Does BT Need A New Report Card?

It's time to re-think the report card used by CIOs to report on BT performance – tomorrow’s BT CIOs must look beyond the traditional IT Balanced Scorecard (BSC). 

I realize this is sacred ground for many people in IT (and some of my colleagues here at Forrester), so let me explain myself before I receive a barrage of complaints. The philosophy behind Business Technology (BT) recognizes technology as integral to every facet of every organization – as such, IT is very much an integral part of the business; we can no longer talk about “business” and “IT” as if referring to two distinct things. I’m suggesting that in the age of BT, we need a new scorecard that better reflects the impact of BT on the business.

A great deal has been written and published on the Balanced Scorecard, including many great pieces of research  by my colleague Craig Symons, such as his recent report "The IT Balanced Scorecard: Customer/Partner Metrics Revisited." I'm not suggesting we throw this out by any means – CIOs absolutely need to use a balanced scorecard to run an efficient and effective BT operation (see fig 1).

 The traditional IT Balanced Scorecard

Fig 1 - A High-Level Balanced Scorecard Template

However, I am suggesting executives outside of BT/IT don't care much about the operational excellence aspects of IT (the ones in the lower right quadrant) or the future orientation aspects of IT. Non-IT execs expect the CIO to run an efficient operation. What they do care a great deal about is the impact BT has on business outcomes.

If you accept for a moment the premise that non-IT execs care little about IT’s internal performance and the metrics used to measure effectiveness in these areas (such as the percentage of projects delivered on-time,  IT SLA performance, or emerging technology research), then what metrics should CIOs use to report BT’s contribution to the business?

Introducing A New BT Report Card

My suggestion is to focus BT’s external report card for business leaders on four similar yet different aspects of technology’s impact on the business:

  • Strategic Value
  • Innovation Value
  • Internal Customer Value
  • External Customer value

To illustrate this, and contrast it to the balanced scorecard above, I’ve used the same graphical format as the balanced scorecard graphic. I’m not suggesting this is a balanced scorecard – it is not; it’s a BT report card (see fig 2).

The BT report card

Fig 2 – The BT Report Card

This new report card places greater emphasis on the big things that matter to the CEO and other executives – how the organization is using technology to move the dial on critical measures of success. 

It's certainly true that not all of these metrics are easy to capture, and the link between technology investments and subsequent changes in the metrics is often indirect, but that's not a reason to back away. After all, if the investments we're making in technology don’t influence these things, then why are we making them?

So what do you think? Does IT need a new scorecard? Do these measures of success make sense? Are there other metrics you think we need to include? How would this report card change behaviors in your IT department? (Comment below or join the discussion on our community).

Comments

Scorecard perspectives

Thanks Nigel, this is a useful article.

As you have indicated, the purpose of the scorecard has to be placed into the context of the audience, and it's likely that the C suite or Board would be generally more interested in the business value themes you have mentioned.

On the other hand, the Balanced Scorecard itself is intended to be not just a report format or selection of measurement types, but is designed to act as the hub of a management system, where managers take into account the traditional four perspectives. I would say one of the key contributions of the BSC system is that it focuses managers and teams on not just the outcomes (where traditionally that had been financial performance of a company), but in defining the relationships between people, processes, and customer priorities, which lead to the effective long term delivery of value.

In that sense, the BT scorecard you propose would be a good display of the key measures of value, but it does ignore the drivers/enablers of that value proposition. This is where a cascaded set of performance objectives can be very helpful, as the CIO can use the "IT BSC" for internal IT management (which may be of interest to many outside IT as well), and use the "BT Report" for the C Suite and Board.

Scorecard perspectives

Absolutely. We need to keep the BSC and I'm not advocating throwing it out for all the reasons you state here - it's vital managers also focus on people and process performance. That's why I was at pains to suggest this is not a replacement for the BSC, more of a supplement. Great feedback - thanks Matt.

The Value Report Card

Nigel,

Yes, IT needs a new scorecard. We should always be improving our focus and measures. However, this report card cannot be owned solely by IT. If we are to move beyond alignment, the non-IT execs will understand that technology's role in Strategic Value, Innovation Value, and External Customer Value is critical to everyone's success. For that reason, Internal Customer Value might be better positioned on the IT balanced scorecard and the BT Report Card held above the CIO level.

The measures make sense but through use I am sure they will change and improve. Most of them focus on business results, which is a good thing, but rarely do organizations measure the results from their IT projects. Most would rather restart the project machine on the "next big thing." It will be difficult for organizations to have the discipline to objectively quantify the impact of the technologies they have already implemented.

As always, great post! Please continue to elevate the discussion and help IT deliver more value.

The Value Report Card

You make an interesting point Ben. Does the measure of internal customer value have relevance on a BT report card? If we equate this to something like a JD Power assessment of customer value for the BT org - by examining performance we can see if it has improved over time, but we can't realistically compare BT to alternatives. On balance I think it's valuable for CIOs to have to report out how well their BT org is performing as far as internal service is concerned (and it's still important for other groups across the org to do the same with regard to their own service performance).

It's true that many orgs fail to measure the business impact of technology investments. One of the things we've been working with clients on is tightly integrating technology strategy to business strategy (BT strategy) and measuring the impact of the strategy. Ultimately if technology is funded out of a P&L the acid test of success is going to show up in the bottom line.

Thanks for the feedback Ben.

Business Role in Defining Value

Nigel thanks for your comments. To Ben's point, I agree there's a significant component of ownership (most?) of the business to define, own, and manage business value, and to partner with IT do so for the great many areas of business operations and projects which have a strong IT contribution to that value proposition. I have seen in various organizations though, that the business does not have the maturity or skillset to "manage strategy" through objective and balanced measures of value (to the business or its customers). As a result, IT struggles to attach itself to measurable business priorities, and continues to therefore "manage IT", rather than "manage the value IT provides".

Each of these topics - IT BSC, BT Report card, etc, are natural components of Enterprise Governance, focused on specific management domains within an enterprise. It's troublesome (but not impossible) for an IT organization to manage value to the business, when the enterprise lacks a systematic way to manage its own value.

Business Role in Defining Value

I agree. We are publishing a BT Strategic Planning Framework to help both IT and non-IT leaders better understand the BT strategic planning model which connects technology to business capabilities and business outcomes. I'll be introducing this in a webinar on Feb 16th "Business Technology Strategy Planning: A Framework To Move IT Beyond Alignment"

http://www.forrester.com/rb/teleconference/business_technology_strategy_...