by Myles F. Suer

How CIOs prove business value

May 29, 2018
CIOEnterpriseIT Leadership

CIOs to align better need to show the business value their team creates u2013 without this their leadership is at increasing risk.

leadership execs superimposed on building
Credit: Getty Images

CIOs have many things that they need to do to succeed in the digital era. One of them is demonstrating the value for the projects and services that IT builds and then delivers. CIOs, in the #CIOChat, claim that doing this well matters. They claim that taking this step will transform IT from a cost center to a valuable contributor to business strategy.

CIOs are candid that IT is something of a ‘black box’ to many business leaders. Demonstrating business value allows business leaders to understand how IT contributes to business goals and, thereby, to buy into the projects IT is managing. CIOs say that demonstrating business value for all projects is essential. For this reason, projects as a goal should have a direct impact on the business and the customer experience that the business delivers. CIOs suggest that any project that does not deliver tangible business value should be evaluated for continuing resource allocations. CIOs asked why should a CEO or any line of business leader pay innovation dollars where no value is being generated?

CIOs insist that a culture of business value starts with the CIO. Only by instilling this into an IT organization can the perception of IT finally be changed. CIOs say that commitment and accountability are the building blocks of an organization’s ability to demonstrate value. They ask if IT leaders aren’t delivering business value, why are they even there?

Demonstrating business value

Many CIOs stress business value is the only thing that matters these days because technology on its own is just a cost or an expensive vanity project. They stress that statements like ‘we have the best technology’ are meaningless unless this technology accrues something directly to the businesses’ bottom line. CIOs have said to me before that IT cost reduction efforts without additional business value will not succeed in today. They stress their CEOs want them and their teams to derive new revenue-generation ideas.

As a part of succeeding, CIOs say that businesses should define KPIs at inception of a project and persist them in cycles of measuring, managing, and publishing. If IT regardless of whether they are fractured or distributed is not held accountable for KPIs, then executive leaders will see them suspect. Preventing this from occurring matters. Today, IT leaders need to describe their value from the customer’s perspective. CIOs and IT teams that succeed understand how their company captures value including from its technology investments.

A philosophy to run across the entire IT organization

CIOs say that demonstrating value should be a philosophy across the enterprise, but it is the case for IT. They stress CIOs should ingrain it in IT culture. CIOs stress that capturing value-in-use is strategic.

CIOs stress that you can’t glean any of this through non-functional requirements. This means that all projects need to be business projects. Increasingly, IT leaders need to require sprint by sprint demonstrations of business value. This requires that CIOs translate business value and then communicate it to everyone in IT and to business stakeholders. Clearly, success requires leadership because technology is always easier than culture.

This led to a discussion about project naming, CIOs had differing opinions. Some CIOs said that technical names are fine as long as the business understands the reasoning, use-cases, and business value being derived from a project. These CIOs say focus less on the name and more on business value being generated.

Other CIOs said that almost all initiatives in their enterprises are business-related and should be business named. These CIOs suggest that it is hard to show the business value with hyper technical program or initiative names. Regardless, CIOs say delivering and demonstrating business value should be a core objective of every person and function within IT. They believe that value should be in the fabric of the company’ s strategic plan.

Techniques most relevant to proving the value IT is generating

CIOs honestly said this depends. They want KPIs identified that provide an agreed upon definition of success. Those KPIs depend upon the business goal and value that should be targeted or demonstrated. CIOs say that ultimately if you can’t agree on a way to measure success, you will never know if you got there.

CIOs suggest that value KPIs should be defined as early as possible in the process. They want organizations to know value measurement in order to ensure they are delivered. They want business leaders to know when core business priorities are being met including performance, efficiency, on-time delivery of project, and on-budget. CIOs collectively suggested several different potential value metrics. These include the following:

  • Revenue/market growth
  • Customer satisfaction/NPS
  • Operational efficiency
  • Security
  • On Time Project Delivery
  • Degree of Innovation
  • Efficiency/Effectiveness Delivery
  • On budget delivery
  • Risk mitigation
  • Usage metrics and surveys
  • Interviews on customer satisfaction
  • Quality factors
  • Financial metrics (revenue, profitability)

CIOs in passing suggest that they expect the use of customer-centricity of KPIs to only increase. At the same time, CIOs suggest it takes guts to say when a project is failing, accept the learning as the value achieved, and move on. CIOs, however, stress again that true innovation means there will be failures as well as successes. All parties need to innovation need to accept this reality. However, CIOs claim if you explain things correctly then business partners will understand it on average. They say business stakeholders want to feel they are adding value to the conversation by being involved from the ground up. This is about trust and partnership. They say you shouldn’t assume business partners ever are stupid.

