Designed to Fail: Why IT Investments Underachieve (and What to Do About it)

Digitaliseringskonferansen 2015Oslo, 16th June 2015

Professor Joe Peppardjoe.peppard@esmt.org@joe_peppard

Is this possible?

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Magic Bullet Thesis

Technologists develop robust technology and shoot it at the problem and expect it to resolve problems, create the required change and penetrate users

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Value for money from IT

IT CostsIT Benefits

Reduce IT costs

Current focus of attention

Need to improve

Realisation of IT benefits

This is where the problem lies!3

The relationship between IT and business benefits

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Benefits and change....

Change

Benefits

Benefits cannot be deliveredwithout change ...

… change without benefits cannot be sustained

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“Why is it that every major transformation initiative always seems

to end up being managed as an IT project?”

John Doyle, former Auditor General, British Columbia, Canada, June, 2012

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Reframing the challenge

IT Investments

Investments inChange

Increasingly complex change that is both shaped and enabled by IT

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Factors contributing to the lack of achievement of benefits from IT investments

They depend upon business and technical changes in a complex way

They do not all come immediately

They are generally not managed for

They are often not properly identified

Benefits

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(IT) benefits management

The process of organizing and managing such that the potential benefits arising from the use of IT* are

actually realized

* It is a process which integrates the realization of benefits with change management and can be applied to all types of change programs as well as IT investments

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Satisfying the investment objective

Enables Delivers Achieves Satisfies

IS/ITFunctionality

Business changes

Positiveoutcomes Benefits

Investmentobjectives

CONTENT OUTCOME BENEFITS INTENT

PROCESS OF CHANGE

ORGANISATIONAL CONTEXT

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Outcomes of IS/IT investments

Opportunityrealization

“bonus”

Nastysurprises

What is beingsought

Price worthpaying

Positive

Negative

Unexpected Expected

Effect ofoutcome

Predictabilityof outcome

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IT benefits management overall objective

Identify,exploit& learn

from

Understand& avoid

Achieveby good

management

Recognize& minimize

Positive

Negative

Unexpected Expected

Effect ofoutcome

Predictabilityof outcome

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Improved segmentation

Better targeting of marketing activity

Decreased defectionsImproved cross sell

Referrals

Customer insight

Campaign management

Improved process efficiency

Increase in employee satisfaction

- serving the customer- fulfillment- customer engagement

Channel integration

The IT latency problem…

Return on investment

timeFor typical 1st Generation CRM investment

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A model for (IT) benefits management

Review &evaluateresults

Identify & structure

benefits

Plan benefits

realization

.. in business terms

.. scale and money

.. where and who?

.. how and when?

Executerealization

plan

.. making it happen

Potential for further

benefits

.. measurement control and

learning

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Stages and activities of the Benefits Management Process

Identify & structure

benefits

• Analyse the drivers to determine the objectives for the investment

• Determine the types of benefits that will result by achieving the objectives and how they will be measured

• Establish ownership of the benefits• Identify changes required and stakeholder implications• Develop outline case for investment

Plan benefits

realisation

• Finalise measurements of benefits and changes• Determine the change actions that will produce

the improvements• with accountable stakeholders• and timescales

• Do a risk assessment/analysis• Submit investment case for funding

Executerealisation

plan

• Manage the change programmes – pursuing benefit delivery as well as technical implementation

Review &evaluateresults

• Formally assess whether the investment objectives and benefits were achieved

• Initiate action to gain outstanding benefits still achievable

• Identify lessons for other projects

Potential for further benefits

• Use the project team and other key stakeholders to identify any new benefitsand initiate action to realise them

Review &evaluateresults

Identify & structure

benefits

Plan benefits

realisation

Executerealisation

plan

Potential for further benefits

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(IT) Benefits Management toolset

Review &evaluateresults

Identify & structure

benefits

Plan benefits

realisation

Executerealisation

plan

Potential for further benefits

Business Case

Project Report on Delivery Status

Project Report on Costs & Benefits Status

Benefits Realisation

Plan

Post Investment Review

Stakeholder Analysis

Category A: Kind of change

A.6 Clarity of vision

A.5 Novelty of solution

A.4 Technology innovation

A.3 Pace of change

A.2 Degree (scale, scope, size) of change

A.1 Business impact

RangeFactor

Risk Analysis

Driver Analysis

Benefits Dependency Network

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Constructing plan for realization of benefits

Can a financialvalue be put on it?

How can we measure benefits?

Can they bequantified?

Benefits Realization Plan

Why do we need to improve performance?

What improvements do we want/could we get?

