IT Value? Added.

Business leaders continue to view IT spending as an expense to be managed and not an investment to be optimized. This inability to quantify the value that IT delivers to the business is, in my opinion, what separates the CIO from a seat in the boardroom.

Most organizations have formed investment councils and require business cases. But very few have defined a “concept to cash” closed-loop management process that directs investments based on strategic portfolio targets, keeps initiatives on track by measuring success around project approach and holds senior executives accountable for demonstrating value. After all, real change isn’t easy.

In The Tipping Point, Malcolm Gladwell discusses engineering change with the minimum of effort. Although conventional wisdom says the progress of IT value management will be evolutionary, Gladwell suggests it can move rapidly if the three Tipping Point laws are applied: the power of context (sensitivity to environmental signals), the stickiness factor (memorable content) and the law of the few (the influence exerted by the socially gifted).

To explore the potential of these laws, consider the practices in place at a small, fast-growing technology company. Since its inception 10 years ago, the company has invested in technology to sustain growth with little consideration given to cost structure or vision for how IT will support its competitive positioning and core business processes. The CFO, COO and CIO make decisions regarding IT investments on a case-by-case basis. Requests and associated IT resource allocations are fragmented by department and have tenuous ties to strategy.

Let’s examine the power of context. It’s amazing how often executives fail to link value management initiatives to strategies and programs that are in place and have momentum. In the tech company, there are growth concerns since its primary market is becoming saturated. Yet IT’s top objective is the integration of its existing ERP processes to knit sales together with downstream supply chain activities. In terms of the company’s emotional energy, this initiative is a yawner and doesn’t have the “coattails” to carry a value management initiative.

The CIO will be a more effective catalyst for change around IT investment if he taps into the company’s emotional concerns around growth. For example, the CIO has uncovered business strategies that call for expanding sales within existing accounts by strengthening customer service and entering new markets with current products. Using this information, the CIO can help frame the business strategy so that the ERP initiative is linked directly to these goals.

Now that the CIO has captured the attention of senior executives, she can demonstrate the fit between current and requested IT projects, and define a targeted IT portfolio and supporting governance. The “closed-loop” management process should focus on basics such as ensuring that investments line up with portfolio targets, possess clear standards for accountability and success, and are monitored regularly via a project dashboard.

Next, let’s discuss the stickiness factor. Too often, value management is designed for the needs of the enterprise and doesn’t provide value to the manager submitting the request for IT funding. To stick, the changes must benefit everyone who needs to comply. Managers will promote a process that makes it easier for them to get funding for strategic initiatives.

There are several ways to accomplish this at the technology company. Senior executives could establish an experimental fund to test new product and service ideas. They might institute a fast-track approval process for growth initiatives. Or they could delegate funds to business unit or function heads for strategically aligned process improvements that utilize existing technologies and have a positive ROI.

Now, let’s explore the law of the few, which identifies an organization’s influencers. A mistake in catalyzing change is to overestimate the influence of mandates from the top. Senior executives operating alone can rarely create the grassroots support necessary for a value management initiative. But by tapping the right people in the social network, support will build, provided the other two laws are respected. The tech company needs to garner sponsors for its initiative by identifying influencers in sales, marketing and customer support.

CIOs pushing the rock of value management uphill need to reconsider their approaches. By viewing value management as a change initiative and leveraging Gladwell’s laws, it is possible for CIOs to accelerate the adoption of value management practices and prove, once and for all, that IT does matter.