Connecting IT and Business Value

ConnectingITandBusinessValueby definingtheIntangibleBenefitsthroughthe BalancedScorecard

ThevalueofITisanegotiated processbetweentheconsumersof servicesandtheprovidersofthose services. Thelanguageofthisnegotiation mustbeinwordsandphrases meaningfultothebusiness. Gettingaseatatthetableisthe ultimategoalforanyCIO FromtheseseatthevalueofITcan benegotiated Theunitsofmeasureofthe negotiatedvaluemustbeindollars orpercentagesofdollars

Nicholas Carrs, Does IT Matter? asks the question isntitenoughforITtoenablecompaniestooperatemore efficiently or deliver better services, to reduce costs or heighten customer satisfaction? [1,p.7]. This is an IT infrastructurequestion,notanITstrategyquestionthetwo are both important but they are different. Carr suggests the investmentsinIThavegonetowasteafterthecollapseof theInternetBubble. While much has been wasted to what were probably poor business choices, managing an IT investment as a strategic initiative still has merit. This merit needs to be connected to the financial performance of the business and thevaluationoftheseinvestmentsmusttakeplaceinthesamewayotherinvestmentdecisionsaremade. Carrs thesis is IT has become a commodity service and not the basis of a differentiated strategic advantage. As the costs of IT go down and its power increases, the capabilities of IT outstrip the companysneeds.ThisisaninfrastructureviewofIT.Liketherailroadsandelectricutilities,ifitisonlya utilityitwillhavedifficultydescribingitsdifferentiatedadvantage. Isthisreallythecasein2007?IfITisacommodity,whatstrategicadvantagecanabusinessdowith the commodity? Is IT really a commodity in the same sense as power and transportation? IT has the capacitytoprovideintelligenceaboutthebusiness,createnewanduniqueuserexperiencesnotavailable throughthetraditionalsalesforce,andprojectofthesecapabilitiesontodevicesandintolocationsnot envisionedwhenCarrstartedhisthesis.ThenotionofITasastrategicenablerdependsonthesuccessful implementation of IT as Infrastructure, but that is not sufficient to enable IT to become a strategic enablerofbusinessvalue.

WHATISSTRATEGYANDWHYSHOULDANYONECARE?
Strategycreatesfitamongabusinesssactivities.Thesuccessofastrategydependsondoingmany thingswellnotjustafew.Theactivitiesthataredonewellmustoperatewithinacloseknitsystemthe strategicframework.Ifthereisnotafitamongtheseactivities,thenthereisnodistinctivestrategyand thereislittletosustainthestrategicdeploymentprocess.Managementofthebusinessrevertstothetask ofoverseeingindependentfunctions.Whenthisoccurs,operationaleffectivenessdeterminestherelative performanceoftheorganization.[19] Improving operational effectiveness is a necessary part of management, but it is not strategy. In confusing the two, managers will unintentionally adopt a way of thinking about value that drives ITs business enablement processes away from the strategic differentiation and toward the tactical improvementofoperationaleffectiveness. Managersmustbeabletodistinguishclearybetweenoperationaleffectivenessfromstrategy.Both are essential, but the two agendas are different. Operational effectiveness involves the continual improvement of business processes that have no tradeoffs associated with them. Operational effectivenessistheplaceforconstantchange,flexibility,andrelentlesseffortstoachievebestpractices. Strategy is the place for making clear tradeoffs and tightening the fit between participating business components. Strategy involves the continual search for ways to reinforce and extend the companys positioninthemarketplace.

