Crea%ng, Measuring and Communica%ng Value. Brian H. Cameron

Transcription

1 Crea%ng, Measuring and Communica%ng Value Brian H. Cameron 1

2 Value 2

3 Tour d Eiffel Built in 1889 for Universal Exposition World s most visited paid tourist attraction Over 220M visitors 300m high, 125m wide Cost: 7.7M francs Paid for itself in 1 year What is the Value? 3

4 Tour d Eiffel Construc%on 18,038 parts prefabricated in the workshop by 100 workers Assembled on site by 132 workers using 2.5M rivets Revolutionized building construction First major structure built using prefabricated parts What was the value? 4

5 Current State of Value Measurement Value Measurement is consistently cited as a top area of importance in enterprise architecture but also consistently cited as one of the areas of lowest maturity. 5

6 Failure to Communicate Business Strategic Objec%ves and Performance Metrics Source: Gartner 6

7 The Key Is To Iden%fy Metrics That Correlate To Business KPIs. Ok, but HOW? Timeliness of Indicator Lagging Leading Very Leading Example Metrics Profit Cash Corporate Value Backlog Contract Value Time to Market Order to Cash Cycle Reputation Index Social- Network Size Partnership Ratio Weak Signals 1 st Order 2 nd Order 3 rd Order 4 th Order Auditability Very High High Medium Low Source: Gartner Performance Management Continuum 7

8 What is Value? The quality (positive or negative) that renders something desirable or valuable The degree of importance you give to something. Source: Wiktionary A value proposition is a promise of value to be delivered and a belief from the customer of value that will be experienced. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services. Creating a value proposition is a part of business strategy. Kaplan and Norton say "Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation. Source: Wikipedia 8

9 Is There Value In Measuring Value? PROS CONS It demonstrates to business partners and the EA team how EA impacts company performance. It is the best way to compare and link EA with the performance of other func;ons. It guides future EA investment decisions toward areas of highest value. It encourages business case discipline and highlights projects where value realiza;on fell short. It is difficult and resource intensive for some organiza;ons, the benefits are not worth the effort. It only provides an approximate measure of value. It cannot dis;nguish among value created by people, process, and technology. It requires business partner assistance and mature IT finance capabili;es. 9

10 What are Components of Value? According to Porter, there are three components of stakeholder value: Economic Value - The financial impact of the investment. What will be your return on investment? What will it do for the company financially? (Investors) Business Value - The primary consideration to the user of the solution. What can the investment do for the organization and how can it increase productivity, efficiencies and effectiveness for those that use the solution. (Consumers) Personal Value - This is more of an intangible value, which answers the question, what will the decision do for me personally? Will I get a promotion, a bonus, peace of mind, or improve my influence with other organizations? (Political) 10

11 How Do You Measure Value? Economic Value Metrics Business Value Metrics Personal Value -??? 11

12 What is Valued with Stakeholders? It is said that if you know your enemies (stakeholders) and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies (stakeholders) but do know yourself, you will win one and lose one; if you do not know your enemies (stakeholders) nor yourself, you will be imperiled in every single battle. --Sun Tzu, The Art of War 12

13 Enterprise Architecture as a Mechanism to Enable Transforma%on Technology is so integrated with business today and so much intertwined that you can t discuss the value of one independently of the other. --Al Sacco, Senior Editor, CIO Magazine 13

14 EA Can Be the Linchpin to Bridge the Strategy to Execu%on Source: Gartner 14

15 EA Can Address C- Suite Priori%es But Only If You Understand Those Priori%es (Any How They Are Measured/Valued) Source: Gartner 7 15

16 Enterprise Architecture as a Mechanism to Enable Transforma%on Many Stakeholders and Value Propositions to Consider 16

17 The CEA Value Framework Purpose: To Provide Guidance On Where To Focus Value Measurement Efforts Stakeholder Analysis / Value Mapping Business Capability Analysis / Value Mapping Stakeholder and Business Capability Value Measures Mapping & Analysis Metrics Selection / Development Governance Considerations Communications Considerations 17

