benefits identification, assessment, validation and ion for information technology projects

8/9/2019 Benefits Identification, Assessment, Validation and ion for Information Technology Projects

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Benefits Identification,Assessment, Validation andRealisation for Information

Technology Projects

Alan McSweeney


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July 1, 2010 2

Objectives

Discuss approaches to understanding, evaluating andachieving benefits identification, assessment, validationand realisation

Define approach to achieving benefits identification,assessment, validation and realisation maturity

Implementing a benefits identification, assessment,validation and realisation framework


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July 1, 2010 3

IT and Benefits Realisation and Business Value

Most organisations focus on the implementation of technologyassociated with information technology investments and not on therealisation of expected business benefits and value

IT is commonly seen as failing to deliver value for money

Benefits are not being achieved despite a project being considered atechnical success

One source of this failure to realise benefits and value is the use ofapproaches and methods that focus on improving the supply-side ofIT delivery

There is a need to engage business managers in such a way as toenables them to apply their collective knowledge to creating

business benefits and value from IT-facilitated changes Realising and assessing business benefits from IT-enabled

investments involves more than simply assessing Total Cost ofOwnership for IT-related projects and managing the IT budget


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July 1, 2010 4

Disconnect Between IT Investments and Business

Value and Benefits

62% of organisations say they find it difficult to calculateROI for IT investments

45% of organisations say their business value metrics donot accurately capture the value of IT investments

52% of organisations say that business executives aresceptical of efforts to measure business value of IT

Only 41% of organisations perform an ROI assessment for

IT budget Poor picture of IT investments and disconnect between

expenditure and business benefits


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July 1, 2010 5

Ensuring Strategic Project Alignment to Projects

Business Vision and

Goal

Strategy

Business Plan

Managingthe IT

BudgetManaging ITLike a

Business

Managingand

Delivering ITCapability

Managing IT for Realisingand Assessing Value

Closing theLoop Between

Cost andValue

Business Strategy

IT Strategy and

Delivery

Link Projects toBusiness

Benefits and

Business Value

DemonstrateAchievement of

Business Benefitsand Business Value


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July 1, 2010 6

Benefits Management

Benefits management is the process of organising andmanaging so that the potential and identified benefitsarising from the use of IT are actually achieved

Need a comprehensive framework to embed businessbenefit and business value achievement

Need to ensure maturity of business value and benefitidentification, assessment, validation and realisationpractices and structures


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July 1, 2010 7

Benefits of a Structured Approach to Benefits Identification,

Assessment, Validation and Realisation

Enables organisations to clearly and consistently articulateITs contribution to achievement of business objectives

Increases confidence in ITs ability to forecast and achievebusiness value from IT investments through consistent andobjective benefits processes including tracking and control

Addresses management culture required to makedecisions, take corrective actions and communicate resultsto increase management confidence in ITs ability to

deliver


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July 1, 2010 8

Realising Benefits from IT Investments

Fundamental principles of realising benefits from IT investments

Just having information technology does not automatically generate any

business benefits or create business value IT projects can generate negative outcomes that must be actively avoided and

IT must work to ensure that positive outcomes are converted to deliver realbusiness benefits and value

Benefits and value are not the automatic outcomes of IT projects and must beactively managed for throughout the life of the solution

Benefits arise when IT enables people to perform their work more efficiently oreffectively or do new work or enable new ways of working

Only business managers and users can generate business benefits by making

changes so the business must accept this responsibility and become involved inprojects with an IT components

These principles must underlie benefits a benefits identification,assessment, validation and realisation framework