Having transparent KPIs and measures helps CIOs improve business stakeholder relationships. CIOs say they want dashboards that can aggregate KPI data across silos, functions, and departments to reveal enterprise business value. With this said, CIOs suggest all parties need to agree upfront what the KPIs are, what they mean, and what defines success for them.

CIOs are clear that projects with ‘soft returns’ are difficult. One CIO said that they have spent days with line of business gathering statistics to calculate productivity gains, opportunity cost, etc. Having said this, CIOs suggest that revenue is king. If you can show revenue added for a project, you’ll gain plenty of trust.

In today’s environment, CIOs need to answer many questions. Is the enterprise gaining more value by keeping technology as a core competency vs. outsourcing it? If it’s not a core competency then they say outsource it. CIOs suggest one area having a lack of resource capability is showing the value gained. CIO need to have the guts to say this is what is needed to achieve this value and be persistent about it.

Demonstrating the value of upgrades to traditional software

CIOs had interesting answers to this question. Some suggested that demonstrating the value of upgrades occurs by performing them efficiently and with minimal disruption to the organization. These CIOs say that it is essential to not create business risk and to show the effort to upgrade don’t detract from other strategic efforts.

Other CIOs counter by saying upgrades have tangible costs and for this reason, there must be business value to doing it. One CIO exclaimed here that they’ve had trouble selling upgrades because doing something has a hard cost compared versus doing nothing.  Productivity gains can be huge, but upgrading end-of-life software costs money and doing nothing is free until it isn’t free anymore. For these reasons, these CIOs suggest that it is important that an upgrade increase efficiency, speed, and the overall user experience/customer satisfaction. If it does not achieve these things, CIOs suggest perhaps an upgrade is unwarranted and the dollars are better expending elsewhere. At the same time, CIOs suggest that if you can’t tie an upgrade to a business SLA or KPI then you should pass and spend resources elsewhere.

One CIO reminded everyone at this point that it is not uncommon for companies to use only a small percentage of the technology functionality they are buying. CIOs suggest for this reason that upgrades need to improve productivity, keep systems compatible, lower complexity, increase ease of integration, or improve security posture. CIOs were willing to consider as value things as well that result in uninterrupted services, stronger operational consistency, and avoidance of technical obsolescence. CIOs suggest as well that it is important to build mission-critical/core competency technology in-house to ensure a purpose-driven application/technology stack. Buying off the shelf product rarely solves the root issue and often causes unnecessary complexity and cost. With this said, Joanna Young, former CIO of Michigan State University said, as someone who had CIO and CFO roles, “end of life” or “vendor is making us” are not going to work these days. Instead, you need to understand product and develop tangible value measurements.

Demonstrating the value add for collaboration software like Slack?

CIOs suggest this can depend on vertical or the importance of differentiating customer experience. CIOs, in general, feel that Slack is great. Having said this, CIOs said IT organizations should endeavor to find measures that resonates and align to goals. Ideas provided by CIOs regarding collaboration software like Slack include the following:

  • The velocity of business change or agility
  • The need for innovation
  • The need to improve employee engagement
  • The speed of market change
  • The need for quality improvement

CIOs said that these offer potential for value proofs, but they say it is critical that they be defined up front so that they are proactively measured. Some CIOs suggest that while the value of better digital collaboration is obvious, they believe it is hard to quantify, mostly because there’s little appetite for measuring this kind of value. However, other CIOs suggested “if you are building a business case for Slack then you have much larger problems. It’s 2018 without tools like Slack how do you expect to create a culture of collaboration and of real-time engagement. These CIOs suggest that employee experience can be a clear business differentiator”.

Regardless of viewpoint, CIOs suggest that culture matters to value being delivered from collaboration software. You cannot charter a “culture change” project. Collaboration technologies can only be a facilitator of better customer or employee experience. The question is does your company have a culture that is supportive of doing this journey.

Clearly, the ability to prove business value impacts the success for every IT leader. While CIOs have multiple perspectives on measuring value, they all suggest that value is the major determinant of IT/business alignment.