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Theconceptoffitamongfunctionalunitsisoneoftheoldestideasinstrategy.Gradually,ithasbeen replacedwithnewconceptsofdefininggoals,criticalsuccessfactorsandkeyperformanceindicatorsand theorganizationchoicesandchangesaroundthesedecisions.[13]Inmostinstancesfitisfarmorecritical tothesuccessofITsystemsthanisrealized.[20]Strategicfitamongthevarioussystemscomponentsand the business processes they support is fundamental to competitive advantage and the sustainability of thisadvantage.[21] Fit among a businesss activities creates pressures and incentives to improve operational effectiveness.Fitmeansthatpoorperformanceinoneactivitywilldegradetheperformanceinanother, with weaknesses exposed drawing managements attention. With increasing fit, improvements of one activitywillpaydividendsinotherareas.ThisisthemeanstoconnecttacticalITprocessesinfrastructure operationswiththestrategicenablementofthebusinesssgoals.ThereareITpositioningquestionsto beaskedtotheBusinessaswellasaskedbytheBusinesstoIT:[3]
WhatITapplicationsshouldbedeployedtoyieldcompetitiveadvantage? Whattechnologicalopportunitiesshouldbeconsidered? WhatITplatformsshouldbedeployedandwhatITpoliciesareneededtomanagetheseplatforms? WhichITcapabilitiesshouldbenurturedandwhichshouldbeacquiredfromoutsidesources? HowshouldITactivitiesbeorganizedandwhatistheroleoftheITfunction? WhatismanagementsroleintheITdomainandwhatITcapabilitiesarerequiredfortodaysmanagers?

TheanswerstothesequestionsdeterminehowthecomponentsofanITStrategyfittogether.

INFLUENCESONTHECONVERSATIONABOUTITSTRATEGY
EstablishingtheinfluencesonITStrategyisthenextstepinstartingtheconversationaboutITvalue. Earlsapproach[3]isaneffectiveviewofthestrategicdecisionmakingprocessesinfourdomains:
DomainofITStrategy
OrganizationStrategy Why TheWhereforeandthe Rationaleforthestrategy

Components
Organizationcomponents Theorganizationalstructure,controlsystems andformalpolicies Businesscomponents Corporateisconcernedwithmission.The strategicbusinessunitstrategyisconcerned withcompetitivepositioning. Alignment Identifyingtheapplicationsrequiredto supportthebusinessstrategy Opportunity Searchingforinnovativeusesoftechnology whichcanbeexploitedtoenablebusinessto beperformedbetter

Attributes
Intent Forcesacrystallizationofpurpose,an operationalorientation,inmakingchoices. Content Thecontextofthestrategy.Theinfluencesof theorganizationalstrategyontheotherthree elements Strategicbusinessunit Theindividualbusinessunit Corporateorgroup Thehighestlevelofthebusinessorganization inwhichtheindividualbusinessunitsoperate

InformationSystemsStrategy What Thecomponentsofthestrategy

InformationTechnologyStrategy How Scope Themechanismsofthestrategy Whichtechnologiesaretobeformally includedintheinformationstrategy Architecture Thetechnologyframeworkwhichdrives, shapes,andcontrolstheInformation TechnologyStrategy

Capability Thesetofskills,knowledgeassetsand activitiesneededtobecompetentinthe marketplace Powers Powersrequiredtoimplementandmonitor thearchitecture.Powersareusedtoexercise technologystewardship

InformationManagementStrategy Who Roles Formal Theparticipantsinthestrategy Whohasresponsibilityforinformation Theintentofrolesandrelationships resourcepoliciesandactions Informal Relationships Thecontextofrolesandrelationships HowarerelationshipsbuiltbetweentheCIO andotherstoassuresuccessovertime Table 1 The influences on IT strategy differentiate the aspects technical of IT services, the management of these services, the consumptionoftheinformationneededforbusinessoperationsandtheorganizationalaspectsoftheseservices.Thesefourdistinct domainsclosethegapbetweentheoperationalviewandthestrategicviewofIT.TheresultingvalueisnowsharedbyITandthe Businessinthesameunitsofmeasure.

