IT Value: Shoring Up the Holes in Leaky Business Cases

When people ask me what I do, I tell them my job is similar to that of a plumber’s. Except I fix business cases that leak “IT value,” rather than faulty pipes. In 13 years at this task (out of more than 30 years in the IT industry), I’ve discovered that business cases can be either the hero or the Achilles’ heel of IT valuation success. Good business cases are management’s beacon for cutting through the fog of value ambiguity, risk and politics. Conversely, bad business cases dangerously confuse value fact and value fantasy.

After helping Fortune 1000 companies from around the globe root out and battle the practice of using problematic business cases, I’ve noticed three disturbing traits. First, weak business cases for IT projects are extremely prevalent?I estimate that more than 90 percent of all business cases are afflicted. Second, the causes and cures for these ineffectual cases are relatively culture-independent?they permeate in Singapore as much as in London, Paris and San Francisco. Third, these failings are serious?but mostly unnoticed. Like the slow, hidden water drip behind a wash basin that ultimately collapses an entire wall, bad business cases are strong, silent killers of IT value that sabotage business payoff before projects ever get off the ground.

There is, however, some good news to report: A concerned manager can discover hidden business case flaws in less than an hour of his time. I know of a single 20-minute effort in one company that revealed $1 million of benefits missed by the business case team. Another examination revealed $16 million of undiscovered business case obstacles to a project payoff. Here’s a quick, three-step method I use to see if business cases have significant value defects. Try it for yourself.

1. Communicate the urgency of the business case reliability. Call your employees together. Remind them that business cases are one of management’s primary inputs for bringing objective clarity to the complex task of selecting and realizing the highest value of potential IT investments. Encourage your team to think about the devastating consequences if a business case erroneously predicts a 12-month payback, when it turns out to be 24 months. Or if a 32-month payback is forecasted, when it should have been eight months. Conclude this discussion with a request to enlist their help in seeing if any of these business case problems have infiltrated your organization. Then, get the word out. Make sure that all who propose, select, manage and count on the benefits of IT investments understand the importance of ironclad business cases as well. Let them know that no business case will be accepted if it has any of the “leaks” contained in “True or False: You’re Leaking Value” (this page).

2. Locate some “typical” business cases. Ask a member of your team to compile copies of four representative business cases recently used by your enterprise. These cost-benefit reports should: be not more than nine months old; address controversial IT projects important to the enterprise’s business success; and be competing for scarce funding resources. Two of these business cases should be for projects selected for funding. The other two should be for proposed projects ultimately rejected.

3. Apply the “value leakage” quick test. Plumbers check for water leaks by blowing compressed air through suspicious pipes. Your staff members can do an analogous value leakage test by passing each of these selected business cases through a gamut of 10 compressed questions listed in the chart. You can compare your business cases to the leaks listed and assess how strong or weak they are. If you frequently answer “true” to the leaks in the chart, you’re in trouble.

The time investment in these steps is minimal, but using this process can go a long way in uncovering hidden business case-related losses. But this is only the first step. In future columns, I’ll be discussing more tips I’ve picked up from surveying the wreckage of IT value misadventures.