Connecting it and business value

Connecting
IT
and
Business
Value
Combining
IT
Infrastructure
management
with
IT
business
Enablement
provides
a
seamless
line
of
sight
connection
between
strategy
and
execution
Glen
B
Alleman
5/21/2007

Connecting
IT
and
Business
Value
by
defining
the
Intangible
Benefits
through
the
Balanced
Scorecard
Nicholas
Carr’s,
! The
value
of
IT
is
a
negotiated
process
between
the
consumers
of
services
and
the
providers
of
those
services.
! The
language
of
this
negotiation
must
be
in
words
and
phrases
meaningful
to
the
business.
! Getting
a
seat
at
the
table
is
the
ultimate
goal
for
any
CIO
! From
these
seat
the
value
of
IT
can
be
negotiated
! The
units
of
measure
of
the
negotiated
value
must
be
in
dollars
or
percentages
of
dollars
2
Does
IT
Matter?
asks
the
question
–
“isn’t
it
enough
for
IT
to
enable
companies
to
operate
more
efficiently
or
deliver
better
services,
to
reduce
costs
or
heighten
customer
satisfaction?”
[1,
p.
7].
This
question
is
the
infrastructure
question.
Carr
suggests
the
investments
in
IT
have
“gone
to
waste”
after
the
collapse
of
the
Internet
Bubble.
While
much
has
been
wasted
to
what
were
probably
poor
business
choices,
IT
investment
as
a
strategic
initiative
still
has
merit.
This
merit
needs
to
be
connected
to
the
financial
performance
of
the
business.
The
measurement
and
valuation
of
these
investments
must
take
place
in
the
same
way
other
investment
decisions
are
made.
Carr’s
thesis
is
IT
has
become
a
commodity
service
and
not
the
basis
of
a
differentiated
strategic
advantage.
As
the
costs
of
IT
go
down,
its
power
increases
the
capabilities
of
IT
outstrip
the
company’s
needs.
Again
this
is
an
infrastructure
view
of
IT.
Like
the
railroads
and
electric
utilities,
if
is
only
a
“utility”
it
will
have
difficulty
describing
its
differentiated
advantage.
Is
this
really
the
case
in
2007?
If
IT
is
a
commodity,
what
strategic
advantage
can
a
business
do
with
the
commodity?
Is
IT
really
a
commodity
in
the
same
sense
as
power
and
transportation?
IT
has
the
capacity
to
provide
intelligence
about
the
business,
create
new
and
unique
user
experiences
not
available
through
a
traditional
sales
force,
and
project
of
these
capabilities
onto
devices
and
into
locations
not
envisioned
when
Carr
started
his
thesis.
The
notion
of
IT
as
a
strategic
enabler
depends
on
the
successful
implementation
of
IT
as
Infrastructure.
WHAT
IS
STRATEGY
AND
WHY
SHOULD
ANYONE
CARE?
Strategy
creates
fit
among
a
business’s
activities.
The
success
of
a
strategy
depends
on
doing
many
things
well
–
not
just
a
few.
The
activities
that
are
done
well
must
operate
within
a
close
nit
system
–
the
strategic
framework.
If
there
is
no
fit
among
these
activities,
then
there
is
no
distinctive
strategy
and
there
is
little
to
sustain
the
strategic
deployment
process.
Management
of
the
business
reverts
to
the
task
of
overseeing
independent
functions.
When
this
occurs,
operational
effectiveness
determines
the
relative
performance
of
the
organization.
[19]
Improving
operational
effectiveness
is
a
necessary
part
of
management,
but
it
is
not
strategy.
In
confusing
the
two,
managers
will
unintentionally
adopt
a
way
of
thinking
about
value
that
drives
ITs
business
enablement
processes
away
from
the
strategic
differentiation
and
toward
the
tactical
improvement
of
operational
effectiveness.
Managers
must
be
able
to
clearly
distinguish
operational
effectiveness
from
strategy.
Both
are
essential,
but
the
two
agendas
are
different.
Operational
effectiveness
involves
continual
improvement
of
business
processes
that
have
no
trade–offs
associated
with
them.
Operational
effectiveness
is
the
place
for
constant
change,
flexibility,
and
relentless
efforts
to
achieve
best
practices.
Strategy
is
the
place
for
making
clear
tradeoffs
and
tightening
the
fit
between
participating
business
components.
Strategy
involves
the
continual
search
for
ways
to
reinforce
and
extend
the
company’s
position
in
the
market
place.
The
concept
of
fit
among
functional
units
is
one
of
the
oldest
ideas
in
strategy.
Gradually,
it
has
been
supplanted
with
new
concepts
of
defining
goals,
critical
success
factors
and
key
performance
indicators
and
the
organization
choices
and
changes
around
these
decisions.
[13]
In
most
instances
fit
is
far
more
critical
to
the
success
of
IT

systems
than
is
realized.
[20]
Strategic
fit
among
the
various
systems
components
and
the
business
processes
they
support
is
fundamental
to
competitive
advantage
and
the
sustainability
of
this
advantage.
[21]
Fit
among
a
business’s
activities
creates
pressures
and
incentives
to
improve
operational
effectiveness.