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July 1, 2010 9

Benefits Identification, Assessment, Validation and

Realisation Framework

IdentifyPotential

Benefits andAssociatedValue

AssessIdentified

Benefits and

AssociatedValue

ValidateBenefits andAssociated

Value

EnsureRealisation

Benefits andAssociated

Value


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July 1, 2010 10

Effective Benefits Identification, Assessment,

Validation and Realisation Within the IT Function

Benefits

Identification,Assessment,

Validation andRealisation

IT Leadership andGovernance

Strategic Planning

Programmme andProject

Management

Total Cost ofOwnership

Risk Management

BudgetManagement

Funding andFinancing

Portfolio Planningand Prioritisation

and Management

Structures,processes and abilityto make decisions to

review and adjustbenefits realisation

plans

Definition of

organisationsstrategic

objectives asbasis for IT

demand

Capabilities todevelop and

update benefitsrealisation planfor programmes

and projects

Definition oforganisations strategicobjectives as basis for

IT demand

Practices to support theorganisation in assessing and

monitoring the riskthroughout the IT function

Benefits from ITprojects are

important to budget

creation andmanagement

Ability toevaluate

benefits ofopportunities

is important todecisions on IT

funding

Making effectiveportfolio planningand prioritisationdecisions requires

benefits valuation


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July 1, 2010 11

Achieving Benefits

To increase the likelihood of success from IT investments,organisations must identify the different causes of benefits before

developing any project implementation plan Types of IT projects with very different approaches to benefits

management Fixing or improving something that exists

Resolve problem Improve integration

Implementing a new initiative New system

New processes

Need to focus on the changes needed to achieve results and take fulladvantage of new facilities offered rather than on IT features

Effective change management is crucial to achieving benefits


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July 1, 2010 12

Achieving Benefits Some Questions to Ask

Why is there a need to improve?

What improvements are needed? What improvements are possible or achievable?

Have the improvements been agreed by all stakeholders? What benefits will be realised by each stakeholder if the business objectives are

achieved? How can each benefit be measured?

Who owns each of the benefits and will be accountable for its delivery?

What business changes are needed to achieve each benefit? Have the explicit linksbetween each benefits and required business changes been identified?

Who will be responsible for ensuring the business changes are made successfully?

How and when can the changes be made? Who will make the changes? Does thebusiness have the ability and capacity to make the changes?


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July 1, 2010 13

Benefits Dependency Network

Benefits Dependency Network (BDN) is an approach to linking:

Information Technology Enablers, Changes and New Capabilities enabling

technologies and functions and facilities needed to support the realisation ofthe identified benefits and to allow the necessary changes to be undertaken

Business Changes business activities and new ways of working that arerequired to ensure that the desired benefits are realised

Enabling Changes - prerequisites for achieving the business changes or that areessential to bring the new system into effective operation

Business Objectives - high level priorities in relation to the drivers, outcomesand improvements to be delivered on completion of the project

Business Benefits - outcomes of a change that are deemed to be positive by a

stakeholder and that are valuable to the organisation and are measureable Stakeholders - individuals or groups who will benefit from the project and are

either affected by or directly involved in making the changes needed to realisethe benefits


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Types of Changes

Business Changes - Permanent changes to workingpractices, processes, procedures, interactions and

relationships that will cause the benefits to be deliveredGenerally need new IT system to be in place

May require enabling changes to be implemented

Enabling Changes - Typically one-time changes that arepre-requisites for making the business changes or arenecessary to bring the new system into effective operationCan be made in advance of system implementation

Training

Processes redesign

New work practices

Changes to job roles and responsibilities


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July 1, 2010 15


InformationTechnology

Enablers,Changes and

NewCapabilities

EnablingChanges

BusinessChanges

BusinessBenefits

BusinessObjectives

Require Allow EnableProvide forDelivery of

BDN provides a framework for explicitly linking the overall investment objectivesand the requisite benefits with the business changes which are necessary todeliver those benefits and the essential IT functionality to both drive and enablethese changes to be made.