18 How Do We Determine What To Focus On? Stakeholder Analysis To Answer Questions Such As: Who are our stakeholders and which ones are key stakeholders? What do the key stakeholders value? What value measures do we use? Stakeholder Value Mapping To determine what value measures are the most important and most frequently cited Capability Mapping To determine understand, categorize, and prioritize business capabilities. Determine what value measures are needed for identified high value business capabilities. 18

19 How Do We Determine Where to Start? Stakeholder Value Measures Business Capability Value Measures Business Stakeholder Capability Value Value Measures Measures How Far Apart Are We? Which Measures Have A Causal or Probable Relationship To EA? 19

20 Establishing Metrics and Measurement Program Factors to Consider Metrics that should/can be used (Quantitative & Qualitative) Governance / Accountability Communications Strategy 20

21 Stakeholder Analysis / Value Mapping 21

22 Stakeholder Analysis & Value Mapping Stakeholder Definition/Identification A stakeholder is anybody who can affect or is affected by an organization, strategy or project. Mind mapping is a useful way visually identifying stakeholders. 22 ea.ist.psu.edu 22

23 Stakeholder Analysis & Value Mapping Analyze Two Major Characteristics of Stakeholders: Interest/Impact of Stakeholders Influence/Power of Stakeholders 23

24 Stakeholder Analysis & Value Mapping Once you have mapped the interests of your stakeholders you need to prioritize them in order of importance. Different methodologies suggest different ways of analyzing stakeholders some complex and some very simple. A common approach is to map the interest and power or influence of each stakeholder group on a quadrant (Bryson 1995). 24 ea.ist.psu.edu 24

25 Stakeholder Analysis & Value Mapping Key Stakeholder Value Analysis Stakeholder (Key Players) Financial Value Considerations Economic Value Considerations Personal Value Considerations 25 ea.ist.psu.edu 25

26 Stakeholder Analysis & Value Mapping Financial Value Considerations Return on Investment (ROI) Return on Assets (ROA) Frequency Also Do For Economic Value And Personal Value Considerations 26 26

27 Capability Analysis / Value Mapping 27

28 Defining Capability A business capability defines the organiza;on s capacity to successfully perform a unique business ac;vity. Capabili;es: Are the building blocks of the business. Represent stable business func;ons. Are unique and independent from each other. Are abstracted from the organiza;onal model. Capture the business interests. A business capability map is: A conceptual model of all of the organiza;on s capabili;es along with the details (people, process, and technology) that enable them. Source: Forrester 28

29 Defining Capability Capabili;es Data gathering Concept development Cri;cal analysis Capabilities are applied to activities to create interim value points Process Research Write Edit Publish Service or product Research Reports Processes structure activities to produce a value proposition The result is a specific value delivery vehicle 29

30 Iden%fy The Organiza%on's Capability Map Capability Map Prospect to customer Market analy;cs Idea sourcing Rapid prototyping Concept to product Engineering Supplier to stock Packaging design Channel placement Request to service Rela;onship management B2B integra;on Quality control Materials management Incident management Market shaping Scheduling Fabrica;on Manufacturing to distribu;on Applied robo;cs Line management Inventory control Distribu;on logis;cs Product educa;on Order to cash Sales Order management Order fulfillment Billing Payments Repair services Corporate management Human resources Finance Facili;es management Contract management Strategic planning IT 10/19/12 30

31 Capability Assessment Advantage capabilities directly contribute to the customer value proposition and have a high impact on company financials. Keep them inside and protect the intellectual property. Strategic Support capabilities have high contribution in direct support of Advantage capabilities. Keep them close. Essential capabilities may not be visible to the customer but contribute to company s business focus and have a big impact on the bottom line. Focus on efficiency improvement; especially in high volume work. Source: Forrester 31

