of business benefits Value delivery practices are continually monitored, evaluated and improved

Val IT Processes and Management Practices Framework:

January 9, 2011 42 Val IT Processes and Management Practices Framework

Summary:

January 9, 2011 43 Summary IT is commonly seen as failing to deliver value for money Benefits and value must be actively managed for Realising and assessing business benefits from IT-enabled investments involves more than simply assessing Total Cost of Ownership for IT-related projects and managing the IT budget Key requirements Ability to get lifetime costs right Ability to define benefits correctly and effectively Ability to manage the benefits management process Ability to increase and sustain benefits management maturity Use existing methodologies and frameworks to implement key requirements quickly ITIM Benefits Dependency Network ValIT Organisational change and commitment Effective benefits management enables organisations to clearly and consistently articulate IT’s contribution to achievement of business objectives

More Information:

January 9, 2011 44 More Information Alan McSweeney alan@alanmcsweeney.com