Fit
means
that
poor
performance
in
one
activity
will
degrade
the
performance
in
another,
with
weaknesses
exposed
drawing
management’s
attention.
With
increasing
fit,
improvements
of
one
activity
will
pay
dividends
in
other
areas.
This
is
the
means
to
connect
tactical
IT
processes
–
infrastructure
operations
–
with
the
strategic
enablement
of
the
business’s
goals.
There
are
IT
positioning
questions
to
be
asked
to
the
Business
as
well
as
asked
by
the
Business
to
IT:
[3]
! What
IT
applications
should
be
deployed
to
yield
competitive
advantage?
! What
technological
opportunities
should
be
considered?
! What
IT
platforms
should
be
deployed
and
what
IT
policies
are
needed
to
manage
these
platforms?
! Which
IT
capabilities
should
be
nurtured
and
which
should
be
acquired
from
outside
sources?
! How
should
IT
activities
be
organized
and
what
is
the
role
of
the
IT
function?
! What
is
management’s
role
in
the
IT
domain
and
what
IT
capabilities
are
required
for
today’s
managers?
The
answers
to
these
questions
determine
how
the
components
of
an
IT
Strategy
fit
together,
how
they
are
interrelated
and
how
they
support
both
the
Infrastructure
view
and
the
Business
enablement
view.
INFLUENCES
3
ON
THE
CONVERSATION
ABOUT
IT
STRATEGY
Establishing
the
influences
on
IT
Strategy
is
the
next
step
in
starting
the
conversation
about
IT
value.
Earl’s
approach
[3]
is
an
effective
view
of
the
strategic
decision-‐making
processes
in
four
domains:
Domain
of
IT
Strategy
Components
Attributes
Organization
Strategy
Why
The
Wherefore
and
the
Rationale
for
the
strategy
Organization
components
The
organizational
structure,
control
systems
and
formal
policies
Business
components
Corporate
is
concerned
with
mission.
The
strategic
business
unit
strategy
is
concerned
with
competitive
positioning.
Intent
Forces
a
crystallization
of
purpose,
an
operational
orientation,
in
making
choices.
Content
The
context
of
the
strategy.
The
influences
of
the
organizational
strategy
on
the
other
three
elements
Information
Systems
Strategy
What
The
components
of
the
strategy
Alignment
Identifying
the
applications
required
to
support
the
business
strategy
Opportunity
Searching
for
innovative
uses
of
technology
which
can
be
exploited
to
enable
business
to
be
performed
better
Strategic
business
unit
The
individual
business
unit
Corporate
or
group
The
highest
level
of
the
business
organization
in
which
the
individual
business
units
operate
Information
Technology
Strategy
How
The
mechanisms
of
the
strategy
Scope
Which
technologies
are
to
be
formally
included
in
the
information
strategy
Architecture
The
technology
framework
which
drives,
shapes,
and
control
the
Information
Technology
Strategy
Capability
The
set
of
skills,
knowledge
assets
and
activities
needed
to
be
competent
in
the
market
place
Powers
Are
required
to
implement
and
monitor
the
architecture.
Powers
are
used
to
exercise
technology
stewardship
Information
Management
Strategy
Who
The
participants
in
the
strategy
Roles
Who
has
responsibility
for
information
resource
policies
and
actions
Relationships
How
are
relationships
built
between
the
CIO
and
others
to
assure
success
over
time
Formal
The
intent
of
roles
and
relationships
Informal
The
context
of
roles
and
relationships

4
CHOOSING
BETWEEN
OPERATIONAL
EFFECTIVENESS
AND
STRATEGY
As
IT
searches
for
its
seat
at
the
table,
negotiating
ITs
value
to
the
business
and
the
business’s
need
for
the
value
IT
provides
becomes
a
visible
gap
in
many
organizations.
The
quest
to
connect
the
value
of
IT
to
the
needs
of
the
business
should
be
the
primary
role
of
the
CIO.
Many
times
this
is
not
the
case.
The
CIO
acts
like
a
Chief
Technical
Officer,
providing
the
technologies
needed
for
the
business
but
not
“engaging”
in
a
conversation
about
the
strategic
needs
for
these
technologies.
This
strategic
discussion
is
many
times
missing
for
good
reasons
–
the
business
simply
does
not
want
to
have
that
conversation
or
the
business
does
not
see
IT
as
a
participant
in
the
strategic
aspects
of
its
operations.
IT
then
continues
to
provide
services
and
focus
on
operational
excellence.
If
the
operations
continue
to
function
as
the
business
expects
this
reinforces
the
notion
that
IT
is
providing
all
the
needed
service
–
the
“dial
tone”
–
so
why
should
they
change
their
approach?
The
challenge
is
how
to
create
fit
among
the
IT
components
and
their
matching
business
components
to
enable
both
infrastructure
advantages
and
business
enablement
advantages.
How
to
move
beyond
Carr’s
thesis
that
“IT
Doesn’t
Matter,”
to
“Making
IT
Matter.”
[7]
Getting
to
the
discussion
about
negotiated
value
starts
with
identifying
the
win
themes
for
this
negotiation.
