Rules for effective benefit realization

Saw a great article recently summarizing the need and framework for benefits realization. Here are some highlights and key points:

For most companies IT is a significant component of capital spending—typically between 50%-75%. For the vast majority, more than 70% of this is in fixed costs, and when you take into account the prior year "carry over" spending, and depreciation, a very small percentage of IT spending in a given year may be creating real value for the company (and that's assuming that those initiatives are successful). Now consider this scary fact from survey and interview research we've done over the past decade: Fewer than 12% of companies can accurately measure the business impact of their IT investments

Benefit realization is about the proactive forecasting, management and measurement of financial, operational and strategic benefits being realized. It's about driving accountability for IT results across the organization. And it's in this role where the CIO can be the greatest advocate and most effective. Most companies either have little or no benefit realization in the critical areas, or they have too many processes and artifacts, and in turn, are viewed as overly bureaucratic, draconian, and non-value add.

Here are a few rules to live by for effective benefit realization:

1. Start Building Selectively:
- Pilot with a particular business unit and set of initiatives.

2. Secure Business Co-Ownership:
- Ensure senior leaders collaborate in selecting IT measurements.
- Work with corporate finance for their input and support.

3. Recalibrate Benefit Measures
- Regularly review and adjust performance measurements being used (yearly) to prevent them from getting stale or obsolete.

4. Demand Business Accountability For Funding And Delivering IT Results.
- If the business is unwilling to have the benefits be incremental to their operating plan, that's a red flag.

5. Be Selective With Benefit Realization Metrics
- Focus on a select few performance measures and take great care not to dilute the need for focus with too many measures.
- Strong CIOs are relentless about determining what results truly matter.

6. Give Yourself and Others a Break
- Do not use the same level of measurement and process rigor on all initiatives as you'll risk killing the effort with bureaucracy.

7. Use A Business Performance Language
- Use metrics that are business-relevant and matter to key stakeholders.
- Ensure measures are speaking to stakeholder interests.
- Take care to not use the same benefit lens across the entire IT landscape (e.g., infrastructure spend is different than new business applications).

8. Measure the Benefits of the Benefit Realization Process Itself
- Done well, this should yield improvement in key areas such as improved ROIC (return on invested capital); and reduced variance of planned to actual costs and benefits.

The bottom line " benefit realization practices are not cookie-cutter. Rather, they are a specific set of processes, methodology, a toolkit, and most of all, a journey. Successful ones are very context-driven and take into account the organization's culture and management style. Don't wait to have everything thought through to perfection " it won't ever be. And most important, make such capabilities part of the organizational DNA, rather than an effort that is a reaction to down or tough times.

The full article "Rules To Live By: Benefit Realization - Improving the Yield on IT " by Amir Hartman can be found here. If you are or planning to work in this area, I highly recommend reading the entire article.