Measuring value in the digital age

How changing your mindset can help you make better technology investment decisions.

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In Deloitte’s recent global CIO survey, only 21 percent of CIOs report having a structured process for measuring the value of tech investments. Even more surprising, 14 percent say they don’t measure the impact of technology investments at all.

Survey respondents cite two primary reasons for the low numbers. First, they may have a business case process, but it’s usually ad hoc and operates by the “squeaky-wheel-gets-the-grease” principle. Moreover, there is no mechanism to track the performance and value of investments. Second, some fear that adding governance to the investment process will slow down innovation and increase time to market.

During the past decade, CIOs have commonly taken on initiatives that require large multiyear investments in platforms such as ERP and CRM systems; today, many are taking on significant digital transformations. Business leaders often go into these initiatives believing technology will solve their problem, but too often these projects fail to deliver the promised value.

A different take on tech investments can help CIOs change how investments are viewed. Here are three shifts in mindset that can help CIOs make more effective investment decisions.

From expense to investment

The majority of IT budget (55 percent) is spent on keeping day-to-day business operations running, with 26 percent allocated to incremental business change, according to survey respondents. CIOs with an expense mindsetoften feel they have no control over the fixed costs of business operations and little control over incremental change spending, since those projects have already been committed.

By contrast, CIOs with an investment mindset constantly evaluate the value technology investments deliver. This value may decrease over time or the cost of ongoing operations may no longer justify the benefits. Or estimated benefits may have been miscalculated, never to be realized. Evaluating IT budgets with an investment mindset often requires difficult judgments and decisions about projects. This may mean admitting to previous mistakes, but such analysis and decisions can help elevate CIOs to the role of business leader.  

A CIO at a consumer packaged goods company took the bold step of halting a multiyear, multimillion-dollar ERP implementation because the promised benefits were not being realized. By reallocating these funds to upgrade back-end systems — including an inventory management system that allowed the company to gain a competitive advantage and increase market share — the CIO delivered significantly more value.  

From project to product

CFOs often complain they are not able to determine tech ROI. This is partly because IT investments have always been viewed as projects, not products. A project mindset focuses on a discrete start and end date and a specific cost. The problem? These IT projects often span years and the investment reaches millions of dollars. Over time, business needs and competitive landscapes evolve. The company may change dramatically through M&A and divestitures. Or the original reasons for launching the project may no longer be valid. Yetmany CIOs find themselves trapped into delivering these projects on time and under budget — even if the project is no longer needed. 

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