[3]
! Business
improvements
are
enabled
by
Information
Technology
that
is
integrated
not
disintegrated.
This
integration
must
be
horizontal
versus
vertical.
Horizontal
systems
remove
islands
of
information
and
build
bridges
between
the
business
units.
In
this
integrated
system,
multiple
data
sources
are
made
transparent
to
the
end
users
as
well
as
the
applications
that
utilize
them.
! Information
Technology
requirements
are
always
growing,
changing,
and
being
extended.
The
Information
Technology
is
no
longer
static,
but
dynamic
adapting
to
the
changing
business
requirements.
! Information
Technology
is
about
abstractions.
If
hardware,
software
and
data
were
the
only
foundations
of
a
system,
then
Information
Technology
would
not
be
able
to
keep
pace
with
the
business
requirements.
Instead,
business
processes,
objects
and
services
are
the
foundation
of
the
system,
which
drive
the
business
processes
in
their
adaptation
of
the
changing
market
forces.
“The
fine
art
of
executive
decision
making
consists
in
not
deciding
those
things
that
are
not
now
pertinent,
not
deciding
prematurely,
not
deciding
those
things
that
cannot
be
made
effective
and
not
deciding
those
thing
that
others
should
decide.”
–
Chester
Barnard
in
Functions
of
an
Executive,
1938
1
A
CORE
CONVERSATION
THAT
MUST
TAKE
PLACE
BETWEEN
THE
BUSINESS
AND
THE
CIO
There
are
another
set
of
questions
to
be
asked
of
IT
by
the
Business
and
of
Business
to
IT.
These
questions
are
the
basis
of
the
Balanced
Scorecard
approach
described
here,
but
the
answers
do
not
depend
on
a
specific
strategy-‐
making
method.
They
are
at
the
root
of
the
business
value
of
IT.
! Is
IT
a
strategic
enabler
of
the
business
or
simply
an
operational
expense?
! Should
IT
focus
on
developing
new
services
that
support
business
operations
and
customers
or
should
it
focus
on
improving
the
infrastructure
so
that
the
business
units
can
stay
focused
on
the
customer?
! How
much
responsibility
should
IT
have
in
meeting
the
business
objectives?
! What
does
IT
need
to
do
to
ensure
its
place
in
the
business’s
strategy?
! Why
is
there
a
disconnect
between
what
corporate
strategists
want
and
what
IT
is
actually
doing?
A
source
of
disconnect
in
answering
these
questions
is
the
failure
to
recognize
that
the
“value”
IT
brings
to
the
answers
is
a
negotiated
entity.
Negotiating
the
“value”
of
IT
must
be
completed
before
any
discussion
of
IT
1 Barnard
laid
the
foundations
of
management
theory.
Bernard
is
widely
credited
with
having
originated
the
“Systems”
approach
to
the
study
of
organizations.
He
recognized
that
in
order
for
the
organization
to
survive
in
the
external
environment
and
to
succeed
in
the
long
run,
it
was
necessary
to
sustain
cooperation
from
employees
by
satisfying
the
condition
of
efficiency.

Strategy
can
take
place.
The
consumers
of
ITs
services
have
a
need
to
understand
how
their
funding
investment
is
returning
value
in
some
unit
of
measure
meaningful
to
the
business.
Any
disconnect
between
ITs
perception
of
its
own
value
and
the
business’s
perception
of
the
value
of
IT
creates
a
gap
between
Strategy,
Governance
and
delivery
of
the
needed
IT
services.
[23]
Establishing
a
compelling
and
well
communicated
framework
for
IT
investment
and
the
return
of
business
value
can
be
provided
through
a
shared
Balanced
Scorecard,
with
IT
and
the
Business
as
full
participation
in
its
construction.
The
Chief
Information
Officer
must
responsibly
govern
all
aspects
of
the
business’s
“information,”
the
facilities
that
produce,
manage,
consume
and
protect
this
“information,”
and
the
staff
that
leads
and
operates
these
facilities.
Like
any
“goods
for
sale,”
the
“Value”
provided
to
the
business
through
these
actions
must
be
negotiated
between
the
provider
and
the
consumer.
The
value
negotiation
process
persuades
all
participants
that
IT
offers
the
best
available
option
for
the
business
by
aligning
the
capabilities
of
IT
with
the
needs
of
the
business.
By
defining
the
role
of
the
Chief
Information
Officer,
the
beginnings
of
a
conversation
of
“how
to
connect
IT
and
Business
Value”
can
take
place.
WHEN
IT
BECOMES
JUST
AN
INFRASTRUCTURE
PROVIDER
When
IT
provides
infrastructure
services,
a
measure
of
operational
excellence
is
the
means
of
negotiating
a
shared
definition
of
value.
Infrastructure
provides
the
operational
services
for
delivering
business
value.
Defining
the
needed
business
value
first
is
a
starting
point
for
defining
this
infrastructure.
What
capabilities
are
needed
to
support
the
business
operations?
This
operational
excellence
approach
must
connect
the
provided
services
with
some
form
of
a
business
case,
business
strategy,
or
business
outcome
measures.