Where will improvements (benefits) occur?

What changes areneeded for improvement?

How and when canchanges be made?

Who will be affected by the changes?

Who is responsible formaking changes?

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How will benefits be achieved?

Can a financialvalue be put on it?

How can we measure benefits?

Can they bequantified?

Benefits Realization Plan

Why do we need to improve performance?

What improvements do we want/could we get?

Where will improvements (benefits) occur?

What changes areneeded for improvement?

How and when canchanges be made?

Who will be affected by the changes?

Who is responsible formaking changes?

Benefit identification and location

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Mapping and understanding how benefits will be achieved: the Benefits Dependency Network

Increaseprofits!

Launch sales drive

Attract newcustomers

Improvemarketing

Increaseproductivity

Reduceoverheads

Examinemargins

ITSystem

Increasesales vol.

Reducecosts

Improvemargin

IncreaseROCE

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Benefit Dependency Network: linking IT with benefits

IS/ITFunctionality

Enablingactivities

Businesschanges

Businessbenefits

Investmentobjectives

DRIVERS

ITSystem

ITSystem

ITSystem

ITSystem

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Benefit Dependency Network: linking IT with benefits

To increasesales volume from

new customers

To improveeffectiveness of

A&P spend

IS/ITFunctionality

Enablingactivities

Businesschanges

Businessbenefits

Investmentobjectives

ITSystem

ITSystem

ITSystem

ITSystem Reduce cost by

avoiding waste onirrelevant customers

Increased rateof follow-up

of leads

Increase responserate from A&P

campaigns

Increased conversion rate

to sales

DRIVERS

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How to get the benefits….

Customerprospectdatabase

Reduce cost byavoiding waste on

irrelevant customers

Increased rateof follow-up

of leads

Increase responserate from A&P

campaigns

Campaignresponsetracking

Projectmanagement

package

To increasesales volume from

new customers

To improveeffectiveness of

A&P spend

IS/ITFunctionality

Enablingactivities

Businesschanges

Businessbenefits

Investmentobjectives

Increased conversion rate

to sales

Measure outcomeof campaignre. objectives

Use database toimprove targeting

in segments

Introduceproj. mgmt

for A&Pcampaigns

Reducemarketing

time onadmin

Redefinecustomersegments D

RIVERS

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Company planning& management

system

Customer prospectdatabase

Contactmanagement

system

Enquiry quotation& response

tracking system

Portable PCs forsales staff

Introduce projectmanagement for all

A&P campaigns

Reduce marketingstaff time on admin

activities

Redefine customersegments

Introduce new account

management processes

Release sales timefrom post-sales

activity to pre-sales

Measure outcomeof campaigns re

objectives

Use database toimprove targeting in

segments

Realign salesactivity with new

customer segments

New sales staffincentives

Identify mostappropriate

communicationmedium for target

customers

Co-ordinate salesand marketing

activity in follow-up

Allocate sales timeto potential high

value leads

Increase sales timewith customers

Reduced cost byavoiding waste on

irrelevantcustomers

Increased response rate from

A&P campaigns

Increased rate offollow up leads

Increasedconversion rate of

leads-to-ordersUse system to

target salesactivity/contact

time

To improve theeffectiveness ofAdvertising &

promotion spend

To increase salesvalue and volume

from newcustomers

IS/IT Enablers Enabling activities Business changes BenefitsInvestmentObjectives

Benefits Dependency Network – CRM investment

• Evidence of achievement

• Responsibility• Timescales

• Benefit owner• Measures

• Evidence of achievement

• Responsibility• Timescales

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Example: X-Ray Booked Appointments Project

IS/ITEnablers

EnablingActivities

BusinessChanges

BusinessBenefits

InvestmentObjectives

Reduced unit cost /X-ray due to less

DNAs

Reduced cost dueto lack of referral

letters/calls

Improved GP’s abilityto track patients- fewer enquiries

Improved patientexperience, choice, access

and information

Better clinical careReduced

inappropriate X-rays

ITassessment

of GPpractices

Securityand

Encryption

E-scheduling

Interface to medical records

NationalStandardsfor encryp-

tion / security

IT trainerin

primarycare

Userinvolvementand comm-unication

GPs can useNHSnet

Identify patientsnot booking

Patient to telephonefor appt

X-rays to beread in 24/48

hours

X-ray Departmentto run appointment

only schedulingsystem

Referral protocolsdeveloped,

reviewed andmonitored

Patient information service to

support care

Electronic postingof results to GPs

100%electronicreferrals

Reducerejection rate for

inappropriatereferrals

Patientscan arrange mutually

convenientappointment

Improve utilisationof X-ray

department

Initialtrainingof GPs

In-patient/out-patientscheduling

process

Adoptclinical

governancebest

practice

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Benefits dependency network: summary

