So far so good, people going up to the wall to see where they need to be, I am sure you have seen it a hundred times.  But then the word came down, the company CEO was going to be visiting the meeting.  Suddenly the information that was helpful was taken down.  ‘It was too messy for the CEO to see,’ argued one of the suddenly present members of the corporate staff.   They will see the mess and assume that that what you are doing is a mess.

So, about 30 minutes before the CEO was expected to arrive, corporate staff swooped in, cleaned up and encouraged people to look busy.  Funny thing was that they were already busy, very busy in fact and the paper, while a little messy was helping them be productive.

People talk about senior executives being distant and disconnected from the front line people, their challenges and their reality.  The idea that corporate needs to come and clean up for the front line associates is not only offensive but also detrimental to the business.

Hiding information from the CEO is never a good idea.  It gives the CEO incomplete information that quickly forms into assumptions and expectations that neither sustainable nor supportable.

We all work hard.  We are all inventive in improving the way we work.  Some of those inventions, while not pretty, work really well.  Some of those inventions are indicative of real operational problems.

Hiding reality from the CEO distorts their view to your and everyone’s determent. It is a sign of weak management. To find others see links below or use the keyword ‘signs of weak management’ on this blog.

Besides how will things ever improve unless we are all honest about the way things are?

Selected links to other signs of weak management

Blame storming – one of the signs of weak management

Strategic constipation – one of the signs of weak management

The Little Red Hen – one of the signs of weak management

Working your way stupid – one of the signs of weak management

Sophie’s Choice metrics – one of the signs of weak management

Precision requires that specific investments that produce pre-defined and specific results.  You want to produce more widgets, then you need to buy another machine.  You can precisely say that new machine produced X widgets at a price of Y and therefore has a value of X * Y.  That is the kind of precision people think about when they think about value.

Precision can be achieved when the relationship between the parts of the business are simple and clear cut.

Simple and clear connections come from decomposing business value into constituent parts and measuring the performance of the parts with the assumption that all other parts function properly.

In the example below, the machine produces more widgets but those widgets have no value until they are sold.  So a more accurate measure of the value of the machine would be the revenue generated from the widgets which requires you to bring in elements such as sales volumes and discounts.  The figure below illustrates the difference.

Now this is a very simple example, but suddenly the realized value of a new machine is not what it can produce, but the portion of its production that is actually sold.

This begs the question – what is the cause of excess inventory?  Is it over production or less effective selling, or both?  How you assign causality in this simple system creates false precision that is captured by the spoken or unspoken assumptions of your business model.

Causality for IT Value is even more complicated as IT solutions bring together multiple parties, players and situations.  If IT is horizontal in an organization, then it can easily be the cause of every problem and the basis for every success to none.

Leaders recognize that modern business is too complex to be able to assign specific and reliable causality between investments and changes in business performance.  Rather than seeking causality, they look to prove the following:

Where IT works, good things happen

Those good things are changes in business performance that can be measured using existing business metrics and critical success factors.   Rather than precision, leaders want to demonstrate that IT does participate and contribute to the creation of business value by raising performance.   They do this by recognizing that IT creates value over time. They also look to measure IT’s production of future value. In both cases, the CIOs are trying to show the impact IT has on business performance and future potential.

Demonstrating that association is one thing, getting business leaders to agree to think in this way is another.

Start by talking with the CFO about how you are going to start including these other metrics in your reporting pack.

• Point out that you are not looking for precision or for causality, but rather to enhance the information the executive team uses in making IT decisions.

• Describe how these measures are important to creating a value-based culture in IT.  If all you report and manage are cost and schedule, then that is all you are going to get, people concerned about spending money on time.

• Admit that these metrics are descriptive, directional and will improve over time. Do not take credit for specific IT investments, yes IT did this, but we all worked together to get that, the result.

• Finally, discuss how these measures begin to establish an executive conversation around what really matters – realizing business benefits from operational and technical change.  The name of the game is business performance, no matter how it happens.  Without a way to looking at performance changes in conjunction with performance results there is simply no way to have an informed business conversation about benefits realization.