These
measures
must
be
in
units
of
dollars.
Measuring
the
business
value
of
these
services
requires
understanding
of
what
the
business
sees
as
valuable.
The
units
of
measure
of
business
value
are
defined
by
the
business,
not
by
IT.
ITs
contribution
to
the
business
value
is
a
negotiation
process.
Agreeing
on
the
units
of
measure,
what
these
units
of
measure
are
attached
to
and
when
the
units
of
measure
will
be
recognized
must
be
negotiated.
Connecting
infrastructure
performance
with
strategy
means
finding
the
link
between
the
technology
and
business
process.
The
infrastructure
provided
by
IT
must
be
seen
as
useful
by
the
business.
Not
only
must
the
business
acknowledge
the
value
of
this
infrastructure,
the
business
must
be
able
to
connect
the
measure
this
value
in
ways
meaningful
to
their
own
performance
measures.
The
operational
aspects
of
the
infrastructure
are
not
very
interesting
to
the
business.
It’s
the
capabilities
created
by
these
operational
aspects
that
are
the
basis
of
the
value
conversation.
WHEN
IT
PERFORMANCE
BECOMES
PART
5
OF
CORPORATE
PERFORMANCE
When
corporate
performance
depends
on
IT,
is
enabled
by
IT
or
is
actually
an
IT
function,
the
measurement
of
ITs
contribution
starts
by
connecting
IT
strategy
with
the
delivery
of
business
value
–
traceable
to
the
balance
sheet.
Finding
the
Goals,
CSF’s
and
KPI’s
for
Its
activities
is
the
starting
point
in
connecting
IT
performance
to
Business
performance.
The
corporate
focus
starts
with
connecting
any
activity
IT
performs
with
a
business
element
in
the
business
and
a
line
on
the
balance
sheet.
The
units
of
measure
of
this
connection
must
be
in
dollars
or
percentages
of
dollars.
This
connection
is
rudimentary
at
first,
but
when
the
connection
between
IT
strategy
and
business
strategy
is
made
–
through
the
Balanced
Scorecard
–
the
conversation
involving
dollars
of
value
lays
the
foundation
for
getting
a
“seat
at
the
table,”
where
discussions
of
business
strategies
take
place.
Asking
and
answering
“why
are
we
doing
this?”
is
the
next
step.
The
motivation
for
any
IT
project
has
two
choices
–
it’s
required
(non-‐discretionary
spending)
or
it
supports
some
business
strategy
(discretionary
spending).
Increasing
discretionary
and
decreasing
non-‐discretionary
should
be
the
goal
of
any
credible
IT
strategy
built
around
supporting
corporate
growth.
Discovering
these
connections
is
also
a
negotiation
process.
One
initiated
by

the
CIO
with
her
peers.
One
based
on
providing
value
to
the
business,
not
just
technology
in
support
of
business
operations.
Separating
discretionary
from
non-‐discretionary
projects
is
the
next
step.
Defining
how
to
make
this
separation
requires
the
participants
of
the
recipients
of
both
the
infrastructure
and
the
business
processes.
Engaging
the
participants
starts
with
a
“conversation”
about
the
value
of
each
approach
to
IT
operations.
The
difficulty
is
starting
this
conversation.
This
is
the
primary
role
of
the
CIO.
As
the
“Chief
Information
Officer,”
she
is
responsible
for
governing
all
aspects
of
the
businesses
“information”
and
the
facilities
that
produce,
manage,
consume
and
protect
this
“information.”
BOTH
INFRASTRUCTURE
6
AND
BUSINESS
ENABLEMENT
ARE
NEEDED
FOR
SUSTAINABLE
VALUE
Whether
IT
provides
strategic
or
tactical
services,
connecting
the
actions
of
IT
with
needs
of
the
corporation
is
the
first
step
in
negotiating
the
value
of
IT
to
the
business
strategy.
The
connection
to
corporate
strategy
must
be
made
in
units
of
measure
meaningful
to
the
business.
When
IT
starts
conveying
its
value
in
technical
terms
the
business
has
a
hard
time
“connecting
the
dots.”
The
currency
of
the
business
is
usually
dollars
or
percentages
of
dollars.
IT
needs
to
speak
to
the
business
in
this
currency
as
a
starting
point.
Once
the
currencies
have
been
established
the
conversation
about
the
quantities
of
this
currency
can
turn
to
how
this
monetary
value
can
be
connected
to
the
specific
activities
of
IT.
These
measures
are
then
negotiated
with
the
business.
This
conversation
is
really
a
business
negotiation.
“I’ll
give
you
X
Dollars
and
you’ll
return
Y
value.”
I’ll
give
you
X
dollars
and
you’ll
be
responsible
for
providing
Y
services
that
I
can
measure
the
value
of
in
dollars.”
The
critical
success
factor
of
this
approach
is
to
not
measure
the
technical
performance
of
the
IT
services
–
this
is
the
common
approach
of
the
“IT
as
Infrastructure”
paradigm.
But
instead
measure
the
IT
performance
first
in
monetary
value
to
the
business.
The
Balanced
Scorecard
can
be
used
to
communicate
as
well
as
control
the
performance
of
IT.