BDN forms part of the benefits realisation plan

Helps keep the focus on benefits realisation during the program execution

Allows variations of the project or program to be assessed for their impact onbenefits realisation


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July 1, 2010 16


InformationTechnology

Enablers,Changes and

NewCapabilities

Enabling

Changes

Business

Changes

Business

Benefits

Business

Objectives

Means to

AchieveChanges

Ways to Achieve Changes Results of Changes


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What

InformationTechnologyCapabilities

and FeaturesOffer

What UsersDo WithInformationTechnologyCapabilities

WhatInformationTechnologyCapabilities

Achieve

What the

BusinessGains FromInformationTechnologyCapabilities

Why the

BusinessUses The

InformationTechnologyCapabilities

Understand Why the Business Will Use the Information Technology System

WhatInformationTechnologyCapabilities

Are Required

What theBusiness Has

to Do

What theBusinessNeeds toProvide

What theBusiness

Needs To See

What theBusinessWants

Understand What Information Technology System is Needed to Deliver on Requirements


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Shows the link from the solution, through business activities,outcomes and benefits to the organisation's overall drivers

Used to confirm that the solution being introduced will actuallyprovide the results you are seeking

Any function within the proposed solution that is not linked to abenefit is potentially of doubtful value

Functions with many link or links to key benefits can be identifiedand given extra attention

BDN is a complex approach that requires benefit identification,assessment, validation and realisation maturity within theorganisation

Imposes a rigour on the organisation in analysing benefits fromprojects


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July 1, 2010 19

Constructing a Benefits Dependency Network

Create registers for:

Business Objectives

Business Changes

Business Benefits

Information Technology Capabilities

Enabling Changes

Stakeholders

Define, validate and create linkages


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July 1, 2010 20

Constructing a Benefits Dependency Network

ITCapability

1

EnablingChange 1

BusinessChange 1

BusinessBenefit 1

BusinessObjective

1

ITCapability

2

EnablingChange 2

BusinessChange 2

BusinessBenefit 2

BusinessObjective

2

ITCapability

3

EnablingChange 3

BusinessChange 3

BusinessBenefit 3

BusinessObjective

3

IT

Capability4

EnablingChange 4

BusinessChange 4

BusinessBenefit 4

Business

Objective4

ITCapability

5

EnablingChange 5

BusinessChange 5

BusinessBenefit 5

BusinessObjective

5


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July 1, 2010 21

Key Building Blocks of Benefits Identification,

Assessment, Validation and Realisation Framework

Embedding benefits management and realisation processes in widermanagement and decision-making processes

Engaging with stakeholders to improve management confidence inthe ability of IT enables investments to deliver measurable businessvalue

Benefits Culture

Tracking benefits between baseline / forecast and post-deployment to

ensure that benefits are delivered proves the value IT investmentsdeliver to the bottom line

Adopting objective and reliable value measurement methods andvalidated data to ensure consistent reporting across all investments todemonstrate that IT can enable the delivery of business value

Benefits Process

Establishing a common language for business value and benefitsbetween IT and the business

Using objective, consistent and accepted benefits and value

evaluation methodsEnabling better investment decisions through robust business casesand comparable data across programmes and projects

Benefits Planning


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Structure of a Comprehensive Benefits Identification,Assessment, Validation and Realisation Framework and

Associated Organisational SkillsBenefits Identification,Assessment, Validation

and RealisationFramework

Benefits Planning Benefits Process Benefits Culture

Establishing a BusinessValue Language

Creating Benefits

Templates and Guidance

Establishing a BenefitsForecasting Capability

Establishing a Benefits

Realisation Capability

Business Value Trackingand Reporting

Implementing and UsingStandard Benefits Process

Using Business Value Data

in Decision Making


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Benefits Identification, Assessment, Validation and

Realisation Organisational Skills

Ensuring the use of business value results in investment decision making andensuring investment decisions are based on solid business cases is important forachieving a sustainable benefits culture

Using Business Value Data inDecision Making

Implementing and embedding the use of a standard benefits realisation processand uses benefits realisation data in other processes, e.g. budgeting andportfolio management is important for achieving a sustainable benefits culture

Implementing and Using StandardBenefits Process

Establishing a capability to measure benefits over lifecycle of investment,review results and adjust if required within dynamic of business environment isimportant in the benefits planning process

Business Value Tracking andReporting

Establishing a capability to identify benefits dependencies and assign clearaccountabilities for value realisation, measurement and reporting is importantin the benefits planning process

Establishing a Benefits RealisationCapability

Establishing a capability to support benefits forecasts with reliable businessvalue data including a capacity for calculation of intangibles and benefit risks isimportant in the benefits planning process

