The New Book “Digital IT - 100 Q&As” Chapter VIII Digital IT Performance Q&As

Many IT organizations are at the inflection point for digital transformation, they are also reinventing themselves from a cost center to a value-added business partner, and continue to improve IT efficiency, effectiveness, and agility. Hence, IT metrics need to evolve to something that matters to the business audience, at the same time that “business sentiment” needs to get put into something more tangible, such as optimize processes, or improve productivity. The various activities are needed to manage performance - strategic and operational plans, innovation metrics, day-to-day decisions. Selecting the right key performance indicator is one of the most important steps in measurement, but keep in mind, measurement is not just numbers, but stories. It is also important to spurring the healthy debates for managing IT performance effectively.
What are performance indicators for keeping IT and the business on the same page: To improve IT management effectiveness and efficiency, keep in mind of this management mantra “You can only manage what you measure.” CIOs need to keep a measure and periodicity at which the measure is reviewed against setting targets, ensure IT raises the bar on a continual basis to ensure the stakeholders get a real picture of how well the IT efforts are bearing desired results and keep IT and the business on the same page. An effective CIO’s job is to improve operations to reduce the burden on the company while trying to stay current with ever-changing information and technologies. That includes reducing costs, improving systems, streamlining processes and providing continually expanding services/solutions. The three keys to presenting IT values are financial returns, return timeline and risk. Just like any other investment, if you can present IT portfolio in a manner similar to an investment portfolio, it makes instant conceptual sense to board and C-level folks, make sure IT and business are always on the same page. IT metrics need to evolve to something that matters to the business audience, at the same time that “business sentiment” needs to get put into something more tangible.
What’s your focal area of IT metrics? IT leaders must keep in mind which KPIs best measure IT ability to deliver business value. The fact of the matter is that it is a lot easier to get metrics wrong than right, and the damage caused from getting them wrong usually exceeds the potential benefit from getting them right. How to measure IT effectiveness and business innovation effort directly impacts on how the business perceives IT as well as how fast IT can reach the high level of maturity. IT metric must get focused on the end-user. The end-user continues to be the key component of any bottom-line-driven business. This is where the metric for a CIO should rest, the end-user experience. The metrics which matters include some well-defined performance indicators for measuring customer satisfaction, or even constructive dissatisfaction, with the potential to optimize IT services or solutions. Overall speaking, IT metrics have to evolve from being a cost center to becoming a revenue generator. IT leaders must keep in mind which KPIs better measure IT capability to deliver business value. Track the right metrics and know what to do with them to see improvement.
Is IT ROI hard number or fuzzy logic? IT investment in many organizations is a controversial subject. Statistically, seventy percent of technology initiatives don’t have a direct measurable effect on the bottom line. Some say IT ROI is more like fuzzy logic these days and causes negative consequences: Lack of business respect, mistrust of project intent and difficulty in entering into the mainstream strategy conversation of the company. Hence, to clarify IT investment ROI, it needs to invite the business to provide information about the potential benefit, and IT brings information about the cost, the ROI calculations should be a joint undertaking. For many CIOs, they need to be able to support essential projects with sound ROI reasoning: How to accurately project the economic impact of a proposed technology, ROI, net present value, internal rate of return and time to payback are all measurement methods CIOs must understand and use to help business leaders decide whether or not a tech investment is worth making. Each organization has specific measurable goals and objectives they have to hit through investing in IT. Use hard numbers if you can and follow “SMART” principle to measure IT performance result effectively.
IT plays a crucial role in optimizing business and improving organizational agility. Outcome-based measurement practices are important to focus on the performance of the entire organization. Keep in mind, financial indicators in many business situations only cover part of the story. Your measures should cover all areas that contribute to value creation including service quality, employee engagement, business competency, customer satisfaction and financial outcomes.Follow us at: @Pearl_Zhu