Benefits Management

How to Increase the Business Value of Your IT Projects

John Ward, Elizabeth Daniel

• Publisher: Wiley
• Year: 2012
• ISBN:
  9781118381601
• Edition: 2
• Topic: Business
• Subtopic: Information Management
• Index: Business

The second edition of Benefits Management has been updated with current examples, further insights from experience and recent research. It shows how the enduring challenges achieving business value from information systems and technology projects can be addressed successfully. The approach, which is synthesized from best practices, sound theories and proven techniques from a range of management disciplines, is exemplified from the authors' extensive experience of working with a wide range of organizations. The book includes examples from a wide variety of projects including non-IT projects. The book is written in an accessible style, ideal for practicing managers, and includes check lists and templates for using the processes, tools and techniques and real-life case studies of their application and impacts.

The book now also includes:

• International survey results that reinforce the importance of the topic, the key management issues and evidence of how the more successful organizations' practices are closely aligned with those described in the book.
• A Benefits Management Maturity diagnostic which enables organizations to understand the reasons for their current investment success levels and then how to increase them.
• Discussion of the role and contribution Project Management Offices (PMOs): how they can improve the delivery of value IT projects.
• Further practical advice and guidance on Program and Portfolio Management, including findings from the authors' recent research in several large organizations.

Chapter 1

The Challenges of IS/IT Projects

Information systems and technology (IS/IT) are now essential components of the majority of businesses, allowing them to achieve greater efficiency of operations, increased agility in responding to changing market demands and the ability to develop innovative products and services. Equally, almost all public sector organizations could not deliver their services effectively and economically without the extensive use of IS/IT or ICT, as it is generally called in the public sector. However, despite the consensus about the strategic importance of IS and IT and the considerable investments that organizations continue to make in their purchase and implementation, the realization of benefits remains challenging. Our own research discussed in Chapter 5 (Ward and Daniel, 2008) has found that, in the majority of organizations we surveyed (57%), less than half of the projects they undertook delivered the expected benefits. This is consistent with earlier studies that show the majority of IS/IT projects are judged to be unsuccessful in terms of the benefits achieved.

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‘Companies currently spend about 5% of their revenues on IT. While there is a large variation in that number, there is an even greater variance in the benefit that companies get out of their IT.’ Upton and Staats (2008)

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We would suggest that the bald statistics hide a number of more subtle issues:

• Organizations are implementing more complex and sophisticated information systems and other IT applications, which require in­creasing levels of managerial and employee skill to deliver and use effectively.
• Expectations created by the IT industry are not realistic in terms of proven benefits or the time it takes to realize them. Despite this, many senior executives tend to believe the promises of instant success they read about in business magazines or hear being promoted by suppliers and consultants.
• The applications are often enterprise-wide and impact more people inside the organization and also relationships with external trading partners and customers. One organization cannot prescribe how others will conduct their business, and achieving benefits relies on the active cooperation of a wide range of stakeholders.
• The types of benefit that IS/IT can deliver are increasingly diverse and less easy to identify, describe, measure and quantify. Uses of IS/IT have increased the volume and quality of information available, but it is still difficult to explicitly value the contribution many of its uses make to organizational success.
• In many cases, it is difficult to relate business performance improve­ments to specific IS/IT projects, as they usually result from a combination of improved technology and other changes in the ways of working.
• The prevailing focus of many organizations on achieving a short-term financial return from their investments prevents many of the longer-term benefits of a coherent and sustained IS/IT investment strategy from being achieved.
• As will be discussed in various parts of this book, organizations do not consistently undertake benefit reviews at the end of projects and transfer lessons learned to future projects. Our research has found that this is the key differentiator between organizations that are more successful in delivering benefits from IS/IT projects and organizations that are less successful.

At the same time the commercial and social contexts in which those investments are made are changing rapidly, both in terms of globalizing industries and the extensive use of IT in individuals’ lives. Organizations not only have to align and synchronize their IS/IT projects with evolving business strategies, but also meet the expectations of ever-more sophisticated customers and, in the public sector, citizens. The volume of information now held electronically, in combination with legislation, has increased the need for greater security of the data stored to counter the threats from fraud and ‘leaks’, as well as to protect organizations’ assets and individuals’ rights.

While these challenges largely result from the rapidly evolving use of technology and the complex problems associated with the scale and scope of deployment, there are a number of management issues that are critical to successful investment.

Strategic Intent and Actions Required

Employees often report that their organizations are continually undergoing change, and that the rate of change is increasing. This is often a result of senior managers developing strategies in order to respond to internal pressures on the organization. However, whilst managers are aware of the pressures and can decide on apparently appropriate responses, they are often unaware of the implications of those responses for the staff, ways of working and systems within the organization. Expressed another way, it could be argued that ‘the devil is often in the detail’.

The public sector, in particular, often suffers from disconnects between strategic intentions and the actions that must be undertaken to achieve them. Politicians make announcements on policy or service changes, which often include significant IS/IT projects, without understanding the implications of implementing those systems at the local level. For example, new healthcare systems in the National Health Service (NHS) in the UK usually require implementation across a large number of providers, either Hospital Trusts or Local Health Economies, all of which are at different levels of experience and sophistication with their current systems. The realization of benefits when many separate parties are involved, all of which are at different starting points, is highly challenging.