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CHOOSINGBETWEENOPERATIONALEFFECTIVENESSANDSTRATEGY
As IT searches for its seat at the table, negotiating provided value and the businesssneed for this valuecreatesavisiblegapinmanyorganizations.ThequesttoconnectthevalueofITtotheneedsofthe businessshouldbetheprimaryroleoftheCIO.Manytimesthisisnotthecase.Instead,theCIOactslikea CTO,providingthetechnologiesneededforthebusinessbutnotengaginginaconversationaboutthe strategicneedsforthesetechnologies.Thestrategicdiscussionismanytimesmissingforgoodreasons the business simply does not want to have that conversation or the business does not see IT as a participantinthestrategicaspectsofitsoperations.ITthencontinuestoprovideservicesandfocusits efforts on operational excellence. If the operations continue to function as the business expects this reinforces thenotion that IT is providing all the needed service the dial tone so why shouldthey changetheirapproach? ThechallengeishowtocreatefitamongtheITcomponentsandtheirmatchingbusinesscomponents toenablebothinfrastructureadvantagesandbusinessenablementadvantages.Thenextstepishowto movebeyondCarrsthesisthatITDoesntMatter,toMakingITMatter.[7]Gettingtothediscussion aboutnegotiatedvaluestartswithidentifyingthewinthemesforthisnegotiation.[3]
BusinessimprovementsareenabledbyInformationTechnologythatisintegratednotdisintegrated.This integrationmustbehorizontalversusvertical.Horizontalsystemsremoveislandsofinformationand buildbridgesbetweenthebusinessunits.Inanintegratedsystem,multipledatasourcesaremade transparenttotheendusersaswellastheapplicationsthatutilizethem. InformationTechnologyrequirementsarealwaysgrowing,changing,andbeingextended.The InformationTechnologyisnolongerstatic,butdynamicallyadaptingtothechangingbusiness requirements. InformationTechnologyisaboutabstractions.Ifhardware,software,anddataweretheonly foundationsofasystem,thenInformationTechnologywouldnotbeabletokeeppacewiththebusiness requirements.Instead,businessprocesses,objects,andservicesarethefoundationofthesystem,which drivethebusinessprocessesintheiradaptationofthechangingmarketforces.

Thefineartofexecutivedecisionmakingconsistsinnotdecidingthosethingsthatarenotnow pertinent,notdecidingprematurely,notdecidingthosethingsthatcannotbemadeeffectiveandnot decidingthosethingthatothersshoulddecide. ChesterBarnardinFunctionsofanExecutive,19381

ACORECONVERSATIONTHATMUSTTAKEPLACEBETWEENTHEBUSINESSANDTHECIO
There are another set of questions to be asked of IT by the Business and of Business to IT. These questions are the basis of the Balanced Scorecard approach described here, but the answers do not dependonaspecificstrategymakingmethod.TheyareattherootofthebusinessvalueofIT.
IsITastrategicenablerofthebusinessorsimplyanoperationalexpense? ShouldITfocusondevelopingnewservicesthatsupportbusinessoperationsandcustomersorshouldit focusonimprovingtheinfrastructuresothatthebusinessunitscanstayfocusedonthecustomer? HowmuchresponsibilityshouldIThaveinmeetingthebusinessobjectives? WhatdoesITneedtodotoensureitsplaceinthebusinesssstrategy? WhyisthereadisconnectbetweenwhatcorporatestrategistswantandwhatITisactuallydoing?

A source of disconnect in answering these questions is the failure to recognize that the value IT bringstotheanswersisanegotiatedentity.NegotiatingthevalueofITmustbecompletedbeforeany discussion of IT Strategy can takeplace. The consumersof ITs services have a need to understandhow their funding investment is returning value in some unit of measure meaningful to the business. Any disconnect between ITs perception of its own value and the businesss perception of the value of IT createsagapbetweenStrategy,Governance,andthedeliveryoftheneededITservices.[23]Establishing acompellingandwellcommunicatedframeworkforITinvestmentandthereturnofbusinessvaluecan be provided through a shared Balanced Scorecard, with IT and the Business as full participation in its construction. The Chief Information Officer must responsibly govern all aspects of businesss information, the facilities that produce, manage, consume, and protect this information, and the staff that leads and operates these facilities. Like any goods for sale, the Value provided to the business through these 3|Page

actions must be negotiated between the provider and the consumer. The value negotiation process persuades all participants that IT offers the best available option for the business by aligning the capabilitiesofITwiththeneedsofthebusiness.BydefiningtheroleoftheChiefInformationOfficer,the beginningsofaconversationofhowtoconnectITandBusinessValuecantakeplace.

