In the last post, we discussed how a Center of Excellence (CoE) can become a strategic partner with the business. At the end, it was all about focusing on generating business value to the organization. This is the area which holds the greatest potential for business benefits. While improving customer satisfaction and lowering total cost of ownership are keys, it is the business value focus that unlocks the strategic relationship with the business customer. It all seems easy to discuss, this is very difficult to achieve in real life. Why? Because it takes a lot of effort and it typically involves changing one’s viewpoint. In this post, we will discuss the primary reasons why a CoE does not act strategically.
I have worked with a variety of customer in the last twenty years and there have been several times where I have come across the following circumstance: The company has decided to move to the SAP application as its primary ERP system. Suddenly, from out of nowhere another part of the company announces that it is moving forward with another application for its manufacturing operations. Are you kidding me? The company has chosen to spend a large amount of capital on SAP and now somebody else says that all operations are going to use a different package. The weirdest thing is the SAP capability was not even considered. Does that make sense? Another scenario that often happens is when a project gets approved to fix a specific problem but the application selected does not integrate well with the ERP package. The solution becomes a little-known seldom-upgraded application that costs a lot more to maintain and as time goes on becomes more difficult to replace.
Each of these real-life examples highlight one of the main reasons why there is a lack of a strategic partnership between the business and IT: namely, there is a lack of alignment between the technology strategy and the overall business strategy. Other tell-tale signs that indicate the technology strategy might be out of alignment with the business strategy is when technology projects seem to come out of nowhere, get approved, but never seem to reach their full potential. Also, application ‘gallop’ occurs. By this I mean that satellite applications are implemented to fix a specific problem with very little thought given to the overall application environment. This situation results in a ‘spaghetti bowl’ of application that do not fit together well but also become expensive to support.
The second area hindering a CoE from acting strategically is that an organization fails to measure business value. On the surface, this seems to be a fundamental issue. Yet, it is surprising the number of customers I have seen who do not do this. Nearly everybody creates a business case for a technology project that outlines the expected benefits versus the anticipated costs and produces a return on investment. This is necessary in order to get the capital funds approved. What is astonishing is the number of companies that do nothing with the business case once the capital budget is secured. There is rarely any effort to re-visit the business case once the project is completed in order to determine if the business case was achieved. It is hard to deliver business value if it is never measured.
One of the common misperceptions of doing this kind of activity is that the value of IT projects is hard, to measure, difficult to quantify, and always subject to interpretation. If a technology project seeks to reduce inventory levels while also improving fill rates, how can one really determine if it was because of the technology or because of other activities that may have caused the movement of the measurement? What impact do overall business conditions have on the measurements? As mentioned above, it can be difficult to measure and subject to interpretation. In the big picture, it is more important to measure the benefit rather to debate over how it came about.
Another common argument focuses on the ideas that resources necessary to measure business value outweighs the benefit of the result. As this thinking goes, “It takes a significant amount of resources to look back and measure actual results versus expected results. There isn’t time to do activities that look at the past. It is more important to focus with what is coming on the horizon.” The old adage of ‘those who don’t know history are destined to repeat it’ seems to apply here. If one doesn’t take to the time to measure results, they will never deliver the expected benefit. If one does not deliver the expected benefits, it is unlikely the organization will be considered strategic.
A third cause of a CoE’s non-strategic relationship with the business is the inability of its resources to speak the language of the business customer. How does this happen? First, what is the typical method of gathering business requirements? Often times, the IT resource talks to the business customer and/or facilitate workshops to try and determine the details for the requirements. The requirement are assembled and put together for the business to read, sign-off, and approve. However, how well do the requirements articulate what the business needs? Although the resource are talented people and want to do a good job, how well do they genuinely understand what the business is trying to accomplish? What tends to happen is if the resources do not truly understand the business, the requirements are likely to be incorrect (at worst) or incomplete (at best). When an application is built on incomplete / incorrect requirements there is a high likelihood the resulting project will fall short on delivering the desired results. In addition, if there is not a thorough understanding of what drives business value, how can the organization be expected to deliver the expected business value?
To summarize, we learn three primary reasons what a Center of Excellence does not act strategically. They are:
• A lack of alignment between the technology strategy and the overall business strategy
• A lack of measuring business value
• An inability to speak the language of the business
What happens when a company’s technology strategy and business strategy are aligned? The biggest benefit is that an organization becomes more capable to adapt to a changing business environment. There are fewer false starts on technology projects. There is an accelerated time-to-market for technology improvements plus an associated acceleration in time-to-benefits of these projects.
If business value becomes a constant and well-defined measurement, companies can now provide the decision-makers with the information needed to make fully-informed decision on IT investments.
Finally, if an organization’s IT resources are fully attuned to the needs of their business customers and can speak the language of the business; it opens the door for developing innovative solution business problems and another way to more fully exploit technology.
More technology projects that ‘hit the mark’; information to make well-informed decisions; solutions to business problems. What’s not to like about a Center of Excellence that is a strategic partner with the business? In the conclusion of this series, we will discuss potential ways to address each of these items and provide some details on how other customers have addressed each topic.
If your customer experiences some of the issues described in this article, we can help. Doug Shuptar is a Principal in SAP’s Industry Business Consulting Group. He can be reached at firstname.lastname@example.org with comments and questions.