Recognition of Organizational Factors

The promises made by the vendors of information technology suggest that all an organization needs to do to improve its performance is to implement a given application or set of hardware – often termed the ‘silver bullet’ approach to IT deployment. However, considerable research has shown that such implementations should not simply be exercises in technology deployment, but, to be successful, should also be accompanied by complementary changes in processes, the working practices of individuals and groups, the roles of individuals and even the culture of the organization. It is the investment in these organizational factors that is often missing, and this is why benefits are not being realized.

Finding a Fair Balance of Benefits

The increased adoption of enterprise-wide systems, as noted above, means that a wider range of users will have access to or be required to use information systems. The investment in such systems is often predicated on the benefits that will be realized by the organization; however, as noted by Jurison (1996), realizing those benefits depends on achieving:

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‘a fair balance of benefits between the organization and its stakeholders. The issue of gain sharing is of critical importance … with no apparent benefits to them, stakeholders are likely to resist the changes.’ Jurison (1996)

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A Common Understanding

The different stakeholders associated with many new system projects result in a variety of perspectives on what the system is expected to achieve and how changes could be made to deliver these benefits. Unless all the stakeholders understand why change is needed and can agree an approach to achieving the necessary changes, it is likely that individuals and groups will pursue multiple different, potentially conflicting, approaches that can waste time and resources, resulting in difficulty in realizing the expected benefits.

Dissatisfaction with Current Approaches to Benefits Delivery

In 2006–2008, we undertook two surveys (one in collaboration with Vlerick Leuven Ghent Management School in Belgium and the other with Cutter Benchmarking Consortium) of senior business and IT managers, in order to explore the activities involved in the delivery of benefits and satisfaction with those activities. In total over 200 responses were received from organizations in over 30 countries. The overall results were almost identical from the two surveys and showed few differences when analysed by geography, type of organization or respondent. The findings relating to satisfaction are summarized in Table 1.1 and show that, in most areas, the managers surveyed were not satisfied with their current practices.

Table 1.1: Satisfaction with benefits management activities

	Not satisfied with their current approach
Identification of project costs	43%
Project prioritization	59%
Identifying benefits	68%
Development of business cases	69%
Planning the delivery of benefits	75%
Evaluation and review of benefits realized	81%

Table 1.1 shows that respondents were most satisfied with their identification of project costs. However, whilst some organizations take a comprehensive approach to identifying costs, the survey found that this is not always the case, with many organizations failing to include internal costs associated with achieving business changes, with the implementation of systems and with new ways of working once the system is operational. Without an understanding of the full costs involved in an IS/IT project, it is impossible to be clear on the overall financial value of undertaking the project.

The resources available for new projects are finite within any organization and, in difficult trading conditions, can become very limited. This results in organizations needing to be able to compare projects and identify those that they wish to undertake or, if they are not willing or able to refuse projects, to be able to identify their optimal order and timing. For those undertaking some form of project prioritization, the most frequently cited reasons given were:

• to align the objectives of each project with the strategy of the organization (92%);
• to avoid over-commitment of limited resources (87%);
• to set priorities across different types of investment (82%).

However, despite having clear intentions for the prioritization of projects, as shown in Table 1.1, the majority of respondents were not satisfied with their organization’s approach.

Respondents were also dissatisfied with their approach to identifying the benefits from IS/IT projects. Only 35% felt that they were successful in identifying all the benefits arising from a project and only 31% believed that they quantified the benefits adequately. As discussed earlier, the success of projects often relies on a fair share of benefits being realized by all the stakeholders involved. Without such a distribution of the benefits, it is likely that some of the stakeholders will have little interest in the success of the project. Worse still, if they are going to be disadvantaged by the project, often described as receiving disbenefits, then they may actually resist the implementation.

The vast majority of respondents (96%) to the survey said they were required to develop a business case in order to justify investment in IS or IT projects. But, as can be seen from Table 1.1, the majority of respondents (69%) were not satisfied with their ap­proach to business cases. While there is a recognition that information system investments are made to yield benefits to the organization, traditionally business cases have not been explicitly stated in these terms. In many organizations, the busi­ness case that is required is essentially a financial assessment. This emphasis is likely to make projects where the benefits are difficult, if not impossible, to express financially hard to justify. However, they may be projects that contribute directly to those areas of the business that are most important to the organization’s future, for example customer care or employee satisfaction. The dominance of a financial mindset within business cases will tend to favour cost-cutting or efficiency projects, which, although worthwhile, may be less beneficial investments than those that improve effectiveness or enable innovation within the organization.

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‘Benefits are typically delivered through extensive changes to business practices and decision making. There is a growing consensus that organizational factors are far more critical to successful IS implementation than technical considerations.′ Markus et al. (2000)

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The surveys showed a clear correlation between higher levels of IS investment success and a wide range of benefit types included in the business cases. In particular, benefits associated with sharing knowledge, collaborative working, team effectiveness and individual job satisfaction were far more common in those organizations’ business cases. The less successful tended to focus on efficiencies from process improvements and cost savings.

Delivery or implementation planning involves identifying and planning the activities needed to ensure benefit delivery from the IS/IT project. Whilst most organizations (64%) indicated that they planned technology implementation, far fewer (31%) had clear plans for the organizational changes necessary to realize benefits, for example how staff were organized and how they carried out their work. Again, as discussed earlier, considerable research has shown that, to be successful, technology deployment must be accompanied by com­plementary changes in processes, the working practices of individuals and groups, the roles of individuals a...