WHENITBECOMESJUSTANINFRASTRUCTUREPROVIDER
When IT provides infrastructure services, a measure of operational excellence is the means of negotiating a shared definition of value. Infrastructure provides the operational services for delivering businessvalue.Definingtheneededbusinessvaluefirstisastartingpointfordefiningthisinfrastructure. Whatcapabilitiesareneededtosupportthebusinessoperations?Thisoperationalexcellenceapproach must connect the provided services with some form of a business case, business strategy, or business outcomemeasures.Thesemeasuresmustbeinunitsofdollars. Measuringthebusinessvalueoftheseservicesrequiresanunderstandingofwhatthebusinesssees asvaluable.Theunitsofmeasureofbusinessvaluearedefinedbythebusiness,notbyIT.ITscontribution to the business value is a negotiation process. Agreeing on the units of measure, what these units of measure are attached to, and when the units of measure will be recognized must be negotiated. Connectinginfrastructureperformancewithstrategymeansfindingthelinkbetweenthetechnologyand businessprocesses.TheinfrastructureprovidedbyITmustbeseenasnotonlyusefulbutneededbythe business.Thebusinessmustacknowledgethevalueofthisinfrastructurethroughitscontinuedfunding. Additionally business must be able to connect the measure this value in ways meaningful to their own performance measures. The operational aspects of the infrastructure are not very interesting to the business. Its the capabilities created by these operational aspects that are the basis of the value conversation.

WHENITPERFORMANCEBECOMESPARTOFTHECORPORATEPERFORMANCE
When corporate performance depends on IT, is enabled by IT or is actually an IT function, the measurement of ITs contribution starts by connecting IT strategy with the delivery of business value traceabletothebalancesheet.FindingtheGoals,CSFsandKPIsforITsactivitiesisthestartingpointin connecting IT performance to Business performance. The corporate focus starts with connecting any activityITperformswithabusinesselementinthebusinessandalineonthebalancesheet.Theunitsof measureofthisconnectionmustbeindollarsorpercentagesofdollars.Thisconnectionisrudimentaryat first,butwhentheconnectionbetweenITstrategyandbusinessstrategyismadethroughtheBalanced Scorecard the conversation involving dollars of value lays the foundation for getting a seat at the table,wherediscussionsofbusinessstrategiestakeplace. Askingandanswering,whyarewedoingthis?isthenextstep.ThemotivationforanyITprojecthas two choices its required (nondiscretionary spending) or it supports some business strategy (discretionaryspending).Increasingdiscretionaryanddecreasingnondiscretionaryshouldbethegoalof anycredibleITstrategybuiltaroundsupportingcorporategrowth.Discoveringtheseconnectionsisalsoa negotiationprocessinitiatedbytheCIOwithherpeers.Onebasedonprovidingvaluetothebusiness,not justtechnologyinsupportofbusinessoperations. Separatingdiscretionaryfromnondiscretionaryprojectsisthenextstep.Defininghowtomakethis separationrequirestheagreementoftherecipientsofboththeinfrastructureandthebusinessprocesses. EngagingtheparticipantsstartswithaconversationaboutthevalueofeachapproachtoIToperations. Thedifficultyisstartingthisconversation.ThisistheprimaryroleoftheCIO.AstheChiefInformation Officer,sheisresponsibleforgoverningallaspectsofthebusinessesinformationandthefacilitiesthat produce,manage,consumeandprotectthisinformation.

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BOTHINFRASTRUCTUREANDBUSINESSENABLEMENTARENEEDEDFORSUSTAINABLEVALUE
Whether IT provides strategic or tactical services, connecting the actions of IT with needs of the corporation is the first step in negotiating the value of IT to the business strategy. The connection to corporate strategy must be made in units of measure meaningful to the business. When IT starts conveyingitsvalueintechnicaltermsthebusinesshasahardtimeconnectingthedots.Thecurrencyof thebusinessisusuallydollarsorpercentagesofdollars.ITneedstospeaktothebusinessinthiscurrency asastartingpoint.Oncethecurrencieshavebeenestablished,theconversationaboutthequantitiesof thiscurrencycanturntohowthismonetaryvaluecanbeconnectedtothespecificactivitiesofIT. These measures are then negotiated with the business. This conversation is really a business negotiation. Ill give you X Dollars and youll return Y value. Ill give you X dollars and youll be responsibleforprovidingYservicesthatIcanmeasurethevalueofindollars.Thecriticalsuccessfactor of this approach is to not measure the technical performance of the IT services as is the common approachoftheITasInfrastructureparadigmbutinsteadmeasuretheITperformanceinmonetary valuetothebusiness. TheBalancedScorecardcanbeusedtocommunicateaswellascontroltheperformanceofIT.Cant gettothemonetaryvalueforIT?Cantmeasurethevalueoftheservicesprovidedtobusinessindollars? Thisisactuallyanunacceptableanswer.ThemissingpieceisamapthatdescribeswhyITexists.Thismap is the IT Balanced Scorecard and the associated IT Strategy Map. With this map, IT can answer the questionwhyarewehere?Whatisourvalue?Whatcontributionarewemakingtothefinancial performancegoalsofthisbusiness? NegotiatingITvaluewiththebusinessandthegovernanceofthedeliveryofthisvalueisthebasisof anITstrategy.Thisrelationshipcanbetopdownorbottomup.Eitherwaythisrelationshipcanbeguided by the Balanced Scorecard.In the end, IT must make acase for the value by connectingtheir activities with the consumption of their budget and the financial performance delivered to that balance sheet. UsingtheBalancedScorecardstrategymap,avisualrepresentationofthecauseandeffectbetweenITs activitiesandfinancialperformancecanbemadevisible. OnceGoals,CriticalSuccessFactors,andKeyPerformanceIndicatorsarevisible,theirmeasurescan be negotiated and the resulting description of performance success agreed to between IT and the business. With this map, IT can now combine infrastructure and business contribution in a single negotiatedvalueprocess,withbothsidesITandtheBusinesssharinginthevisionandmissionofIT.

