A new look at extracting value

HP of late has enjoyed stunning growth under its new leader Mark Hurd. However, as with any big company, growing revenues is always a challenge. With $100 billion in sales, it is hard to keep growing at 10% every year. One of the drivers for HP's growth is its research labs. The new head, Prith Banerjee, has an interesting way to ensure that the HP labs generate value add ideas to generate growth. Basically he is narrowing the focus, getting resources allocated on high impact projects and making projects justify their value. "Value methodology" as I call this is the same justification for the business case and benefits management process. Realize the benefits by focusing on high impact areas thereby maximizing the utilization of the scare resources.

Here are some relevant excerpts from the article:

- "HP Labs today does a lot of cool things — about 150 research projects – but it does so many things that none of the projects get enough resources to have a high impact," says Banerjee. "My message was, let's try to narrow the focus."

- Banerjee's vision borrows heavily from the culture of Silicon Valley venture capital firms, which fund fresh new ideas and try to nurture them into the next Intel (INTC) or Google (GOOG). Traditionally, HP Labs scientists have had little incentive to transform concepts into products. But in the future, research efforts that fail to meet benchmarks won't get more funding, according to HP executives; instead, more resources will go to larger projects that are meeting goals and are likely to mature into profitable new businesses.

- Likewise, it will take years before investors can be sure whether HP's revamp of its labs is bearing fruit. Many of the research areas that the company identifies in 2008 won't yield products until 2013, though the new model could produce some benefits sooner. For instance, HP's personal computing group has set up a team called the Innovation Program Office that seeks to grab good ideas from inside and outside the company and turn them into products more quickly.


The full article can be found at : http://bigtech.blogs.fortune.cnn.com/2007/12/17/turning-an-idea-farm-into-a-hit-factory/?source=yahoo_quote

Involving IT and articulating the benefit

There was an article in the WSJ today talking about the importance of the IT department in companies and why they should be involved in the strategic decision making process. Most big companies realize the value of "IT" and how they can enable the successful operations of a company. Whether they are leveraging this is another matter. I think how effectively "IT" is involved is the key differentiating factors of successful companies. It is also just as important for IT to keep showing how they can benefit the company and one of the best ways to articulate this is via the business cases process. The business case is essentially the first contract between IT and the "business" to demonstrate the value (benefits) being achieved and how much (cost) it will take to get this. It is normally written in business terms without all the "IT" jargon so that business executives involved can easily understand, evaluate and buy in to the proposal. If they don't, it will more than likely result in the change effort not delivering value (real or perceived) even if meets schedule and cost targets.

Here are some excerpts from the article I mentioned that talk about the value of IT and the outline some of the pitfalls as seen by business executives. Sound familiar?

- According to a study by Diamond Management & Technology Consultants Inc., of Chicago, 87% of business leaders say they believe that IT is critical to their companies' strategic success. The study finds that few businesses have yet positioned IT in a way that allows it to achieve this. Only 33% of business leaders say IT is very involved in developing their company's strategy, and 30% say the business executive in charge of strategy works closely with IT, according to the Diamond study. That has an impact on performance: 76% of companies say they have had to abandon a tech project, including 29% that say they have abandoned more than 10% of these projects, according to the Diamond study.

- At Walgreen Co., the Deerfield, Ill., pharmacy chain has included its CIO on its management team since the late 1990s. That has helped Walgreen connect all its pharmacies via a single software system, which the IT department updates several times a year. The IT department depends on feedback and suggestions from pharmacists and other store employees in order to make changes. Jeffrey Rein, Walgreen's CEO, says having the CIO on his leadership team sends a message to employees that they need to make providing this feedback a priority. "If you don't involve the CIO in strategy meetings, you end up with systems that don't serve the needs of your employees or customers," says Mr. Rein.

- One reason many companies haven't worked closely with their IT departments is because IT professionals often struggle to explain what their departments do in language that business leaders understand, says Jerry Luftman, a professor at the Stevens Institute of Technology, in Hoboken, N.J. That has made it hard for non-techies to see the value that an IT department contributes to a company and creates the impression that IT leaders are too focused on bits and bytes. < This is where the business case comes in as a key channel for clearly documenting the business value to be delivered>