32 Capability Assessment Source: Gartner 32

33 Capability Assessment Source: Gartner 33

34 Iden%fy Capabili%es That Provide Market Differen%a%on Capability Map Prospect to customer Market analy;cs Idea sourcing Rapid prototyping Concept to product Engineering Supplier to stock Packaging design Channel placement Request to service Rela;onship management B2B integra;on Quality control Materials management Incident management Market shaping Scheduling Fabrica;on Manufacturing to distribu;on Applied robo;cs Line management Inventory control Distribu;on logis;cs Product educa;on Order to cash Sales Order management Order fulfillment Billing Payments Repair services Corporate management Human resources Finance Facili;es management Contract management Strategic planning IT Advantage Strategic Support Essen;al 34

35 Create Investment Pools and Priori%ze Funding Advantage Strategic Support Essen;al Idea sourcing Rapid prototyping Packaging design Quality control Concept to product Channel placement Supplier to stock Order to cash Order management Billing Request to service Product educa;on Repair services Engineering Market shaping Rela;onship management Sales Strategic planning Incident management Applied robo;cs Line management Distribu;on logis;cs Contract management Order fulfillment B2B integra;on Materials management Manufacturing to distribu;on Scheduling Fabrica;on Inventory control Payments Prospect to customer Market analy;cs Corporate management Human resources Finance Facili;es management IT Allocate 60% of available funding Allocate 25% of available funding Allocate 15% of available funding 10/19/12 35

36 Capability Analysis Once you have categorized the business capabilities, you need to prioritize them by value to the business and the complexity of assessing the value of the capability

37 Capability Value Mapping Capability (High Business Value, Reasonable Value Complexity) Value Measures Used 37 37

38 Stakeholder and Business Capability Value Measures Mapping 38

39 How Do We Determine Where to Start? Stakeholder Value Measures Business Capability Value Measures Business Stakeholder Capability Value Value Measures Measures How Far Apart Are We? 39

40 How Do We Determine Where to Start? Business Stakeholder Capability Value Value Measures Measures Determine Causal or Probable Relationships with the Identified Measures 40

41 Metrics Selec%on 41

42 Value Measurement Not everything that can be counted counts, and not everything that counts can be counted. Albert Einstein 42

43 A Tradi%onal View of Enterprise Architecture Domains Business Architecture Business goals and objec;ves Business systems, organiza;on units, func;ons, processes, events Data / Information Architecture Application Architecture Business domains, business en;;es, data elements, rela;onships Data requirements Applica;on porzolios, subsystems Interfaces, integra;on Technical/Infrastructure Architecture Hardware and software platforms Network and communications infrastructure 43

44 Define Architecture Process & Approach Current State Alignment Business Strategy Future State Business Architecture Obtain & Maintain Buy In & Support Governance Project Management Business Architecture Data/Informa;on Architecture Applica;on Architecture Change Management Enterprise Analysis Communica;ons Strategy Risk Management Enterprise Modeling Value Measurement & Management Understanding of Organiza;ons Enterprise Informa;on Technology Acumen Leadership & Decision Making Data/Informa;on Architecture Applica;on Architecture Technical / Infrastructure Architecture Enterprise Integra;on PorZolio Management Migra;on / Implementa;on Planning Technical / Infrastructure Architecture Where we are How we re going to get there Where we want to be 44

45 How Do We Measure Architecture? Cost Reduction Implementation Operations Maintenance Enhancements Integration Complexity Reduction No. of Systems, platforms, etc. Redundant assets Flexibility and Agility -?? Time to market Alignment -?? Architecture Processes Time, resources, errors Results, influence Architecture Output No. of artifacts produced Effectiveness of artifacts Architecture Governance No. of projects reviewed Time to review projects Recommendations Cost Avoidance Opportunity exploitation 45

