Focus and Change

Blog Query: From your previous post it appears that my IT will have to transform to successfully support my business change agenda. How can IT both support my critical business change objectives and transform itself at the same time?

A difficult challenge comes when the business has a critical need for the IT change enabling capability at the same time that IT is transforming itself. To be successful, IT needs clear focus on what needs to be delivered for the business, so that the IT transformation program can run in parallel and shape its deliverables to best support both business objectives and IT transformation objectives.

Similarly, I would suggest that one of the most important factors determining the success of the business transformation is the ability to focus on the investments necessary to achieve the business transformation goals across functions and business units.

For this, a new process is generally needed for the various business units to classify their investments in common categories aligned to strategic directions and financial goals. Then, standardized business cases can be developed and compared between initiatives within categories.

This process begins with bottoms-up identification of desired projects by business unit and the development of categories that will be used to group the investments. Next, a tops-down investment allocation by category is needed, with an eventual investment proposal created by category based on strategic focus, competitive analysis and operational readiness

Sound complex? Not really.

Let’s say that there are currently 400 business unit proposals, some requiring major IT investment, with a projected capital spend of $150M.

Our executive committee determines that given our strategic direction, all investments will be classified as Cost-Cased, Revenue-Based, Risk-based or Customer-based. The business cases will be built to reflect the goals for each category. The CFO informs us that due to current capital conditions that our total spend can only be $100M across all categories. After intense discussion about strategic direction and priorities, it is decided that the $100M will be initially allocated across categories as follows: 

• Cost – $50M
• Revenue – $25M
• Risk – $15M
• Customer – $10M

Each category now has an initial investment allocation, and each function and business unit is now accountable for classifying investments into these categories and creating corresponding business cases. Each investment should have an executive committee sponsor and a senior business leader accountable for the veracity of the business case (usually the function or SBU leader – remember these are business investments, some with an IT component).

Now that we have investments by category with comparable business cases, each category team (the full executive committee or a subset) can prioritize the investments as either above the funding line or below. Once that is accomplished the initial proposal for each category is submitted to the executive committee for review, discussion and approval to proceed. Once this approval is given, all functions and business units will be operating off of the same investment list, including IT.

The ongoing responsibility of the category teams is to track the progress of approved investment projects, review and prioritize new investment proposals, and report issues and opportunities back to the full executive committee.

Once this process is established, we can be reasonably certain that our investments are aligned with strategic direction and that we are all executing with the same priorities. 

Note that this, like any process will occur over multiple budgeting cycles, so at any point a category will have committed funds overhang from work in process as well as future year commitments. The $100M total and tops-down distribution are current year examples for discussion.