These actions are a start for IT to measure its impact, albeit a little one.  Greater precision comes over time as the business becomes more comfortable with measurement and more precise in its own measures.   Right now that ability to grow, refine, improve and extend measurement does not happen for the simple reason that many organizations are not ready for these measures, they do not know how to manage to them.  They create false precision that leads to less powerful decisions and misdirected strategies.

Better to start with measures that recognize the reality of business complexity and seek to explore associated connections and then grow into a more prescriptive model.

Otherwise managers are faced with muddling through the same way a High School Student muddles through when trying to learn postgraduate mathematics.  Sure some get them, and you kind of know what is going on, but its decisions based on intuition rather than information.

We came to that finding by asking CIOs to rate the importance of their business priorities in terms of each priority on a scale ranging from differentiating to common practice across all industries.  Likewise we asked CIOs to say how strongly connected were their IT strategies to their business strategies on a scale ranging from Very strong to none.  The result was:

Many claimed to be tightly connected to the business strategy with more than 80% of their plans either strongly or very strongly connected.

However:

The power of those business strategies were quite low as more than 70% represented strategies that were general practices in their industry or across industry.

That was in 2011.

We are about to complete and finalize plans for 2012.  So it’s a good time to look at business strategies, IT plans and business expectations through the same lens.  See: It is time to create more than a little competitive instability for some ideas

Are you being asked to do the dishes again for 2012?  You are if you’re in support of business plans that do not drive your enterprise’s competitiveness – the things that make it

• Unique,
• Different from the competition, or
• Represent the reasons why customers choose to do business with you over others.

These are the terms the business uses to assess the strategic importance of a plan, an investment, or action.    Notice that size does not impart strategic importance.  Your large IT projects, one that may be too big to fail, is not necessarily strategic and in fact may be the epitome of ‘doing the dishes.’

So its time to look at your plans and ask:

• What are my major plans for 2012?  Which business strategies do those plans support?
• What is the level of that support?  What will IT do that will realize the strategy and its objectives.
• What is the strategic nature of that business strategy?  Does it create strategic value that the business would recognize?
• What are the other business strategies where IT is not involved?  What is their strategic nature?  Could IT make them more strategic?

Not every IT plan will be strategic.  In fact for a strategy to be unique and differentiating, it has to be somewhat rare. Trying to claim that all IT plans have business based strategic relevance is not recommended as it makes you look co-dependent.

Rather, treat the business strategically relevant IT plans differently.  Give them more ‘quality time’ in leadership meetings.  Give them greater visibility in your communications with the business.  Adopt business performance based measures for their success rather than progress against plan.

Raise their profile, because if you treat the business strategic programs the same as everything else in your plan then you are telling your business peers that there strategic plan is the same as general practices – you see doing them the same as doing the dishes.

Its time for the CEO to bring together a team to make the hard decisions required to move from goal setting to goal execution and achievement.  That team should address the following issues answered by the following senior executives.

• Top Line Revenue – answered by the business unit leadership, sales and the Chief Marketing Officer (CMO)
• Bottom Line Earnings – answered by the Chief Operating Officer (COO) and/or operational leaders found in manufacturing, service delivery and the supply chain
• Cash and Capital requirements – answered by the Chief Financial Officer (CFO) who also provides the additional benefit of rendering an opinion on the feasibility of top and bottom line plans.
• Organizational exposure – answered by the Chief Corporate Council  (CCC) who renders an opinion on regulatory and litigation exposure.
• Ability to execute at Speed and Scale– answered primarily by the Chief Information Officer (CIO) as they have the understanding of the degree of operational changes necessary to implement strategic decisions, alternative approaches to achieve these goals and drive necessary scale.

It is common for CEOs to start with Sales, then Finance, then Operations, then legal, then IT.  That sequence makes sense, as revenue and growth are the drivers of shareholder value and results.

Taking a serial approach creates core rigidities in the strategy execution process that leads to creating organizations that are:

• unnecessarily complex,
• unable to change,
• brittle, costly, and
• overall weaker than they need to be.