46 IT is an Integral Part of the Business 46

47 A Non- IT Centric Enterprise Architecture Perspec%ve Business Processes Vision, Mission Strategy and Goals Data / Informa;on Applica;ons vs. Business Capabili;es Collateral Flows Technical / Infrastructure Systems and Services Physical and Intangible Assets Len Fehskens, VP Skills & Capabilities, The Open Group 47

48 A Non- IT View of Enterprise Architecture Domains Vision, Mission Strategy and Goals Business Capabilities Collateral Flows Systems and Services Physical and Intangible Assets The enterprise-wide vision, mission, strategy and goals that the business capabilities support. The integration of multiple systems and services and the collateral flowing within and between them into business capabilities. Generalizing information to everything that flows within and between the enterprise s systems and services. Generalizing IT applications to all the systems and services built up from the physical and intangible assets of the enterprise Generalizing the physical (HW infrastructure) and intangible (SW infrastructure) assets of the IT organization to the entire enterprise. 48

49 Some Enterprise IT Value Metrics Cash Cycle 1. Days of Inventory 2. Days of Receivables 3. Days of Payables Efficiencies 4. Headcount Reduction/Avoidance 5. Headcount Productivity 6. Headcount Turnover 7. System End-of-Life 8. Material Discount 9. Hardware/Software Avoidance 10. Unit Cost and Other Cost Avoidance 11. Factory Uptime 12. Scrap Reduction 13. Risk Avoidance 14. Time to Market Open Markets 15. Opening New Markets 16. Optimizing Existing Markets 17. Cross-Selling 18. Customer Excellence Program Each metric measures value in dollar terms created by the IT system. Source: CIO Executive Board 49 49

50 5 Essen%al Metrics for EA 1: EA Strategy Momentum 2: EA s Financial Impact 3: EA Customer Satisfaction 4: EA Skills And Capability Growth 5: EA Process Improvement Source: Forrester 50 50

51 The Gartner Business Value Measures Source: Gartner 51

52 12 Next Genera%on Metrics for EA Source: The Corporate Executive Board Company 52

53 Sample of Mapping EA Capabili%es to Business Value and Metrics Strategic Initiatives Run EA Capabilities Translate business vision and strategy into effective enterprise operations. Business Value of EA Minimize business operating costs; maximize the efficiency of operations. Sample Metric Operating costs, event or opportunity response index, manufacturing efficiency metric. Grow Identify the risk-reward of emerging business- and IT-driven solutions by providing guidance. Maximize the business impact, and reduce the risk from investments. Market coverage index, channel profitability index, sales opportunity index. Transform Translate business vision and strategy into effective enterprise change by creating, communicating and improving the key requirements, principles and models. Maximize the revenue/ impact, based on business goals and objectives. New product/market index, R&D success index. Source: Gartner 53

54 Metrics Overload The problem isn t a lack of metrics, its knowing which ones make sense for your organization and will provide the most value for the effort required 54

55 Five Aaributes Of An Effec%ve Metric Source: CIO Executive Board 55

56 Seven Piballs of IT Value Metrics 56 ea.ist.psu.edu College of Information Sciences and Technology Source: CIO Executive Board 56

57 Probable Cause Metrics Example: Customer Satisfaction Document performance in targeted benefits: Take the measures before launch and periodically via scheduled surveys Recognize that the benefits obtained cannot be directly linked to EA many other factors could contribute to an outcome Therefore, show "probable cause" make the case with circumstantial evidence And then publicize such quantitative measures of qualitative opinions 57

58 Probable Cause Metrics - Use Scenarios A good architectural investment is robust in an uncertain world Scenarios enable us to test/prove robustness Scenarios explain value in a nontechnical way Scenarios are self-consistent, plausible futures Scenarios should be dominated by business futures Scenarios provide cost justification support 58

