Make sure to give your IT teams the ability to demonstrate how they create value so they become capable of effecting great changes in the organization.
When organizations adopt a value-focused approach to business strategy, the benefits permeate the entire enterprise. By implementing a strategy that incorporates value-indicating metrics, it’s possible to align strategy across all domains. Value stream metrics can also help internal departments earn stakeholder buy-in for their own initiatives, or to gain the autonomy needed to agilely determine priorities.
This value metric-based approach may be part of an appropriate strategy for IT organizations that are actively trying to shift perspectives from a cost-centered enterprise to a value-centered one. IT budgets are notoriously constrained, representing a mere 3.28% of total revenues across all industries, according to a Deloitte analysis of technology investment data from their US CIO program.
The pitfalls of underinvestment in IT are far-reaching. Consequences include a limited potential for earnings, relentless drains on productivity, and other issues. But the costs involved with investing in new technologies or IT solutions may be difficult to compare without illustrating the explicit benefits to various stakeholders. For example, a move to containerization can simplify CI/CD while simultaneously improving security, but how can these benefits be quantified?
In many circumstances, it may also be necessary for IT to demonstrate their value contributions in general. In fact, value-indicating metrics and data can be used by IT as a way to fight budget cuts, request more resources, or even gain greater control over the key technology decisions that are being made by the organization as a whole.
A solid starting point is to determine how IT service can represent the magnitude of its contributions. Some ways to begin this process include:
- Start by mapping key IT activities and the flow of values through each process or task.
- Identify key performance indicators that not only reveal the benefits of work, but also the measurable value.
- Import data from key systems of record in order to track these metrics, visualize them, and then obtain actionable guidance on ways to optimize with an eye towards greater value.
Rethinking common IT metrics from a value perspective
Previously, we’ve covered the topic of mapping internal value streams and highlighting metrics that are valuable to stakeholders
When it comes to trying to fully represent the value of IT, it helps to consider some common metrics and then determine how they reveal value creation. The best approach will likely involve some combining of existing metrics with new variables, like creating expressive KPIs.
The following are some examples of how to combine and compare several, typical existing metrics with new variables in order to reveal new perspectives on value:
- Example 1: Revealing the total cost of downtime as indicated by customer churn, lost productivity, or other common issues. In this case, the metric “average cost of downtime in dollars lost per hour” can be combined with the mean time to resolve (MTTR) metric to show tangible cost savings. This metric can also be used to indicate the value of low unplanned downtime.
- Example 2: Revealing the value gained in shorter release cycles, as indicated by higher engagement numbers, improved productivity, elevated subscription sales, or other positive results. Combining this metric with deployment time can show how IT helps create value with quicker deployments.
- Example 3: Comparing direct revenues lost in the aftermath of a major incident to the value gained once the incident was resolved. In this example, this data can later help establish the value of proactively avoiding an incident in the first place.
In order to be most effective, it’s crucial for these metrics to be created by the automated import of data from all key systems of record. That way, they can be aggregated into an analytics solution capable of producing accurate measurements with low latency, creating an objective single source of truth (SSoT).
Visualizing and acting on IT service value metrics
Data on its own, however, isn’t likely to shift any mindsets or prompt a change in culture.
We recently discussed, using a real case example, how a dashboard is a key tool that IT teams can leverage to use data to spark action, noting that, “a dashboard presents information in a highly visible and objective single source of truth for all key stakeholders, driving unity even across complex operations.” A dashboard is critical in order to present data to key stakeholders and convince them of positive processes or achievements.
The ability to explore the right kinds and combinations of metrics is vital to learning more about IT service value and then using the information to act. Using a high-performing dashboard makes it easier and more efficient to make observations, ask relevant questions, and complete more thorough analyses.
Comprehensive visualizations can help identify key drivers when metrics are trending in the right direction. For instance, if there’s a low average cycle time for changes, what types of changes get through the quickest? Conversely, what are the negative drivers?
Incidents with high MTTR can be isolated into clusters, revealing the incidents that cause the most pain in the organization, thus lowering value creation.
The information revealed in IT service value metrics is not only valuable for the current state of IT but can also be used to optimize performance in the future. Data and metrics can provide various significant insights into IT service value. For example, learning the answer to the question: what steps in IT processes impede value creation? Or: can more value be created using strategies that shift left for problem resolution? It’s also possible to determine the ROI of a proposed solution by looking at current value metrics, such as the before and predicted after-effects when weighing implementation of automation at scale.
Meanwhile, global strategic management experts at McKinsey & Company caution that various key stakeholders in organizations don’t always focus on the long-term results. McKinsey notes, “managers and investors alike too often fixate on short-term performance metrics, particularly earnings per share, rather than on the creation of value over the long term.”
But introducing value metrics to the discussion can be extremely helpful when working to convince stakeholders of the long-term benefits of a decision normally weighed on short-term considerations.
Overall, IT service should not have to justify the value it creates, but it often finds itself in the position to do so. Unfortunately, the traditional perspective often incorrectly assumes that IT generates costs rather than value. This assumption adversely impacts IT teams by limiting proactive action, restricting opportunities, and possibly hurting team morale. But when IT has the ability to create visualizations that demonstrate how their teams create value and then present them in a dynamic way to key decision-makers, they then become capable of effecting great changes in their organization.