IS/ITFunctionality

Enablingactivities

Businesschanges

Businessbenefits

Investmentobjectives

ITSystem

ITSystem

ITSystem

ITSystem

DRIVERS

The benefits and why we want them

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Benefits dependency network: summary

IS/ITFunctionality

Enablingactivities

Businesschanges

Businessbenefits

Investmentobjectives

ITSystem

ITSystem

ITSystem

ITSystem

DRIVERS

How new ways of working can deliver the benefits and how to make

happen

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How Benefits Management fits with other methods

BenefitsManagement

Strategic Planning

InvestmentAppraisal (e.g. PID)

ChangeManagement Methods

RiskManagement Techniques

Systems DevelopmentMethodology(e.g. SSADM)

ProjectManagement Methodology

(e.g. PRINCE2)

Programme and Project

Portfolio

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The IT benefits management challenge: changing mindsets

From

• Technology delivery

• Value for MONEY- low level project task monitoring

• Expenditure proposal- loose linkage to business needs

• IT implementation plan

• Business manager as on-looker/victim

• Large set of unfocused functionality

To

• Benefits delivery

• VALUE for money- benefits tracking

• Business case- integration with business drivers

• Change management plan

• Business manager involved and in control

• IT investment which is sufficient for the job

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What distinguishes successful from less successful organisations in realising benefits?

1. The more successful select projects on the basis of desirability and their capability to deliver them, not just desirability.

2. Having methodologies is not sufficient; it is important that both business managers and specialists use them on all projects

3. Developing realistic and robust business cases, which include benefits for (if possible) all the investment stakeholders

4. Managing the benefits over the whole investment lifecycle through consistently applied practices and processes

5. Integrated planning of benefit delivery with organisational, process and technology changes 6. Business ownership and accountability for the benefits and changes7. Systematic review of the results of investments in terms of the benefits realised or not realised8. Transferring the lessons learned from successful and unsuccessful projects to others

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Technology is not a panacea

• Technology has no inherent value in itself- possession of technology does not confer any benefits or create value

• Benefits and value must be unlocked- only managers and users can do this

• All IT projects have outcomes but not all outcomes are benefits• Benefits must be actively managed for

- they are not something which automatically occur

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Further reading• J. Peppard, ‘Releasing Value from IT Investments’, Management Quarterly, Issue 19, May, 2003, pp. 35-41. • C. Tiernan and J. Peppard, ‘Information Technology: Of Value or a Vulture?’ European Management Journal, Vol. 22, No.

6, 2004, pp. 609-623.• J. Peppard and J. Ward, ‘Unlocking Sustained Business Value from IT Investments’, California Management Review, Vol.

48, No. 1, 2005, pp. 52-70.• J. Peppard and J. Ward, ‘Managing for the Realization of Business Benefits from IT Investments’, MIS Quarterly

Executive, Vol. 6, No. 1, 2007, pp. 1-11.• J. Ward, L. Daniels and J. Peppard ‘Building Better Business Cases For IT Investments’, MIS Quarterly Executive, Vol. 7,

No. 1, 2008, pp. 1-14.• C. Ashurst, N. Doherty and J. Peppard, ‘Improving the Impact of IT Development Projects: The Benefits Realization

Capability Model’, European Journal of Information Systems, Vol. 17, 2008, pp. 352-370.• S. Maklan, S. Knox and J. Peppard, ‘The Missing Link of CRM Profitability: Building Marketing Capabilities’, MIT Sloan

Management Review, Vol. 52, No. 4, Summer, 2011, pp. 77-85.• C. Ashurst, N. Doherty and J. Peppard, ‘Factors Affecting the Successful Realisation of Benefits from Systems

Development Projects: Findings from Three Case Studies’, Journal of Information Technology, Vol. 27, 2012, pp. 1-16.• J Peppard and D. Marchand, ‘Why IT Fumbles Analytics’, Harvard Business Review, January-February, 2013, pp. 104-

112.• S. Maklan, J. Peppard and P. Klaus, ‘Show Me the Money: Improving our Understanding of How Organizations Generate

Return from Technology-Led Marketing Change’, European Marketing Journal, Vol. 49, No. 3, pp. 561-595.• D. Marchand and J. Peppard, ‘Is Paradigm Paralysis Choking your IT Investments?’ MIS Quarterly Executive,

forthcoming.

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