Establishing a Benefits ForecastingCapability

Creating and then using standard templates to ensure consistent and objectivebenefits evaluation and measurement is important to allow comparison ofinvestments in prioritisation decisions and organisation-wide consistent valuereporting

Creating Benefits Templates andGuidance

Adopting a business benefits metrics as common language of describingbusiness value between business and IT to consistently capture business benefitis important for alignment of objectives

Establishing a Business ValueLanguage


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What Does Benefits Identification, Assessment,

Validation and Realisation Maturity Look Like? Using consistent set of business benefit metrics and templates to

both develop effective business cases that can be compared forrisk/value/cost decision making

Creating and using a common value language, metrics and guidancefor business case and realisation plan development and execution

Be able to create and execute benefit realisation plans, from whichdelivered value can be tracked, measured and reported on

Implementing benefits identification, assessment, validation andrealisation across the organisation

Leveraging performance results and reporting feedback to maintainconsistency, reduce risk and drive overall realised business value

Provide a business value function that can help drive best practice,readiness and consolidate and report both business and benefitrealisation maturity investment results, to help embed benefitrealisation as part of normal business operations


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July 1, 2010 25

Benefits Management Maturity Levels

1 Ad Hoc

2 Basic

3 Intermediate

4 Advanced

5 Optimising

IncreasingBusiness

Value


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Improving Benefits Identification, Assessment,

Validation and Realisation Maturity

1 Ad Hoc 2 Basic 3 Intermediate 4 Advanced 5 Optimising

What Are the Benefits

Set up common businessbenefit metrics

Set up standard businesscase template andconsistent benefitsvaluation process

What to Do

Allows alignment ofbusiness and it objectives

with performance criteria

Enables like-for-likecomparison of competinginvestment decisions

Set up standard businessrealisation plan

Create alignment processfor business realisation planwith all stakeholders andbusiness objectives

Measure business benefitsmetrics pre- and post-implementation

Implement control systemto constantly measurebusiness benefits overproject lifetime

Define project adjustmentprocess

Implement IT businessvalue reporting system

Set up system to analyseand simulate business valueeffects of it projects

Install process tocontinuously review andupdate bar process

Exploit benefits realisationdata to improve other ITcapabilities

Ensures accountability forbusiness benefits realisationon IT and business

stakeholders

Demonstrates businessbenefits delivered andenabled from ITinvestments

Allows adjustments of ITinvestments with changingbusiness or IT situation

Increases overall confidencein business benefitsmeasurement

Allows reliable reporting ofITs business valuecontribution to the business

Allows proactiveadjustment of ITinvestments based onbusiness needs or newcapabilities available

Allows detection ofbusiness benefits

Creates basis for businessvalue indicatedimprovements of otherprocesses


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Types of Project

Fixing or improving something that exists

Resolve problem

Remove constraint

Improve integration

Implementing a new initiative

New system

New processes

Each types of IT projects has a different approach to

benefits management


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Project Fix an Existing Problem

InformationTechnologyEnablers,

Changes andNew

Capabilities

EnablingChanges

BusinessChanges

BusinessBenefits

BusinessObjectives

Means toAchieveChanges


Define the improvement targetsand potential business benefits

Identify the combinations of IT facilities,business changes and enabling that can

contribute to achieving each of thebenefits

Design and agree on solution that combines themost cost effective and low risk mix of IT andbusiness changes to achieve the key benefits

12

3

1

2

3


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Project Implement a New Solution

InformationTechnologyEnablers,

Changes andNew

Capabilities

EnablingChanges

BusinessChanges

BusinessBenefits

BusinessObjectives

Means toAchieveChanges


Create an overall visionfor the new solution

Describe the new ways ofworking and the benefits

these will deliver

Assess the feasibility of making each of thechanges and of achieving each of the benefits

1

1

23

4

23

Define IT solutionthat enable the

changes


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Business Case and Benefits Management

An appropriate business case is needed to support a decision to make aninvestment in a project, programme or change

Preparing the business case so it can be presented for agreement requires a clearunderstanding of the proposition in terms of scope, objectives, options,implementation and investment and return