59 Enterprise- Wide Value Standardiza%on A Finite List of Metrics for Everyone - 18 metrics cover all possible ways to create business value. All project business cases are created using metrics from this list. Metrics Business Leaders Recognize - Metrics of project success are the same ones that appear on CXO scorecards. Quantifiable and Measurable Metrics - Each metric can be measured and translated into a dollar value. The metrics can then be aggregated to measure total value. Source: CIO Executive Board 59

60 A Word on ROI 60

61 What s Wrong With ROI? Numerous companies and individuals attest to the difficulty of measuring technology ROI. A recent study found that 89 percent of companies use intuition or guesswork to calculate the ROI of IT expenditures. Echoing the frustration of many business and IT executives, Intel CIO Diane Bryant recently said, It s not always easy to predict how you would even do an ROI analysis. You could spend a year figuring out ROI, and then you might have wasted a year. 61

62 What s Wrong With ROI? A CIO Magazine article quoted one IT executive as saying, ROI has more credibility when it s stated in raw benefits, which are sometimes non-quantifiable, rather than translated into dollars. That translation is often fuzzy and tends to lose some audiences. Clearly, the attempt to measure technology ROI is fraught with difficulty. But then it isn t impossible and, done right, it can yield a wealth of valuable insight. What is needed is a simplified framework for understanding EA s return on investment. 62

63 Governance 63

64 Why Do We Need Governance for Value Measures? Stakeholder Value Measures Change Business Capability Value Measures Change 64

65 Communica%on 65

66 Focus Communica%on on Value Delivered Reflect the business priorities (they have changed again) Address the business issue, not the IT issue Use the language of the business and write it down Volatility demands revisiting core assumptions 66 66

67 Develop A Clear Communica%ons Plan Create a communications strategy/plan for key stakeholders. Identify the tasks needed to collect the information Identify the supporting tasks (communication, metrics, governance). Determine resource requirements Identify dependencies 67

68 Know Your Audience 68 ea.ist.psu.edu College of Information Sciences and Technology 68 Source: CIO Executive Board

69 Concluding Thoughts 69

70 Concluding Thoughts Measure just what you need. More measurement isn t always better measurement; resist the temptation to measure things just because you can The organization needs to be literate in data interpretation and comfortable with data-based decision making. Similar levels of data maturity are required across the organization for cross-cutting metrics. All metrics require specific individuals to be tasked with collecting and collating the underlying data accountability. Get buy-in before you measure. Gathering the data for your metrics can be time consuming, so make sure you are creating metrics that matter Value creating metrics require time commitment from business partners Be conservative. Many EA metrics are derived from subjective data. Don t be tempted to exaggerate EA s performance. EA stakeholders must trust the metrics if they are to have any value. When you have to make a call, be conservative 70

71 Concluding Thoughts Evolve your metrics sophistication. Start with easy-to-build, easy-to-explain metrics. Over time, add more-sophisticated measures to the dashboard. One caution: The major purpose of metrics is to improve the EA team s performance and perceived value to the enterprise. Don t go overboard with measurements and metrics that won t contribute to performance-based decisions Make the most of measurement resources: Leverage other measurement data being collected across the organization. Make friends with the people who do this regularly: - CFO organization - Performance management groups - Quality groups (for example, Six Sigma) Think Qualitative as well as Quantitative measures Focus resources where they will have the greatest impact and the most benefit. Learn to work with less-than-perfect data: - Ambiguous definitions - Lack of rigor in data collection - Inappropriate data representation (for example, too many decimal places) - Assessment of data quality not provided - Qualitative versus quantitative 71

72 Concluding Thoughts Communicate the results widely, often, using a variety of media, and at a level appropriate to the audience. Have a communications strategy for each of your key stakeholder groups. 72

73 The CEA Value Framework 1. Plan (Stakeholder & Business Capability Analysis / Value Mapping) 2. Assess (Stakeholder and Business Capability Value Measures) 3. Design & Build (Metrics Selection / Development) 4. Implement & Review (Governance) 5. Communicate Results 73