The sequence of making strategy execution decisions fosters these results as it creates conversations based on the following:

• Implementing point solutions to generate revenue and respond to point changes in the marketplace
• Providing an incentive for individual players to invest in correcting past problems – never again – rather than looking
• Limiting the ability to leverage existing and proven capabilities across the company.
• Creating an incentive for BU’s and functions to focus on their differences as a means to secure resources, which they view as a source of power and influence, rather than the results they generate.

Individual conversations yield independent solutions that drive complexity, cost and reduce agility.  The result is a series of semi-independent processes, applications, operations the implementation of each making sense in isolation, but making less sense in the aggregate.

High Risk, High Pressure, Expensive transformation programs are the price for serial strategy

The result is that enterprise wide investments that should be part of continuous evolution of your firm become the subject of high risk/cost transformation revolution.  Don’t believe me, just look at your current transformation programs that may be deemed too big to fail.

How did you get there?

Gradually and through a series of deferred decisions or conversations that never happened because the issue did not come together until it came to dominate the enterprise.  The supply chain did not become our problem until it was everyone’s problem.

That happens, in part, based on the way in which the CEO sets up the strategy planning and execution planning process.  Rather than creating a set of interlocking and shared goals, serial conversations create individual goals and the hope that they add up to deliver the strategy.

Without an interactive discussion, that approach creates a situation where individual executives make the right decisions for themselves that in aggregate answer the wrong question.

Strategy execution is a conversation

CEOs need to think of strategy execution as a collaborative conversation rather than a one-on-one interrogation.  CEOs who see their direct reports as individuals are managing with a model that worked in the past when things were less complex, changed in predictable ways and were more local than global.

CEOs with a track record of results recognize that each of these players is responsible for the resources and key decisions required to implement your strategy.   Treating each separately and serially in the strategy process undermines your organization’s ability to coordinate its actions, to build strength upon strength, to deliver new capabilities to market at speed.   See: Does your company work like five fingers, a fist or a claw? for other considerations.

The level of interaction, collaborations, and trade-offs required to handle the realities of creating value. Recall the adage: none of us is as smart as all of us.

The collective wisdom, experience, energy and insight of the senior executive team shows itself best when the CEO takes a team approach to major decisions such as how you will implement your strategy.

Related Post  CFOs share their concerns about their strategic importance.

1. Become a Strategic CFO
2. Drive value through capital allocation
3. Develop a financial leadership pipeline
4. View cash as a strategic tool
5. Provide short-term and long-term balance

Looking at these priorities highlights the consistency between all of the direct reports of the CEO – everyone wants to be more strategic, drive more value and have their unique resources appreciated among the executive team.

A prior post, The CIO and the Rest of the C-Suite, discusses a recent HBR article that highlights the changes across the entire C-Suite with particular focus on what they mean for the CIO and technology.  That study mirrored the feedback reported by the WSJ CFO Network.

The CFO has as much right as the other C level positions to play a bigger role in setting strategy.  As much, but not more for the reason that while a poor financial position closes strategic options and can kill a company, the opposite is not true.  Financial strength alone does not make a company great.   The same can be said for the CIO and technology, the CMO and marketing, as well as the Chiefs of HR and people.

Strategic importance comes from being more than ‘good enough’ or operating within the range of industry performance.   Strategic importance comes from creating something valuable to customers and unique in the marketplace.  More about that latter.

The opportunity to do that is open to every C-level and senior executive and based on the WSJ CFO network priorities it is a considerably more level playing field than one would expect.

Over the past 30 years the CIO role has grown up from a technical operations role (data processing) through a technical focus on back office applications (management information systems) to a focus on enterprise information and performance (chief information officer).

During that transition it is easy to dwell on the shortcomings and issues between the CIO and the executive team.  Arguments that CIO stands for Career is Over, or highlighting the fact that the rest of the business just does not ‘get IT.’   These arguments and the resulting commiseration among CIOs may have been helpful in defining what the CIOs role was becoming, but they are not detrimental to what the CIOs role needs to be in the future.

