Restructuring IT Departments: towards value-based project management

Faced with an ever-changing digital environment, companies need to continue their transformation to keep pace with changing customer expectations, respond to competition from new entrants and combat pressure on margins. This transformation is reflected in an exponential proliferation of projects. Unprecedented demands for responsiveness are weighing on business and operating models.

As such, IT has taken on a major role in operating expenses, which necessarily implies :

• A need to measure ROI in delivered projects, making KPI criteria essential
• ROI becomes the starting point for prioritizing plans, as well as a decisive tool for assessing IS performance and the quality of time-to-market.

Often perceived as rigid, opaque and costly, IT Departments need to reposition themselves as strategic gas pedals, so that business lines can benefit from services that are easy to understand and use. At the heart of this issue lie three fundamental questions:

• Is the project portfolio aligned with the company’s strategy?
• How can we frugalize the investment effort of our projects?
• Is there any feedback on the benefits of the projects once delivered?

Value-based management is a rational part of this approach. This approach puts the impact of performance (customer satisfaction, business, productivity) at the heart of project decision-making.

Phase 1: Aligning with the company’s challenges

The objectives of this first stage are to characterize the strategic business areas (SBAs), to define the challenges in terms of economic performance, and to assess the impact of existing or future projects. This upstream structuring is essential to define the key priority issues and check that the projects/programs undertaken or to be undertaken correspond to the company’s strategy.

This involves building a strategic dashboard around the 4 axes of a Balanced Scorecard (Customer / Process / Resources / Finance). The purpose of this dashboard and its KPIs is to shed sufficient light on the company’s identity, efficiency (cost of run) and project management.

Phase 2: Prioritizing investments

Following this initial assessment, choosing the “right” projects is crucial to defining the right Product Plan.

This involves drawing up business cases, taking into account the expected measurable benefits, and challenging these projects on the basis of a cost/value approach.

Finally, once this approach is complete, all that remains is to prioritize the investments to be made. This requires the selection of coherent KPIs, enabling the customer and operational impact of the various projects to be defined as accurately as possible.

Phase 3: Maximizing impact

Selecting projects to launch/maintain is an important step in value-based management, but you also need to monitor them to ensure that they are delivering the expected benefits. This involves periodically reviewing delivered projects, with the help of appropriate usage and performance indicators.

Action needs to be planned if performance isn’t up to scratch, not only to maximize the benefits of existing projects, but also to capitalize on the next ones, so as to set up a continuous improvement cycle.

To set up a value-based management system, it is necessary to act on several fronts and mobilize all the company’s departments.

When it comes to designing tools and indicators, the business divisions and the new emerging data divisions will be heavily involved. They must design the dashboards produced by the new datawise and datawall tools made available to them. The IT department must ensure that the data made available is enriched in terms of usage, business, cost, etc.

On the governance side, the existing comitology must evolve towards more stringent requirements in terms of valuing and analyzing performance indicators. A system of experimentation in this area should ensure a smooth transition.

Design methods must incorporate the new evaluation components: DAS, prioritization matrices, Strat & Go® toolbox. In addition, we need to ensure that the data dimension is taken into account right from the design phase. Last but not least, the continuous improvement process will be enriched by Kaizen-type approaches.

To ensure the long-term success of value-based management, a performance acculturation program is required. Revising the management system to gear it towards performance, and implementing a policy of rewarding excellence are guarantees of a successful plan to support change in development teams.

In conclusion

• Implementing this type of approach requires a tightly-knit, multi-disciplinary and responsive team.
• Sponsorship from top management and a vision from Comex is a key success factor.
• To ensure the long-term success of this type of approach, it’s essential to define and communicate objectives clearly, and to develop attitudes alongside tools and methods.
• This approach must be carried out in project mode, setting achievable and realistic milestones within the reach of the teams in charge of the transformation.

To discuss this topic with Palmer Consulting consultants, please contact :

• François Pascale, Chairman
• Thomas Valynseele, Partner