CONNECTINGINFRASTRUCTUREANDBUSINESSVALUEWITHBALANCEDSCORECARD
If the connection between IT and Business is to be made, it needs to be made with a way of measuring both the value of the connection and theperformance of the efforts that deliver this value. Balanced Scorecard is one way to identify the value, state the benefits and guide the work efforts in deliveryofthisvalue. Balanced Scorecard is a strategymaking and strategyexecution method developed by Harvard professorsRobertS.KaplanandDavidP.Norton.[1,9,10]Itisinitsthirdgenerationwiththeworkof PaulNiven.[15]TheBalancedScorecardisbasedonfourperspectives.[5]
Financialhowarefinancesconnectedtocustomer,internal,andlearningsandgrowth? Customerhowdothecustomersseeuswhileweareprovidingourservicesorproducts? InternalProcesseswhatprocessesareusedtodelivervalue? LearningsandGrowthwhatskills,experience,trainingandmanagementpracticesareneeded?

ItisbeyondthescopeofthispapertopresenttheBalancedScorecard.Theresourcesavailableastext books,papersandwebsiteslistedintheBibliography.1Table2showsanotionalexampleofabusiness strategy.MakingtheconnectionstotheITstrategyisthenextstep.

There are several formats for Balanced Scorecards, not all are appropriate for IT strategies. There are currently three generations of Balanced Scorecard. The 1st generation is the classic four box description of Financial, Customer, Process, and Learning and Growth. This format provides performance management focused on metrics and targets. The 2nd generation identifies the strategic linkages between goals of the strategy and the metrics associated with these goals. The 3rd generation best suited for connecting IT with the Business inverts the strategy design process by starting with the destination statement, followed by the objectives, measures and targets. This destination statement describes how IT provides business enablement.

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 UserOrientation

Strategies BethesupplierofchoiceforIT productsandservices Focusresourcesonattaining businessstrategiesthrough effectiveITservicesdelivery

BusinessValue

Operational Excellence

Delivertimelyandeffective servicesatorunderbudgetthat meettheValueStreamgoals Developinternalcapabilitiesto learnandinnovatetoexploit futureopportunitiesusingIT

FutureOrientation

KeyPerformanceIndicators Customersatisfaction Usersurveyscore Percentageofprojectsdeliveredontime Totalbusinessimpact ITbudgetasapercentageofrevenue Costimpactforeachrelease Percentageofbudgetallocatedtonew development ITbudgetversusactual Staffutilization Staffturnover Historicalavailability Numberofdocumentedbestpractices ExistenceofProductLineArchitecture Totalcostofownership

ThenextstepofmakingajointITandBusinessscorecardisnotalwayswelldeveloped.Theresultisa lessthanacceptableforconnectionbetweenITValuewithBusinessValue.Oneapproachstartswitha toplevelITstrategy.AStrategythatstatesthevaluefrombothanInfrastructurepointofviewandfroma Business point of view. One that states both strategic initiatives and operational excellence, that when combined provide the negotiated value to the business. Table 2 shows four notional Balanced Scorecard perspectives for an IT strategy. The User Orientation replaces the financial perspective, BusinessValuereplacestheCustomerperspective,OperationalExcellencereplacesInternalProcessand FutureOrientationreplacesLearnings&Growth.