A recent article in the Harvard Business Review entitled The New Path to the C-Suite (March 2011 page 61 – 68) illustrates the need for us to change our view of the CIO.  In the article the authors review each of the major C-Suite jobs:

• Chief Information Officer
• Chief Marketing and Sales Officer
• Chief Financial Officer
• Chief Supply Chain Officer
• Corporate Counsel
• Chief Human Resources Officer

With short vignettes around the changing nature of each role, the authors summarize the new requirements for the role.  I have put these new requirements into a single table shown below.

The table represents a watershed for CIOs and their role.  Often the CIO and the future of the CIO are dealt with in isolation and rarely can you see a projection of the CIO role relative to the other roles in the C-suite.  The table above and more importantly the article provides a landscape of what the authors see as future executive requirements. I recommend reading both.

Several things are striking.

First, those that believe the CIO role is narrow will highlight the fact that the CIO’s column has fewer rows than the others.  Fewer rows do not mean less important, particularly when you consider the items in those rows compared to the other roles.

CIOs according to the authors have responsibility for an enterprise wide view – unique across the roles.  They also are responsible for coordinating the business process and information that flows across the organization and how to best use technology to raise business performance.

Technical understanding and outsourcing are mentioned in several other roles indicating the depth at which things the CIOs have known and worked with for years are central to other operations.

The authors describe the new requirements for the other roles, with the exception of the CFO, as largely concentrating around their function.  Marketing concentrates on marketing, supply chain around supply chain, and HR on people, compensation and succession.  A personal observation is that these roles are still forming as organizations and their leadership teams adapt to the information, technology and pace of modern markets and competition.  In some ways the CIO’s expectations reflect the scope of concern associated with a general manager than the others.

These new requirements, defined by the authors, also highlight potential future areas of competition/conflict between the CIO and their C-suite peers.  These include

• Customers, which are part of the requirements for the Chief Supply Chain, Chief Marketing and Sales and CIO – all of which have some degree of responsibility for how the organization uses information, technology and channel intensive solutions to market, sell and serve customers.

• Business model as the CIO has requirements based on a process and information standpoint while the CFO sees the business model from an accounting and finance perspective.

• Marketing and customer channels which are increasingly technology driven and therefore represent a potential conflict between the CIO and CMO.

• Regulations and green considerations that are highlighted, as areas for General Counsel but require an information and technology based response.

• Change management and cultural transformation, which are increasingly driven by technology brings the CIO and Chief Human Resource Officer together as the organization looks at issues of collaboration, evaluation, rewards, etc.

How CIOs and the rest of the C-Suite handle these apparent overlapping requirements will determine if the C stands for Collaboration or Conflict.  In the past, executives have created a zero-sum game at the top where one person’s growth involves the demise of another role.  Now you can say – not any more – to what I just wrote, but go back to your last re-organization and think about how you all talked about who won and who lost in the re-organization.

Its time to get past all of that, not because its counterproductive, but rather because its unnecessary as there is more than enough responsibility, resources and accountabilities to go around.

Consider this, past and current turf wars were about the control of internal resources and functions.  That is an internal battle where winners and losers are a company matter.  No longer

Consider the overlapping requirements facing the C-suite around customers, channels, partners, products, profitability and you see a complex set of issues that cannot be readily solved through a functionally oriented approach to divide and conquer.  True collaboration is essential in the C-suite.

That is the one big take away from the article.

Why?

Well even as the authors tried to delineate the requirements for individual roles in the C-suite they have created definitions that taken together highlight the need for the C-suite to be a team rather than a cast of role players.

And the CIO right there with the rest of them.

Benefits realization is one area that is in need of re-imagination.

According to more than 2, 000 CIOs responding to Gartner’s annual CIO survey, an IT business case is among the most frequently used technique for realizing business benefits. These CIOs also rank an IT business case as among the least effective at supporting the organizations realization of business benefits.  Here is why?

IT business cases, in practice, concentrate on justifying an IT project by demonstrating that its projected benefits outweigh implementation costs.   These cases are the object of intense focus at the start of the project and in the early stages of governance.

Ask a team about the business case and its influence on their work and you find out that the solution is engineered to meet its specification rather than solve a specific problem or enable an opportunity.

