Embedding the change #2 - Defining the benefits
Truly understanding the benefits that any project in the work place will deliver is a major challenge. Going on to deliver the benefits and proving that the desired return has been achieved is often seen as a step too far.
This blog continues from ‘Embedding the Change #1 - Preparation’. In this and the next blog, we look at ways to define the benefits of a project and how to track progress to make sure they are actually delivered in practice. We use IT projects as our example; where there is a new system or major enhancement.
Writing about IT projects, Gartner says that:
Sometimes IT professionals are so bowled over by the features and functions of the new product or service that they expect the business manager – who will foot the bill- to be equally impressed.
This isn’t always the case. Even when agreement is reached on what benefits the project will bring, tracking them and making sure they’re delivered are major issues. As the project heats up and the focus is fully on the delivery of the change, the link between the benefits the project is supposed to deliver and what actually happens in practice can be harder to see.
There is an issue up front; that is there is generally no standard for the definition of benefits let alone processes on how to track their achievement. In a recent review of IT projects in a large blue-chip client, the benefits of the IT projects taking place were often described as producing ‘efficiency savings’ or ‘operational improvements.’ They were impossible to track.
So, the problem is not only to identify the benefits that will be achieved but to measure them in a specific (not general) way. A good starting point is to understand what kind of project the IT initiative is.
Gartner writes that:
The business value of IT is always measured in improving business performance.
For any IT project, they identify three questions to help categorise:
- Does the project help run the business?
- Does the project help to grow the business?
- Does the project transform the business?
Run the business
Run the business projects are about keeping the lights on or maintaining what is in place. Measures of the benefits these projects deliver come under the headings of reducing costs, lowering risk or improving the performance of a business function that doesn’t produce revenue (Human Resources, Purchasing, Finance or IT). Relevant measures could include cash collection times, compliance costs or administrative costs.
Grow the business
Grow the business projects are about producing more revenue with the current operating structure. For example, equipping a mobile sales force with better technology can lead to greater sales and improved customer retention. ‘Grow the business’ measures could include increased sales, higher customer numbers, larger market share or shorter time to close a sale.
In both these cases, specific numbers and owners can be allocated against the benefit.
Transform the business
Transform the business projects are rare. This is where the business wants to move into a totally different market, produce new products or introduce new business operating models. The business is taking a serious change in direction that IT enables (or at worst, doesn’t hinder). Examples include Apple’s entry into the online music business. Another is that of IBM who sold commercial scales and punch card tabulators and later, massive mainframe computers and calculators. IBM subsequently transformed their business to developing software and selling consulting and IT services.
Measures at this level are harder to find – and will be clouded by unknowns. There may be hints in the revenue and profit estimates that are generated from the new markets in business cases, or in the sales forecasts or projected customer numbers.
This simple framework is a starting point to help identify the benefits that a project is delivering to the business. It helps to put a specific, tangible value on them. By measuring current performance for the measure and comparing values moving forward, a more effective assessment can be made on whether the project delivered or not.
In our next blog, we will discuss ways that the benefits, once the measures have been agreed, can be tracked as the project progresses.