Table 2 a notional description of an IT strategy thatincludes both Infrastructure and Business value delivery. This approach combinesthetwochoicesintoasynergisticoutcometoavoidtheblackorwhitedecisionaskedintheintroductionofthispaper. ThisscorecardisinternallyfocusedonIT,withasingleconnectiontotheusercommunity.

CREATINGTHESTRATEGYMAPFORCONNECTINGITSVALUEWITHTHEBUSINESS
Connectinginfrastructureand Stakeholder Perspective business enablement into a Service Attributes Relationships Image coherent strategy is defined Application Timely Business Recognition of Stakeholder Quality Delivery Capabilities Value Relations through the contents of the four Balanced Scorecard perspectives. Internal Processes Perspective Figure 1 is a notional example of Regulatory Operations Stakeholder Innovation such a map in a different Processes Management Management Processes arrangement than the traditional Balanced Scorecard, one focused Learnings & Growth Perspective on IT instead of the general Human Capital business functions. The Information Capital stakeholder perspective provides Organizational Capital astatementaboutthevalueofIT Budget Perspective in terms meaningful to the Project Budget Resource business. The Internal Processes Performance Management Management perspective describes the operational and infrastructure Figure1anexamplestrategymapforanITorganization.ReplacingtheFinancial perspectivewithaStakeholderperspectiveisthefirststepinbuildingtheBalanced elements needed to deliver this Scorecard for IT. This scorecard is more representative of a joint IT and Business valuetothestakeholder.Learning negotiatedvalueview and Growth lay the groundwork forstaffing,training,organizing,andmanagingtheneededresources.TheBudgetPerspectivestateshow compliancewiththeexternallydefinedbudgetwillenablethedeliveryofITvaluetothestakeholders. Thestrategymapisavisibleindicatoroftheconnectionbetweenstrategicgoalsandexecution.The CriticalSuccessFactorsarethemeasuresofperformanceforthesegoals.Theprocessofstrategicthinking startswiththiscauseandeffectmapofstrategies.ConnectingCriticalSuccessFactorswithKey

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PerformanceIndicatorsprovidestraceabilityfromexecutionattheprojectleveltofulfillmentofstrategic objectives.

ITSALLABOUTMANAGINGTHEINFRASTRUCTUREPERFORMANCETOENABLESTRATEGICPERFORMANCE
A conceptual framework is needed for a performance measurement and management system. Effective internal and external communications are the keys to successful performance measurement. Accountability for results must be clearly assigned and well understood. Performance measurement systems mustprovide intelligence fordecision makers,not justcompiled data. Compensation, rewards, and recognition may be linked to performance measurements. Performance measurement systems shouldbepositive,notpunitive.Resultsandprogresstowardsprogramcommitmentsshouldbeopenly sharedwithemployees,customers,andstakeholders.[14] The measurement of IT performance that is meaningful for the business must start with strategy. Eachmeasureis: Derivedfromstrategyawaytooperationalizethevisionofthebusinessandmovefroman infrastructurebasistoastrategyfocusedorganization. Activitybasedactionsguidedbyperformancemeasures,eachconnectedtoanelementofthe BalancedScorecard. Customerfocusedactionsguidedbyinternalandexternalcustomers. Dynamicwithnewmetricsdevelopedasneeded. ParticipativebetweensupplierandconsumerasthebasisofthenegotiatedvalueofIT.