Purpose of a business case is to capture the reason and justification for initiating aproject

Business cases should be appropriate to the size and scope of the project as wellas the needs of the organisation

Key elements of any business case should be the background of the project, theexpected business benefits, the options considered (with reasons for rejecting orcarrying forward each option, including the option of doing nothing with the costs

and risks of inactivity), the expected costs of the project, the tangible savings, agap analysis and the assumptions and expected risks

Business case represents the apex of an analysis, design and planning exercise


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Business Case Generation Process

Confirm scope and requirements outputsand scheduled

Identify, analyse and document business,functional, technical and implementationrequirements and analyse existingprocesses and systems impacted by theproposed investment

Design a logical solution to meet thedefined and agreed requirements

Analyse the options for implementing thesolution package acquisition andcustomisation, existing system upgrade,system development

Create a realistic plan to implement thesolution, incorporating resourcerequirements and constraints and includes

risk, assumptions and dependencies Quantified the full costs to implement and

operate the solution and identify thetangible savings

Scope Definition andAgreement

RequirementsAnalysis, Definition

and Agreement

SolutionArchitectureSpecification and

Design

SolutionImplementation

Options andSelection

ImplementationPlan Roadmap

Financial Analysis

BusinessCase


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Elements of Business Case

Plan for achieving the desired outcome with key milestones and dependencies

Contingency plans

Risks identified and mitigation plan

External supplier plans

Resources, skills and experience required

Plan for Achievement

Statement of available funding and details of projected whole-life cost of project(acquisition and operation), including all relevant costs

Expected financial benefits

Whole-Life Costs

Proposed sourcing option with reasons

Key features of proposed commercial arrangementsProcurement approach/strategy with supporting details

Procurement and

Implementation

Cost/benefit analysis of realistic options for meeting the business need

Statement of possible soft benefits that cannot be quantified in financial terms

Identify preferred option and any trade-offs

Options Evaluation andIdentification

Business need and its contribution to the organisation's business strategy

Key benefits to be realised

Critical success factors and how they will be measured

Strategic Fit


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Implementing Benefits Identification, Assessment,

Validation and Realisation Key requirements

Ability to get lifetime costs right

Ability to define benefits correctly and effectively Ability to manage the benefits management process

Ability to increase and sustain benefits management maturity

Use existing methodologies and frameworks to implement keyrequirements quickly ITIM


ValIT

Organisational change and commitment

Create customised integrated approach to suit the needs of yourorganisation

Adapt and simplify as required take the best and most suitableelements


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Ability to Get Lifetime Costs Right

Key requirement no point in having effective benefitsmanagement framework if project costs are not accurate

and realistic

Use ITIM methodology strong focus on cost management


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Characteristics of Credible Cost Estimates

Clear identification of requirements of the ultimate deliverable

Broad participation in preparing estimates

Availability of valid data for performing estimates historical,experience, benchmarks

Standardised and comprehensive estimate structure that includes allpossible sources of cost

Provision for uncertainties include known costs explicitly and allowfor unknown costs

Recognition of inflation

Recognition of excluded costs Independent review of estimates for completeness and realism

Revision of estimates for significant changes in requirements


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Challenges of Developing Good Cost Estimates

Requires detailed, stable, agreed requirements

Agreed assumptions Access to detailed documentation and historical data for

comparison

Trained and experienced analysts Risk and uncertainty analysis

Identification of a range of confidence levels

Adequate contingency and management reserves


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Reasons for Good and Bad Cost Estimates

Detailed,Stable,AgreedRequirements AgreedAssumptions

DetailedDocumentationandHistoricalData

EffectiveRiskandUncertaintyAnalysis

TrainedandExperiencedAnalysts

IdentificationofaRangeofConfidenceLevels

AdequateContingencyandManagementReserves

ComplexProjectorTechnology

UnrealisticProjectSavings

NewProcesses UntrainedandInexperiencedAnalysts

NoorLimitedComparisonDataAvailable

ProjectInstability

UnrealisticAssumptions Overoptimism

UnrealisticorUnreliableData

UnfamiliarTechnologyorFirst-TimeUseProblemsGett

ingAccesstoData Unreasonable

ProjectBaseline

IneffectiveRiskandUncertaintyAnalysis

Lost of reasons for and causes of inaccurate cost estimates


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Sources of Risk and Uncertainty in Estimating Costs

