Getting Measurable Results from IT Spending

The strategic role of technology is to create more value to the business through incremental investment. Where to invest, what to invest, and what outcomes should be expected can be looked at in several dimensions:

• Time. Investments in information technology should reduce the amount of time that it takes to perform a business process. Increasing the speed of a business process through automation, or, through elimination of redundant steps, or, through bypassing steps will accelerate business activities.
• Efficiency. Often it’s not enough to be fast but to work smarter. Technology can be used to conduct business activities more efficiently in ways that reduce waste and maximize return.
• Distance. Geography isn’t important to technology. Spending on technology can reduce or eliminate the importance of geography to performing business processes. If geographic barriers are eliminated, that can open the door to a new way of thinking about the business and its services, especially in a digital age.
• Innovation. Technology can be leveraged to create new markets and new products, or enhance those that the company already has. Technology can be used to extend value to relationships and to provide additional post-sale features and services that make doing business with the company worthwhile.
• Growth. Technology can contain the expenses associated with growth. An investment in technology today may allow a company to reduce the amount of investment needed in future labor or capital equipment, yet still allow the company to meet its growth requirements.
• Accuracy. Installing fast computer systems that efficiently process information may sound good, unless – of course – we find that the computer did these things inaccurately. Investments in technology can improve the accuracy of the information system to reduce mistakes and lower the costs of waste inside of a business process.
• Reliability. Finally, technology should make a process reliable. The business process should go down less-frequently, it should be more predictable, and it should be transparent and auditable.

Usually, one of the big questions that I’ll get from a business owner is, “Well, what is this big investment in tech going to get me?” And the answer to that question is found in at least two of those outcomes, and hopefully those effects can be quantified by some metric that the manager is already following. A couple of examples:

• Speed and Efficiency. Process outputs will increase by 7 – 10 percent and will require one less FTE (Full-Time Equivalent) employee.
• Accuracy and Reliability. Error rate will be reduced by 25-percent and the scrap budget by 10-percent; our goal is to reduce downtime on this process to less than 1 hour/month.
• Growth and Innovation. Investment in this technology will open a new market for online distribution of our ideas, and, enhance our self-service offerings. With more self-service, customers will find what they need online first rather than contacting us, lowering our staffing requirements and providing competitive services to our clients that they just can’t get anywhere else. We can measure that with market share statistics and web-usage data.
• Distance and Time. Now capable of remotely accessing information from anywhere, our employees will be able to respond to problems faster and more directly – where-ever they might be. That will give us a leg up on sales and satisfaction. We should see an increase in sales and post-sales satisfaction surveys.

In thinking about technology spending, management should always be asking how their spend contributes to at least two or more of these outcomes. Naturally, it’s totally great if an investment does all of these things but that’s really unrealistic: technology investments are usually more targeted than that. At least they should be (wink) – technology has a tendency to “over-promise” if you’re not careful.

Also, management can look at technology spending that has already and ask itself:

1. The computers are always going down. I have more downtime. How is this useful? How is this more Reliable?

2. The information system is giving us bad information. I’m creating more errors. How is this more Accurate?

3. It takes longer to get something done. It’s nine steps now instead of four. How is this more Efficient? Or Speedier?

4. Our customers are completely misunderstanding our services. They’re not using the website. How is this more Innovative?

If management is asking these questions of itself, then these questions are eventually going to be posed to an in-house technology manager or to a solutions vendor, and hopefully those questions would be put to them. And that’s what management should be doing: critically evaluating technology spending for value.

If the spend is yielding no value, or, the value that’s supposed to be there isn’t, then something is wrong. Something is wrong with strategy, execution, or design. And somebody’s got to go back and make it right.

Any time that management is considering spending money on tech, it should ask itself (or your vendors or your internal IT department), “Just how will investment improve Speed, Accuracy, and Reliability? How will it allow me contain the cost of my Growth? How will it make me more Efficient, or more Innovative, or lower Distance barriers?” Hopefully you don’t get blank “deer-in-headlight” kinds of responses. After all, the answer isn’t, “Because servers are cool”, or, “Everybody’s got a Droid”, or, “You need an upgrade.” The answer should be something meaningful to you – the business owner – in a way that makes sense to your business.

Finally, after management has found at least two outcomes where they anticipate some strategic benefit, they should find real, quantified metrics to monitor, so that those improvements can be materially seen, and thereby creating a clear distinction between objective business measurements and return on investment.

And that’s just one way strategic application of IT helps yield value and measurable results.

R

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