Discuss how the business case is translated into operational metrics and management goals and you can see that the traditional case concentrates on one thing – justifying the project.

We need to replace a business ‘case for investment’ with a business investment plan.

It may sound like semantics but a ‘case for investment; is exactly that a case to support a decision, whereas a plan is a set of decisions that commit the organization to operate in a different way.

Characteristics of a business investment plan include:

• An actual expected return, measured in terms of specific changes in cost, capital, cycle time, revenue and capabilities.
• A business performance model outlining the current and future operational metrics for the process or capability undergoing change.
• A set of new management metrics that define how the organization should operate its processes and the solution.
• The new commercial relationships, inter-company activities, service levels , commitments, job designs and the other elements required to sustain the intended higher level of performance.

A business plan should have a similar weight as a P&L budget as the returns from the investment determine the organization’s performance.  Fail to make the investment plan work and it will impact their bonus.

A business plan should be a basis for making commitments and assuming responsibility for the business result.  That is the test of a solid business investment plan.   If you are not willing to put your career and job on the line then you have a plan.

Many organizations have IT business cases that function as proof of the validity of the project.  That is useful in getting a project approved, but is not the best basis for benefits realization.   That is what CIOs are saying when they say that they use business cases but they are not particularly effective at benefits realization.

Umair Haque’s book makes an argument for what 21st capitalism should look like in the face of the economic, social, environmental and technical challenges we all face.  Haque points out that the open-ended consumption model we have today is not sustainable and certainly crazy to be the preferred path for how emerging markets grow and develop.

Note: this s a long review as The New Capitalist Manifesto is a complex and unique book.  It’s not just a call for reform couched in populist terms, but a rather serious look at alternative ways of conducting capitalism in the future.  It sits in the gaps between economics, business, environmentalism, social science and probably a few other disciplines than that.  The combination makes for a complex, but accessible book that makes you think.

Haque’s book is a studied look at the issue and strong advocacy for something he calls “constructive capitalism” that is based on creating close looped value cycles rather than unsustainable open-ended value chains.  The book is a provocative and progressive look at a potential future for the capitalist economic system.

Recommended for anyone wondering what will come next, how companies will compete on a broader level and price and economic scale.  I found the book helpful in thinking about what the future and future strategies might look like.   Highly recommended for strategists and those looking to understand an implementable argument

Haque’s central argument revolves around the observation that current capitalistic practices lead to what is called ‘thin’ value.  Thin from the perspective that the value created relies on exploitation — not in the Marxist sense — but in the environmental sense.  Resources depleted without an incentive to return them or replace them with something better.

In contrast, Haque encourages companies to create ‘thick’ value, which is described as generating profits by activities that create value for sustainability, authentically to people and build up rather than tear down people, communities and resources.

The books chapters

Chapter 1: A Blueprint for a better business sets the stage and makes the argument that the current type of capitalism is not sustainable.  Rather than call for simply ripping it up and replacing capitalism with another system, Haque lays the groundwork for how capitalism can go through a revolution to meet the challenges we all face.

Chapter 2: Step One: The Loss Advantage / Changing value chains into value cycles discusses the notion of socio-efficiency and the value potential of limiting business loss and exploitation.   This chapter goes into detail about the elements of a value cycle that Haque suggests needs to replace the value chain.

Chapter 3: Step Two: Responsiveness / From Value Propositions to Value Conversations is all about gaining agility and the ability to engage customers, suppliers and the public.  Rather than a discussion about marketing 2.0, this chapter offers a look at how increased participation drives requirements for greater participation.

Chapter 4: Step Three: Resilience / From Strategy to Philosophy points out that the ability to survive is based more on your ability to constantly challenge your current business model, products and markets. Those that constantly look to disrupt themselves learn more and are more resilient than firms that seek to defend the same turf and terms of competitive advantage year after year.   This chapter also makes the point that value extraction is significantly different than value creation.

Chapter 5: Step Four: Creativity / From Protecting a Marketplace to Completing a Marketplace discusses how creativity plays in this new system in identifying ‘impossible’ markets that can be found in the gaps in any market structure.  The chapter discusses the different levels of creativity and how they apply to new ways of looking at market opportunities.