CONNECTINGSTRATEGYWITHEXECUTION
Without the ability tonegotiate value, IT cannot engagethe business in a meaningful conversation about its contribution to corporate performance. Adding the three scorecard perspectives, Customer, Process and Learning and Growth to the financial perspective provides the language tostarttheconversationaboutthecorporate valueofIT.Thisvaluenegotiationcanaddress boththestrategicandtacticalcapabilitiesofIT avoiding the dilemma found in many organizations. Inverting the question of the role of IT how can IT start the conversation about negotiating business value in terms of IT capabilities. To start this conversation, a shared vocabulary is needed. One that demonstrates the connections between strategy and execution. Figure 2 describes a notation for this vocabulary for the strategy Increase Customer Retention. This vocabulary Figure2MappingStrategytoExecutionOncecorporate containswordsandphrasesmeaningfultothe strategieshavebeendefined,connectingthesestrategieswiththeIT Business. The Units of Measure exchanged strategiesanddefiningtheircontributedvaluetakesplacethrougha duringtheconversationaboutITsmeasurable mapofthePerformanceGoals,CriticalSuccessFactors,andthe valuetothebusinessindollarsorpercentages KeyPerformanceIndicators.. ofdollars.Onlywhentheseunitsofmeasure, thevaluetheyspeakto,andtheconnectionsbetweenstrategyandexecutionareinplace,canITstartto lookatitsoperationalexcellenceactivities. Figure 2 describes the fulfillment of the strategy Increase Customer Retention, by defining the Performance Goals, Critical Success Factors, and Key Performance Indicators associated with the operationalexcellenceofIT.ThisisthewaytheCIOgetsaseatatthetable.ThisisthewayITisconnected tothebusinessasamemberofthevaluestream.ThisisthewayITconnectsinfrastructure,withbusiness valueandwithitsownvalue.

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ANSWERINGTHEQUESTIONOFWHATISITSROLEINTHESTRATEGYSIDEOFTHEBUSINESS?
ThequestionsaskedinthebeginningofthispapernowneedanswersinthecontextofaBalanced Scorecard. QuestionsabouttheroleofIT? AnswersusingtheBalancedScorecard
Is IT a strategic enabler of the business or simply an Operational excellence and its associated cost are operationalexpense? needed to fulfill strategy. Strategy is not needed as the basisofoperationalexcellence. ShouldITfocusondevelopingnewservicesthatsupport This is the difference between strategy and operational businessoperationsandcustomersorshoulditfocuson excellence. Without the latter, the former is not an improving the infrastructure so that the business units operation. If IT is to contribute to corporate growth, it canstayfocusedonthecustomer? needstodoboth. How much responsibility should IT have in meeting the This is the outcome of the negotiation between IT and businessobjectives? thebusiness. What does IT need to do to ensure its place in the ITneedstonegotiateitsrolewiththebusiness.Itneeds businesssstrategy? tobeaparticipantintheperformancemeasuredusedby thebusiness. Why is the disconnect between what corporate Thelanguageusedtocommunicatestrategyneedstobe strategistswantandwhatITisactuallydoing? inunitsofmeasuremeaningfultothebusiness. IfthecorrectroleforITisthatofasharedservicebureau, Connectingtherequestswiththeenterprisearchitecture howcanITbestensuretherequestsitreceivesalignwith through a portfolio management process. This PPM companystrategy? approachshouldmakeuseofrealoptionsasthetradeoff decisionmakingprocessforeachrequestanditsimpact onthebusinessbenefitsofthisarchitecture.Connecting EA and Balanced Scorecard is well established in the literature. What IT applications should be deployed to yield ByfollowingthestrategyfromitsMission,Vision,tothe competitiveadvantage? Performance Goals, IT should be able to speak to what applications are needed for the successful fulfillment of thisstrategy Whattechnologicalopportunitiesshouldbeconsidered? The statements about strategy must include future activitiestheoutyearsofthestrategy.Thesefuture oriented strategies are the groundwork for the IT technologicalroadmap. Which IT capabilities should be nurtured and which Thestrategictradeoffdiscussionstartswiththelineof shouldbeacquiredfromoutsidesources? sight connection between financial performance, throughCustomerFocus,toInternalProcessesandthen toLearningsandGrowth. Along this path, the alternatives in their monetized measures can be discussed between the business and IT. HowshouldITactivitiesbeorganizedandwhatistherole This is a key contribution of IT to the business. But the oftheITfunction? conversation starts with determining how IT can best fulfill the short, medium and long term strategic initiativesofthebusiness. WhatismanagementsroleintheITdomainandwhatIT IfITistohaveaseatatthetable,thenmanagementof capabilitiesarerequiredfortodaysmanagers? the business and management of IT must be seen as peers. The role of the Chief Information Officer is equivalent to the Chief Financial Officer, the Chief OperationsOfficer. Table3eachquestionaskedinthebeginningofthispapercannowbeaddressedthroughthecontextofBalanced Scorecard.AnsweringthequestionwhatistheroleofITtacticalorstrategichastheanswerofBoth.Bothare needed,butmoreimportantly,thestrategicapproachdependsontheoperationalexcellenceofthetactical approach.