Can’t
get
to
the
monetary
value
for
IT?
Can’t
measure
the
value
of
the
services
provided
to
business
in
dollars?
This
is
actually
an
unacceptable
answer.
The
missing
piece
is
a
map
that
describes
why
IT
exists.
This
map
is
the
IT
Balanced
Scorecard
and
the
associated
IT
Strategy
Map.
With
this
map
IT
can
answer
the
question
–
“why
are
we
here?”
“What
is
our
value?”
“What
contribution
are
we
making
to
the
financial
performance
goals
of
this
business?”
Negotiating
IT’s
value
with
the
business
and
business’s
governance
of
the
delivery
of
this
value
is
the
basis
of
an
IT
strategy.
This
relationship
can
be
top-‐down
or
bottom-‐up.
Either
way
this
relationship
can
be
guided
by
the
Balanced
Scorecard.
In
the
end
IT
must
make
the
connection
between
their
activities
and
the
consumption
of
budget
the
balance
sheet
of
the
business
and
the
financial
performance
of
that
balance
sheet.
Using
the
Balanced
Scorecard
strategy
map,
a
visual
representation
of
the
“cause
and
effect”
between
IT’s
activities
and
financial
performance
can
be
made
visible.
Once
visible
Goals,
Critical
Success
Factors,
and
Key
Performance
Indicators
can
be
identified,
their
measures
can
be
negotiated
and
the
resulting
description
of
“performance
success”
agreed
to.
With
this
map,
IT
can
now
combine
infrastructure
and
business
contribution
in
a
single
negotiated
value
process,
with
both
sides
–
IT
and
the
Business
–
sharing
in
the
vision
and
mission
of
IT.
CONNECTING
INFRASTRUCTURE
AND
BUSINESS
VALUE
WITH
BALANCED
SCORECARD
If
the
connection
between
IT
and
Business
is
to
be
made,
it
needs
to
be
made
with
a
way
of
measuring
both
the
value
of
the
connection
and
the
performance
of
the
efforts
that
deliver
this
value.
Balanced
Scorecard
is
one
way
to
identify
the
value,
state
the
benefits
and
guide
the
work
efforts
in
delivery
of
this
value.

Balanced
Scorecard
is
a
strategy-‐making
as
well
as
strategy
execution
method
developed
by
Harvard
professors
Robert
S.
Kaplan
and
David
P.
Norton.
[1,
9,
10]
It
is
in
its
third
generation
with
the
work
of
Paul
Niven.
[15]
The
Balanced
Scorecard
is
based
on
four
perspectives
–
forming
the
balance
between
these
perspectives.
[5]
! Financial
–
defines
the
long
range
financial
goals
in
terms
of
profits
or
earnings
! Customer
–
how
do
the
customers
see
us
while
we
are
providing
our
services
or
products?
! Internal
Processes
–
what
processes
are
used
to
deliver
value?
! Learnings
and
Growth
–
what
skills,
experience,
training
and
management
practices
are
needed?
It
is
beyond
the
scope
of
this
paper
to
present
the
Balanced
Scorecard.
The
resources
available
as
text
books,
papers
and
web
sites
listed
in
the
Bibliography.
! Customer
satisfaction
! User
survey
score
! Percentage
of
projects
delivered
on
time
! Total
business
impact
! IT
budget
as
a
percentage
of
revenue
! Cost
impact
for
each
release
! Percentage
of
budget
allocated
to
new
development
! Number
of
documented
best
practices
! Existence
of
Product
Line
Architecture
! Total
cost
of
ownership
-‐
a
notional
description
of
an
IT
strategy
that
includes
both
Infrastructure
and
Business
value
delivery.
This
approach
combines
the
two
choices
into
a
synergistic
outcome
to
avoid
the
black
or
white
decision
of
asked
in
the
introduction
of
this
paper.
7
2
Table
1
shows
a
notional
example
of
a
business
strategy.
Making
the
connections
to
the
IT
strategy
is
the
next
step.
Strategies
Key
Performance
Indicators
User
Orientation
Be
the
supplier
of
choice
for
IT
products
and
services
Business
Value
Focus
resources
on
attaining
business
strategies
through
effective
IT
services
delivery
Operational
Excellence
Deliver
timely
and
effective
services
at
or
under
budget
that
meet
the
Value
Stream
goals
! IT
budget
versus
actual
! Staff
utilization
! Staff
turnover
! Historical
availability
Future
Orientation
Develop
internal
capabilities
to
learn
and
innovate
to
exploit
future
opportunities
using
IT
Table
1
The
next
step
of
developing
IT
and
Business
scorecards
and
making
the
connections
between
them
is
not
always
well
developed.
The
result
is
a
less
than
acceptable
for
connecting
IT
Value
with
Business
Value.
One
approach
is
to
start
with
a
top
level
IT
strategy.
One
that
states
the
value
from
both
an
Infrastructure
point
of
view
and
from
a
Business
point
of
view.
One
that
states
both
strategic
initiatives
and
operational
excellence,
that
when
combined
provide
the
“negotiated”
value
to
the
business.
