by Adam Hartung

CIOs Should Learn the Two Metrics That Matter

Dec 17, 20134 mins
BudgetingBusiness IT AlignmentCIO

CIOs need to be prepared to explain how their expensive IT project will improve the numbers every CEO cares most about.

Twenty years ago I was geared up for a meeting with the CEO. I was all ready to tell him how much better the new IT projects were going to be.

When I walked in to meet with him, he looked at me and said, “So, regarding today’s discussion, will this sell more stuff–or save me money?”

I wanted to die.

The new IT would be better. It would be faster. Long-term it would be cheaper, but initially it was going to cost a lot of extra money. I felt like it was the right thing to do, but I was not prepared for his simple question. How would what I wanted to do either sell more stuff or save the company money?

A new book, Business Cases that Mean Business, by Jim Maholic, makes much the same point. He lays out in great detail how to create and present a compelling business case for a big IT project. But he says it all starts here: “A business case is about business. Business is about money–making more money than we spend and spending effectively so that we either make more money or spend much less money.”

Crisp, Credible Numbers

Maholic says most business cases are good at computing the costs of the project and identifying the benefits. Where they often fall short, he writes, is on providing crisp and credible numbers detailing the financial benefits of the project.

Remember: Business executives listening to your proposal are wondering: Why is this project worthy of a chunk of our limited pool of capital? Why should we do anything? And why must we do it now?

“Too often,” Maholic says, “business case developers overlook the single biggest competitor of every project–doing nothing!”

We live in a world where we seek followers on Twitter, friends on Facebook and discussions on LinkedIn. We track operations with ERP and customers with CRM. We communicate with customers and vendors on the website. But how often do we know whether what we do either sells more stuff or cuts costs?

Missing What’s Important

Metrics like page views, followers and database requests all provide data about business improvement. But it’s too easy to get wrapped up in those metrics without tying them to what really makes business leaders happy. We lose sight of the two key metrics that CEOs love.

And then there are the follow-up questions: How much more stuff will we sell? How much will it cut costs? Here’s where an initial lack of clarity leaves us unable to offer specific answers. We’re reduced to mumbling, “Well, I’m not sure, but it will allow us to do this a lot more, and what we do will be a lot better, and we can respond faster, and I think long-term it has to be cheaper.” But that isn’t very convincing.

It’s especially less-than-convincing if the competition is breathing down your neck and the C-suite is focused on the quarterly and annual earnings reports to the board–and to investors.

In my 30 years as a C-level exec and consultant, the biggest communication breakdowns I’ve seen occurred when projects promised “more, better, faster” but were unclear about the P&L effect–the top and bottom lines.

Great leaders, including great CIOs, never lose track of how to answer the most important question they’ll be asked every time they propose investing in a project. Repeat after me: Will this sell more stuff, or will this cut costs?

Adam Hartung is CEO of Soparfilm Energy, an adviser on innovation, and the author of Create Marketplace Disruption.

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