The Strategy to Bottom Line Value Chain

The Prioritization Practice

The following is an excerpt from  "From Business Strategy to IT Action"

"Business-based prioritization is the tool for assessing the bottom-line impact of IT projects and assigning resources to the most valuable. It answers a fundamental management question:

How does the company make technology investment decisions, and how can it develop business management consensus on where these investments should be made?

Companies want to allocate limited resources (dollars, people, time, and management attention) to initiatives that will produce the greatest "return" to the enterprise.  While there are several prioritization methods being used in IT today, the issue goes beyond determining if individual projects contribute to the enterprise's financial or strategic success.  Management faces a number of serious questions about how it is assigning IT resources:

• Are IT investments strongly connected to strategic intentions?

• Is the company putting its IT resources into the areas most valuable to the company?

• Is there a partnership between IT and business management for making the IT decisions?

• Does company management understand where IT investment resources are going?

• Are IT investments described in business terms?

A process, and more importantly a philosophy, is needed that embraces the following principles:

Bottom-line impact is based on an initiative's predicted impact on strategic intentions (which can include ROI calculations as one component).

• Business management is responsible for assessing the bottom-line impact of IT initiatives.

• Business managers should understand fully the business impact of all of the IT initiatives, not just the ones in their area.

• Investments are assessed individually but prioritized as a complete set, across the business unit.

• Investments are described in business terms, addressing the business issue, business requirements and risks, and return on the investment.

 The Prioritization Practice focuses on assessing the business value, in terms of bottom-line impact, of proposed IT investments.  On its surface Prioritization addresses a straightforward question: which of the proposed IT investments provide the most return to the company, when assessed by their intended impact on strategic intentions? In practical terms, this is a much more complicated issue, requiring answers to other questions, such as what is assessed, who assesses, against what, how often, how are resources assigned?

In the past, companies have equated "return" with ROI, which limits the bottom-line impact assessment to financial (and in many cases questionable) justification. In the Right Decisions, Right Results Culture, "return" includes not only financial justification but also an investment's potential impact on the enterprise's strategic intentions."

Excerpt from "From Business Strategy to IT Action"