Chapter 6: Step Five: Difference / From Goods to Betters looks at the basis for creating meaningful differences in your customers, products and services.  This chapter is particularly provoking in advocating a focus on creating products that support positive outcomes rather than just delivering features and functions.

Chapter 7: Step Six: Constructive Strategy / From Dumb Growth to Smart Growth covers how to create strategy and business models based on ideas such as Generosity, Creativity, Resilience, etc.  This is perhaps the most challenging chapter as it seeks to offer a broader strategic model, one that has the potential to identify previously hidden sources of value and performance.

Chapter 8: Constructive Capitalism provides a summary of how the steps and concepts fit together.  Its a good summary, however the topics and terms are specialized meaning that this is a place to refresh your understanding rather than a place to go for a quick summary.

Strengths

Balance, not in the FOX News fair and balanced sense, but in the recognition that the system that created these issues is perhaps the best system to fix them.  I would have been easy for Haque to simply join the bandwagon and call for a return to government driven, controlled and managed economies in the name of the public good.  This is not to say that Haque’s recommendations are a validation of the current system, rather they represent a radical redefinition of the way economies work.  Any book that would upset conservatives, progressives and environmentalists  considers a broad range of opinions and needs definitely is worth reading as the truth is in the cracks between them.

Comprehensive in its outlook and consideration of the ideas of what type of capitalism should come next.  Haque discusses what he sees as the logical next steps for capitalism, replacing value chains with value cycles.  This gives the book and its recommendations greater credibility, as it’s apparent that Haque has thought many of these things through.

Use of named companies like Wal-Mart, Google, Star-Kist, among others. This helps illustrate different points, but I am not sure that Haque has studied these companies in detail or just went off of available information.

Challenges

The book has an aggressive and progressive style, which sometimes gets in the way of the arguments as the author’s passion shows through.  Normally this would be good, but in places and in some chapters the book tries to cover too much ground and winds up dealing with issues at a more superficial level than intended.

The examples and descriptions used to illustrate Haque’s points are rather general and lack specificity.  It is more like he is looking for some examples to fit his description than capture the conscious decisions by companies to change how they compete.

The book is light in the area of the new kinds of management and management tools required to make this work. This is a significant gap as achieving these ideas requires adjusting management’s approach which is largely based on cost and resource control.  This is an area for future research and insight as the tools you used in the 20th century value chain cannot be expected to deliver different results in the 21st world.

The book is also light on technology.  Its assumed that information and technology are parts of the future, its just that their role in constructive capitalism is not as prevalent as one would expect given technologies role in both empowering and exploiting people, economies and the environment.

Overall, this is a unique book, one that has few to compare it to as it deals with broad issues and trends in a directive and focused manner.  Recommended reading for people who like to disrupt their own thinking and learn more by being challenged than having their beliefs confirmed.

PS: I find myself referring ot the ideas in this book from time to time making purchase of a hard copy perhaps a better choice as my electronic copy is getting heavily annotated and less helpful.

How is this possible?

Well it all depends on your point of view and how you look at IT finance.

The IT financial management regime in place in many companies work something like this:

• Capital investment in IT is determined at the enterprise level where they allocate enterprise funds for IT.  A business unit may have to prioritize its own capital before it is allocated, but it does not have the option to skip investment in order to inflate earnings
• Capital expenditures are recouped by depreciation charges to the business unit.  So it comes out of the business unit budget not as expense but as depreciation.
• The same business unit leaders are measured and receive bonuses based on their EBITDA performance.  EBITDA stands for earnings before interest, taxes, depreciation and amortization.

Under such a regime, traditional IT projects are essentially free to the business unit leader.  Free in the sense that CAPEX is allocated at the enterprise level and therefore are not spending real money, from the BU perspective of course.  Free in the sense that depreciation charges for that CAPEX do not count against their performance bonus because they are below the EBITDA line.