Lack of understanding of the project requirements

Shortcomings of human language and differinginterpretations of meaning of project

Behaviour of parties involved in the cost estimationprocess

Haste

Deception

Poor cost estimating and pricing practices


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Ability to Define Benefits Correctly and Effectively

Use an approach such as Benefits Dependency Network


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Ability to Manage the Benefits Management Process

Use elements of ValIT framework

IT-enabled investments are managed as a portfolio

IT-enabled investments include the full scope of activities that are needed toachieve business value

IT-enabled investments will be managed through their full life cycle

Value delivery practices recognises that there are different categories ofinvestments that will be evaluated and managed differently

Value delivery practices define and monitor key metrics to enable quickresponse to any changes or deviations

Value delivery practices engage all stakeholders and assign appropriateaccountability for the delivery of capabilities and the realisation of business

benefits Value delivery practices are continually monitored, evaluated and improved

l d


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Val IT Processes and Management Practices

Framework ValITVG Value Governance PM Portfolio Management IM Investment Management

VG1 - Ensure Informed and CommittedLeadership

VG2 - Define and Implement Processes

VG3 - Define Roles and Responsibilities

VG4 - Ensure Appropriate and AcceptedAccountability

VG5 - Define Information Requirements

VG6 - Establish Reporting Requirements

VG7 - Establish OrganisationalStructures

VG8 - Establish Strategic Direction

VG9 - Define Investment Categories

VG10 - Determine Target Portfolio Mix

VG11 - Define Evaluation Criteria byCategory

PM1 - Maintain Human ResourceInventory

PM2 - Identify Resource Requirements

PM3 - Perform Gap Analysis

PM4 - Develop Resourcing Plan

PM5 - Monitor Resource Requirementsand Utilisation

PM6 - Establish Investment Threshold

PM7 - Evaluate Initial ProgrammeConcept Business Case

PM8 - Evaluate and Assign RelativeScore to Programme Business Case

PM9 - Create Overall Portfolio View

PM10 - Make and CommunicateInvestment Decision

PM11 - Stagegate (and Fund) SelectedProgrammes

PM12 - Optimise Portfolio Performance

PM13 - Reprioritise Portfolio

IM1 - Develop a High-Level Definition ofInvestment Opportunity

IM2 - Develop Initial ProgrammeConcept Business Case

IM3 - Develop Clear Understanding ofCandidate Programmes

IM4 - Perform Alternatives Analysis

IM5 - Develop Programme Plan

IM6 - Develop Benefits Realisation Plan

IM7 - Identify Full Lifecycle Costs andBenefits

IM8 - Develop Detailed ProgrammeBusiness Case

IM9 - Assign Clear Accountability andOwnership

IM10 - Initiate, Plan and Launch theProgramme

IM11 - Manage Programme

IM12 Manage and track Benefits

IM13 - Update Business Case

IM14 - Monitor and Report onProgramme Performance

IM15 - Retire Programme

PM14 - Monitor and Report on PortfolioPerformance


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Summary

IT is commonly seen as failing to deliver value for money

Benefits and value must be actively managed for

Realising and assessing business benefits from IT-enabled investments involvesmore than simply assessing Total Cost of Ownership for IT-related projects andmanaging the IT budget

Key requirements Ability to get lifetime costs right Ability to define benefits correctly and effectively

Ability to manage the benefits management process

Ability to increase and sustain benefits management maturity

Use existing methodologies and frameworks to implement key requirementsquickly ITIM

Benefits Dependency Network ValIT Organisational change and commitment

Effective benefits management enables organisations to clearly and consistentlyarticulate ITs contribution to achievement of business objectives


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More Information

Alan McSweeney

[email protected]

benefits identification, assessment, validation and ion for information technology projects

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