Table
1
shows
four
notional
Balanced
Scorecard
perspectives
for
an
IT
strategy.
The
User
Orientation
replaces
the
financial
perspective,
Business
Value
replaces
the
Customer
perspective,
Operational
Excellence
replaces
internal
process
and
Future
Orientation
replaces
Learnings
and
Growth.
2 There are several formats for Balanced Scorecards, not all of which are appropriate for IT. As well there are currently three
generations of Balanced Scorecard. The first generation is the classic four box description of Financial, Customer, Process and
Learning and Growth. This format provides performance management focused on metrics and targets. The second generation
identifies the strategic linkages between goals of the strategy and the metrics associated with these goals. The third generation –
bets suited for connecting IT with the Business – inverts the strategy design process by starting with the destination statement,
followed by the objectives, measures and targets. This destination statement describes how IT provides business enablement.

Service Attributes Relationships
8
Stakeholder Perspective
Internal Processes Perspective
Learnings & Growth Perspective
Budget Perspective
Budget
Management
Resource
Management
Application
Quality
Timely
Delivery
Business
Capabilities
Stakeholder
Relations
Recognition of
Value
Operations
Management
Stakeholder
Management
Innovation
Processes
Regulatory
Processes
Human Capital
Information Capital
Organizational Capital
Image
Project
Performance
Figure
1
-‐
an
example
strategy
map
for
an
IT
organization.
The
replacement
of
the
Financial
perspective
with
a
Stakeholder
perspective
is
the
first
step
in
building
the
Balanced
Scorecard
for
IT
CREATING
THE
STRATEGY
MAP
FOR
CONNECTING
IT’S
VALUE
WITH
THE
BUSINESS
Connecting
both
infrastructure
and
business
enablement
into
a
coherent
strategy
can
be
defined
through
the
contents
of
the
four
Balanced
Scorecard
perspectives.
Figure
1
is
a
notional
example
of
such
a
map
in
a
different
arrangement
than
the
traditional
Balanced
Scorecard,
one
focused
on
IT
instead
of
the
general
business
functions.
The
stakeholder
perspective
provides
a
statement
about
the
value
of
IT
in
terms
meaningful
to
the
business.
The
Internal
Processes
perspective
describes
the
operational
and
infrastructure
elements
needed
to
deliver
this
value
to
the
stakeholder.
Learning
and
Growth
lay
the
groundwork
for
staffing,
training,
organizing,
and
managing
the
needed
resources.
The
Budget
Perspective
states
how
compliance
with
the
externally
defined
budget
will
enable
the
delivery
of
IT
value
to
the
stakeholders.
The
strategy
map
is
a
visible
indicator
of
the
connection
between
strategic
goals
and
execution.
The
Critical
Success
Factors
are
the
measures
of
performance
for
these
goals.
The
process
of
strategic
thinking
starts
with
this
cause
and
effect
map
of
strategies.
Connecting
Critical
Success
Factors
with
Key
Performance
Indicators
provides
traceability
from
execution
at
the
project
level
to
fulfillment
of
strategic
objectives.
IT’S
ALL
ABOUT
MANAGING
THE
INFRASTRUCTURE
PERFORMANCE
TO
ENABLE
STRATEGIC
PERFORMANCE
A
conceptual
framework
is
needed
for
a
performance
measurement
and
management
system.
Effective
internal
and
external
communications
are
the
keys
to
successful
performance
measurement.
Accountability
for
results
must
be
clearly
assigned
and
well
understood.
Performance
measurement
systems
must
provide
intelligence
for
decision
makers,
not
just
compiled
data.
Compensation,
rewards,
and
recognition
may
be
linked
to
performance
measurements.
Performance
measure
systems
should
be
positive,
not
punitive.
Results
and
progress
towards
program
commitments
should
be
openly
shared
with
employees,
customers,
and
stakeholders.
[14]
The
measurement
of
IT
performance
that
is
meaningful
for
the
business
must
start
with
strategy.
Each
measure
is
! Derived
from
strategy
–
“a
way
to
operationalize
the
vision
of
the
business”
and
move
from
an
infrastructure
basis
to
a
strategy
focused
organization.
! Activity
based
–
actions
guided
by
performance
measures,
each
connected
to
an
element
of
the
Balanced
Scorecard.
! Customer
focused
–
actions
guide
by
customer
feedback,
both
internal
and
external
customers.
! Dynamic
–
with
new
metrics
developed
as
needed.
! Participative
development
approach
–
engagements
between
supplier
and
consumer
are
then
the
basis
of
the
negotiated
value
of
IT.

–
Once
corporate
strategies
have
been
defined,
connecting
these
strategies
with
the
IT
strategies
and
defining
their
contributed
value
takes
place
through
a
“map”
of
the
Performance
Goals,
Critical
Success
Factors,
and
the
Key
Performance
Indicators.
9
CONNECTING
STRATEGY
WITH
EXECUTION
Without
the
ability
to
negotiate
value,
IT
cannot
engage
the
business
in
a
meaningful
conversation
about
its
contribution
to
corporate
performance.