Compare that to a cloud based services model.  True there is no capital expenditure.  But there is also no depreciation.  That means that the cost of cloud services comes out of the business units sales and operating expense which is ABOVE the EBITDA line.  In this context cloud services cost real money to the BU because it has an impact on their performance and performance bonus.

There are some ways to get over this hurdle.  The company could expense their entire IT investment and operating budget to remove this distortion.  This is called going from accrual to a more cash based accounting approach.  Many companies already do this now.  However, expensing IT, particularly large transformation initiates can distort earnings as the company invests current dollars ahead of future expected benefits.

Another approach is to move IT onto a cost accounting style of financial management.  Activity based costing and other techniques raise the transparency of IT costs, their Allocations and the like This is a tact being taken at a number of companies where that have business based CIOs who are frustrated by IT’s in ability to understand their cost structure, cost drivers or manage from a cost basis.

These approaches recognize that current CAPEX/OPEX/Accrual based approaches to managing IT finances are running out of steam.  They worked well when IT’s primary job was to build out the company’s technology base.  Now that that base is laid and new service based models are available, its time to upgrade IT financial management to reflect actual costs and not those distorted by accounting.

Otherwise we can easily make decisions based on perfectly inaccurate financial information — such as the cloud point made in this post.

IT is all about making decisions about where to invest, who to work with, what technologies to choose, etc.  Decision making is so prevalent in IT that the industry is rife with scoring models, classification schemes, hype cycles and quadrant models.  Each decision involves choosing among various options, and it is in the presentation of those options that can make all the difference.

Here is an illustration with sample numbers:

You are considering a new project and of course there are multiple options in how to proceed.  Here are two options that CIOs often face:

Option 1:  Customized Solution — delivering 95% of the requested functionality at a cost of 100 units.  The business value from that investment is expected to be 200 units.

Option 2: Package Solution — delivering 75% of the requested functionality at a cost of 50 units and a business value of 150 units.

This is a common set of choices facing CIOs, a custom solution that delivers more value or one that does a good enough job that saves money with the funds going back into the corporate treasury.

Some like Option 2 because it saves money, represents lower risk and implements proven practices embodied in the package. After all, with benefits realization a risky opposition, the best thing to do is to take an option that costs less.

However the business sees things differently.  With option 2 they are getting only 3 out of 4 requirements and they are losing funding that has been part of their business plans.

IT winds up sitting in the middle between investing in future value and saving current dollars.  That tension is created by IT as it presents an either or option.

In fact there is a third choice that is rarely presented or considered.

Option 3:  Multiple project solution — based on option 2 that implements a package solution delivering 75% of the functionality at half the cost.  In addition, IT highlights the other two projects that each cost 25 units and deliver 50 units of value.

The figure below highlights these options.

Too often IT options are based on a spend/save basis without considering the potential value of investing savings now.  The assumption is that any savings will of course flow back through capital allocation and governance processes — however those processes are slow and the business unit risks losing its already approved capital.

Presenting the business with an either Option 1 or Option 2 decision pits their desire to achieve their strategy against a business decision to preserve capital.  Facing that choice of spending more to get more, or spending less to get less — its little wonder that executives can see IT as limiting  business value.

That limitation is unnecessary because there is always an Option 3.  An Option that  shows what can be achieved by investing the savings of option 2 into other changes the business needs.

It is the type of win-win option that technology was supposed to deliver.

The business wins as they get three projects completed, rather than a single project.  The three projects expands business capability across multiple areas.  It also creates the greatest value at 250 units.

IT wins as they have the opportunity to create more value and apply technology in multiple areas of the business.  Each project represents a value moment and getting three moments is always better than one.

The company wins as it creates greater capability for the same cost. There is no financial loss as the original 100 units of capital are invested in the business rather than stranding 50 units in one time savings.

All of these happen because of the choice set CIOs and IT presents to the business.  Adding a third choice, one that shows the potential value of investing potential savings immediately in other capabilities changes the game from either/or – win/lose – zero sum to one of greater opportunity and impact.

The business may still choose option 1.

Corporate may require the business to save money and force option 2.

But at least all sides have a well informed choice set and you are not in the middle.

It is all in how you present the options.