At most enterprises, benefits realization (BR) fails to reap the full business value of IT-intensive investments. CIOs can correct this by considering the five levels of BR capability, and moving to the next level when the timing, triggers and current capability are right.
The only reason to make business investments, including IT-intensive ones, is to generate business value (the benefits). But most enterprises and their IT organizations have weak benefits realization practices. This weakness is becoming more of an issue as IT-intensive investments pervade more aspects of the enterprise.
This report addresses the question, What practical steps can CIOs take to improve the benefits yield of IT-intensive business investments?
“Benefits Realization: The Gift That Keeps On Giving” was written by members of the CIO & executive leadership research group, led by Dave Aron (vice president and Gartner Fellow), assisted by Michael Smith (vice president).
We would like to thank the many organizations and individuals that generously contributed their insights and experiences to the research, including:
The contributors to our interviews and case studies: Himanshu Gupta, BP (U.K.); Dr. Colin Ashurst, Durham University (U.K.); Phil Cook, Electrocomponents (U.K.); Tay Yeow Koon and Col. Rupert Gwee, MINDEF (Singapore); Steve Williams, Newcastle University (U.K.); Ho Sin Kheong, RHB Bank (Malaysia); Jaeil Suh, Samsung SDS (South Korea); Jeff Hess, SAP (Germany); and Stephen Warren, U.S. Department of Veterans Affairs.
Other Gartner colleagues: Jim Arnott, Steve Bittinger, Youn Choi, Linda Cohen, Judi Edwards, Jim Hocker, Poh-Ling Lee, Jean-Marc LeJeune, Eddy Louchart, Mark McDonald, Nigel Rayner, Jonathan Settle, Jennifer Simmonds, Bill Swanton and Yuet-Nan Wong.
Other members of the CIO & executive leadership research group: Barbara Gomolski, Richard Hunter and Andrew Rowsell-Jones.
Shifting focus from activities to benefits is a challenging enterprise change, but necessary to capturing the money currently left on the table by weak benefits realization practices. In addressing this issue, enterprises and their CIOs must take one step at a time.
As businesses increasingly digitize, it is clearer than ever that most cannot reliably realize the value of IT-intensive investments. Enterprises and their CIOs must therefore take committed action.
Evidence from the Gartner 2011 CIO Survey and separate interviews with CIOs show that in most enterprises, benefits realization (BR) is poorly done, and consequently a significant chunk of money is left on the table. Furthermore, the techniques used most frequently in this area do not drive the most benefits. Only invasive, accountability-focused disciplines will capture a greater benefits yield.
Consider this scenario: An IT organization with a $100 million IT budget and average BR capabilities might turn a $30 million capital investment budget, targeting a 20% return ($36 million), into $22 million. This would be a 39% loss. In contrast, investing about $1 million in mostly soft costs, such as staff time, might increase benefits by almost $4 million. This would be an ROI of more than 200%.
BR is not a responsibility of the CIO alone (and cannot become so), but it is critical for the success of IT-intensive investments and hence the IT organization. As a C-level leader, the CIO can and should influence enterprise improvements in BR, support BR practices with tools and methodologies, and demonstrate good behaviors with CIO-sponsored initiatives. Bear in mind that a recent Gartner survey found that what CFOs want most from CIOs is the realization of benefits from IT-intensive initiatives.
“The most important factor is senior executive commitment to doing something different.”
As a cultural issue ultimately requiring a change of mind-set across the enterprise, BR cannot happen overnight. Each of the five levels of BR capability brings significantly increased ability to harvest the value of IT-intensive investments (see figure below).
Polls of some 200 CIOs at recent Gartner events reveal that the majority of enterprises spend most of their time between Levels 2 and 3 (basic and holistic visibility), with some enterprises regressing to Level 1 (chaos) and others outperforming the average enterprise at Level 4 (accountability).
The increased benefits at successive levels require, along with significant new capabilities, a higher level of senior executive commitment. Most enterprises that successfully increase their BR level, or maturity, are responding to a trigger, such as the need for deep, participative change in business processes.
Few enterprises achieve Level 5. Those that do are in a position to truly manage business value, even in the face of significant internal and external change and uncertainty.
Whatever the BR maturity of an enterprise, a CIO can build skills and capabilities that accelerate BR performance, making it an “unconscious competence” of the enterprise. These skills and capabilities include the following:
Extend project management capability beyond the fundamentals of administering and monitoring a project plan. Pair or team people who have complementary technical and business knowledge; build leadership and influencing capability in the project management discipline and team; and look for unusual techniques, in such areas as the social sciences, that connect project outcomes to business results.
Find a home for the BR discipline and a repository for benefits-related learning. This may be the enterprise or IT project/program/portfolio management office (PMO). Make sure the PMO has the mandate, skills and tools necessary to deliver on BR.
“Benefits realization is the responsibility of the whole enterprise. If you hold your IT organization responsible for benefits realization across the enterprise, you’re setting yourself up to fail.”
Use vendors and standards judiciously to accelerate BR capability. The P3M3 (Portfolio, Programme & Project Management Maturity Model) and Val IT standards hold promise here. Consider using vendors capable of supporting clients with benefits planning, benchmarking, monitoring and harvesting, but do not overlook risks such as vendor lock-in. At a minimum, ensure that vendors or partners on a project can participate in your benefits approach without in any way hindering it.
Consider whether adjacent or complementary disciplines—business process management, business and IT strategy, people and partner management, etc.—represent an aid or an obstacle to your BR journey, and act accordingly.
Adopt the powerful language of projects and investments to convey ideas about purpose, importance, ownership and accountability. Ideally, everything is a business project these days; there are certainly no pure IT projects anymore. Remember that “customers” refers to external purchasers of enterprise products, not to internal colleagues and partners. Likewise, project names should reflect purposes and outcomes (e.g., “presenting a single face to the customer”)—definitely not the name of an IT product or vendor.