Adding
the
three
scorecard
perspectives,
Customer,
Process
and
Learning
and
Growth
to
the
financial
perspective
provides
the
“language”
to
start
the
conversation
about
corporate
value
of
IT.
This
value
negotiation
can
address
both
the
strategic
and
tactical
capabilities
of
IT
–
avoiding
the
dilemma
found
in
many
organizations.
Inverting
the
question
of
the
role
of
IT
–
how
can
IT
start
the
conversation
about
negotiating
business
value
in
terms
of
IT
capabilities.
To
start
this
conversation,
a
shared
vocabulary
is
needed.
One
that
demonstrates
the
connections
between
strategy
and
execution.
Figure
2
–
Mapping
Strategy
to
Execution
Figure
2
describes
a
notation
for
this
vocabulary
for
the
strategy
“Increase
Customer
Retention.”
This
vocabulary
contains
words
and
phrases
meaningful
to
the
Business.
The
“Units
of
Measure”
exchanged
during
the
conversation
about
IT’s
measurable
value
to
the
business
in
dollars
or
percentages
of
dollars.
Only
when
these
units
of
measure,
the
value
they
speak
to,
and
the
connections
between
strategy
and
execution
are
in
place,
can
IT
start
to
look
at
its
operational
excellence
activities.
Figure
2
describes
the
fulfillment
of
the
strategy
“Increase
Customer
Retention,”
by
defining
the
Performance
Goals,
Critical
Success
Factors,
and
Key
Performance
Indicators
associated
with
the
operational
excellence
of
IT.
This
is
the
way
the
CIO
gets
a
seat
at
the
table.
This
is
the
way
IT
gets
connected
to
the
business
as
a
member
of
the
value
stream.
This
is
the
way
IT
connects
infrastructure,
with
business
value
and
with
its
own
value.

10
ANSWERING
THE
QUESTION
OF
“WHAT’S
IT
ROLE?”
The
questions
asked
in
the
beginning
of
this
paper
now
need
answers
in
the
context
of
a
Balanced
Scorecard
Questions
about
the
role
of
IT?
Answers
using
the
Balanced
Scorecard
Is
IT
a
strategic
enabler
of
the
business
or
simply
an
operational
expense?
Operational
excellence
and
its
associated
cost
is
needed
to
fulfill
strategy.
Strategy
is
not
needed
as
the
basis
of
operational
excellence.
Should
IT
focus
on
developing
new
services
that
support
business
operations
and
customers
or
should
it
focus
on
improving
the
infrastructure
so
that
the
business
units
can
stay
focused
on
the
customer?
This
is
the
difference
between
strategy
and
operational
excellence.
Without
the
latter,
the
former
is
not
an
operation.
If
IT
is
to
contribute
to
corporate
growth
it
needs
to
do
both.
How
much
responsibility
should
IT
have
in
meeting
the
business
objectives?
This
is
the
outcome
of
the
negotiation
between
IT
and
the
business.
What
does
IT
need
to
do
to
ensure
its
place
in
the
business’s
strategy?
IT
needs
to
negotiate
its
role
with
the
business.
It
needs
to
be
a
participant
in
the
performance
measured
used
by
the
business.
Why
is
the
disconnect
between
what
corporate
strategists
want
and
what
IT
is
actually
doing?
The
language
used
to
communicate
strategy
needs
to
be
in
units
of
measure
meaningful
to
the
business.
If
the
correct
role
for
IT
is
that
of
a
shared
service
bureau,
how
can
IT
best
ensure
the
requests
it
receives
align
with
company
strategy?
Connecting
the
requests
with
the
enterprise
architecture
through
a
portfolio
management
process.
This
PPM
approach
should
make
use
of
real
options
as
the
tradeoff
decision
making
process
for
each
request
and
its
impact
on
the
business
benefits
of
this
architecture.
Connecting
EA
and
Balanced
Scorecard
is
well
established
in
the
literature.
What
IT
applications
should
be
deployed
to
yield
competitive
advantage?
By
following
the
strategy
from
its
Mission,
Vision,
to
the
Performance
Goals,
IT
should
be
able
to
speak
to
what
applications
are
needed
for
the
successful
fulfillment
of
this
strategy
What
technological
opportunities
should
be
considered?
The
statements
about
strategy
must
include
future
activities
–
the
“out
years”
of
the
strategy.
These
future
oriented
strategies
are
the
groundwork
for
the
IT
technological
road
map.
Which
IT
capabilities
should
be
nurtured
and
which
should
be
acquired
from
outside
sources?
The
strategic
trade
off
discussion
starts
with
the
“line
of
sight”
connection
between
financial
performance,
through
Customer
Focus,
to
Internal
Processes
and
then
to
Learnings
and
Growth.
Along
this
path
the
alternatives
–
in
their
monetized
measures
–
can
be
discussed
between
the
business
and
IT.
How
should
IT
activities
be
organized
and
what
is
the
role
of
the
IT
function?
This
is
a
key
contribution
of
IT
to
the
business.
But
the
conversation
starts
with
determining
how
IT
can
best
fulfill
the
short,
medium
and
long
term
strategic
initiatives
of
the
business.