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BIBLIOGRAPHY
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. DoesITMatter:InformationTechnologyandtheCorrosionofCompetitiveAdvantage,NicholasG. Carr,HarvardBusinessSchoolPress,2004 TheChiefInformationOfficer:AStudyofSurvival,M.J.Earl,CentreforResearchinInformation ManagementWorkingPaperWP93/3,reprintedasWP95/1,LondonBusinessSchool. IntegratingISandtheOrganization:AFrameworkofOrganizationalFit,MichaelJ.Earl,London BusinessSchool,CentreforResearchinInformationManagementWorkingPaper,CRIMWP95/4. TransformationoftheITFunctionatBritishPetroleum,JohnCross,MichaelJ.Earl,andJefferyL. Sampler,MISQuarterly,21(4),1997. TheDevelopmentoftheBalancedScorecardasaStrategicManagementTool,IanCobboldand GavinLawrie,PMAConferenceProceedingsMay2002 InformationManagement:TheOrganizationalDimension,M.J.Earl,OxfordUniversityPress,1996 MakingITMatter,CharlieFeldandDonnaStoddard,HarvardBusinessReview,February2004. Alignment:UsingBalancedScorecardtoCreateCorporateSynergies,RobertS.KaplanandDavidP. Norton,HarvardBusinessSchoolPress StrategyMaps:ConvertingIntangibleAssetsintoTangibleOutcomes,RobertS.KaplanandDavidP. Norton,HarvardBusinessSchoolPress ImplementingtheITBalancedScorecard:AligningITwithCorporateStrategy,JessicaKeyes,Auerbach Publications AgileInformationSystems:Conceptualization,Construction,andManagement,EditedbyKevinC. Desouza,ButterworthHeinemann StrategicPerformanceManagement:LeveragingandMeasuringYourIntangibleValueDrivers, BernardMarr,ButterworthHeinemann SensemakinginStrategyImplementation,SakuMantere,Espoo,November2000 GuidetoaBalancedScorecardPerformanceManagementMethodology,NationalPartnershipfor ReinventingGovernment,U.S.DepartmentofCommerce,1999 BalancedScorecardStepbyStep:MaximizingPerformanceandMaintainingResults,PaulR.Niven, JohnWiley&Sons BalancedScorecardDiagnostics:MaintainingMaximumPerformance,PaulR.Niven,JohnWiley& Sons IntegratedValueManagement:AMultiFacetedApproachtoCreatingCorporateValue,Shinichi Shibayama,NomuraResearchInstitute InformationTechnologyProcessReengineeringandPerformanceMeasurement:ABalanced ScorecardAnalysisofCompaqComputerCorporation,CaseStudy,Communicationsofthe AssociationforInformationSystems,Volume1,Article8,January1999. WhatisStrategy,M.E.Porter,HarvardBusinessReview,Volume74,Number6,pp.6178. ControlYourDestinyorSomeoneElseWill:LessonsinMasteringChangeFromthePrinciplesJack WelchUsedtoRevolutionizeGE,N.M.TichyandS.Sherman,HarpersBusiness,1994. JackWelchSpeaks:WisdomfromtheWorldsGreatestBusinessLeader,J.WelchandJ.C.Lowe,John Wiley&Sons,1998. TheCIOastheDrivingForceBehindITRestructuring,KokiYodokawa,NomuraResearchInstitute DontjustleadGovern,PeterWeil,MISQuarterly,Volume3,Number1,March2004.

19. 20. 21. 22. 23.

BIOGRAPHY
Glen Alleman is PracticeDirector,Strategyand PerformanceManagement, Lewis & Fowler, Denver Colorado. Glens role defines, develops, deploys, and assesses the benefit of Lewis & Fowlers strategy and performance management processes for CIOs and senior business management clients using Balanced Scorecard, Project Portfolio Management, Enterprise Project Management, and Program ManagementOfficedeployments.

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