What
is
management’s
role
in
the
IT
domain
and
what
IT
capabilities
are
required
for
today’s
managers?
If
IT
is
have
a
“seat
at
the
table,”
then
management
of
the
business
and
management
of
IT
must
be
seen
as
peers.
The
role
of
the
Chief
Information
Officer
is
equivalent
to
the
Chief
Financial
Officer,
the
Chief
Operations
Officer.

11
BIBLIOGRAPHY
1. Does
IT
Matter:
Information
Technology
and
the
Corrosion
of
Competitive
Advantage,
Nicholas
G.
Carr,
Harvard
Business
School
Press,
2004
2. The
Chief
Information
Officer:
A
Study
of
Survival,
M.
J.
Earl,
Centre
for
Research
in
Information
Management
Working
Paper
WP93/3,
reprinted
as
WP95/1,
London
Business
School.
3. Integrating
IS
and
the
Organization:
A
Framework
of
Organizational
Fit,
Michael
J.
Earl,
London
Business
School,
Centre
for
Research
in
Information
Management
Working
Paper,
CRIM
WP95/4.
4. “Transformation
of
the
IT
Function
at
British
Petroleum,
John
Cross,
Michael
J.
Earl,
and
Jeffery
L.
Sampler,
MIS
Quarterly,
21(4),
1997.
5. “The
Development
of
the
Balanced
Scorecard
as
a
Strategic
Management
Tool,”
Ian
Cobbold
and
Gavin
Lawrie,
PMA
Conference
Proceedings
May
2002
6. Information
Management:
The
Organizational
Dimension,
M.
J.
Earl,
Oxford
University
Press,
1996
7.
“Making
IT
Matter,”
Charlie
Feld
and
Donna
Stoddard,
Harvard
Business
Review,
February
2004.
8. Alignment:
Using
Balanced
Scorecard
to
Create
Corporate
Synergies,
Robert
S.
Kaplan
and
David
P.
Norton,
Harvard
Business
School
Press
9. Strategy
Maps:
Converting
Intangible
Assets
into
Tangible
Outcomes,
Robert
S.
Kaplan
and
David
P.
Norton,
Harvard
Business
School
Press
10. Implementing
the
IT
Balanced
Scorecard:
Aligning
IT
with
Corporate
Strategy,
Jessica
Keyes,
Auerbach
Publications
11. Agile
Information
Systems:
Conceptualization,
Construction,
and
Management,
Edited
by
Kevin
C.
Desouza,
Butterworth–Heinemann
12. Strategic
Performance
Management:
Leveraging
and
Measuring
Your
Intangible
Value
Drivers,
Bernard
Marr,
Butterworth–Heinemann
13. Sensemaking
in
Strategy
Implementation,
Saku
Mantere,
Espoo,
November
2000
14. Guide
to
a
Balanced
Scorecard
Performance
Management
Methodology,
National
Partnership
for
Reinventing
Government,
U.
S.
Department
of
Commerce,
1999
15. Balanced
Scorecard
Step–by–Step:
Maximizing
Performance
and
Maintaining
Results,
Paul
R.
Niven,
John
Wiley
&
Sons
16. Balanced
Scorecard
Diagnostics:
Maintaining
Maximum
Performance,
Paul
R.
Niven,
John
Wiley
&
Sons
17.
“Integrated
Value
Management:
A
Multi–Faceted
Approach
to
Creating
Corporate
Value,”
Shinichi
Shibayama,
Nomura
Research
Institute
18. “Information
Technology
Process
Reengineering
and
Performance
Measurement:
A
Balanced
Scorecard
Analysis
of
Compaq
Computer
Corporation,”
Case
Study,
Communications
of
the
Association
for
Information
Systems,
Volume
1,
Article
8,
January
1999.
19.
“What
is
Strategy,”
M.
E.
Porter,
Harvard
Business
Review,
Volume
74,
Number
6,
pp.
61–78.
20. Control
Your
Destiny
or
Someone
Else
Will:
Lessons
in
Mastering
Change–From
the
Principles
Jack
Welch
Used
to
Revolutionize
GE,
N.
M.
Tichy
and
S.
Sherman,
Harpers
Business,
1994.
21. Jack
Welch
Speaks:
Wisdom
from
the
World’s
Greatest
Business
Leader,
J.
Welch
and
J.
C.
Lowe,
John
Wiley
&
Sons,
1998.
22.
“The
CIO
as
the
Driving
Force
Behind
IT
Restructuring,”
Koki
Yodokawa,
Nomura
Research
Institute
23. “Don’t
just
lead
Govern,”
Peter
Weil,
MIS
Quarterly,
Volume
3,
Number
1,
March
2004.
BIOGRAPHY
Glen
Alleman
is
the
Practice
Director,
Niwot
Ridge,
LLC,
Denver
Colorado.
Glen’s
role
is
to
define,
develop,
deploy
and
assess
the
benefit
of
strategy
and
performance
management
processes
for
IT
and
business
clients
using
Balanced
Scorecard,
Project
Portfolio
Management,
Enterprise
Project
Management,
and
Program
Management
Office
using
Performance-‐Base
Project
Management®.

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