Internet of Things Online Training
Technology capabilities are the fundamental building blocks of IT, including everything from physical assets to functional teams, such as helpdesks. Information system capabilities relate to how these technology capabilities are used by the organization to create solutions for the benefit of the organization's operation. An example would be how technology capabilities are used to facilitate business analysis. When measuring the success of an IT strategy, it's important to consider how these two capabilities are connected. It's also important to identify the value that the organization derives from its investment in IT-enabled business initiatives.
There are four main steps in measuring an IT strategy's effectiveness:
- Define metrics – The first step is to define the metrics and measures to be used. Defining metrics answers the question, "What should we measure?" The metrics selected should be clearly in line with the needs of the organization.
- Monitor results – Monitoring the results indicates whether the formulated IT strategic plan is producing the required and expected performance. If not, the results should give an insight into the necessary actions to improve performance.
- Compare to benchmarks – Comparing IT performance to benchmarks means comparing the performance of your organization's IT strategy to those of other organizations – either within your industry or in other industries.
- Control for variances – Controlling for variances means adapting the strategy to take account of internal or external events that impact on it.
Measuring the success of the IT strategy is critically important because approximately 10% of operational costs relate to IT and even more business processes rely on IT. Measuring a strategy's effectiveness and being able to present hard data to back it up is the easiest way to demonstrate the strategy's value to executives. However, non-IT executives may have little understanding or interest in IT, seeing it as a cost rather than an investment. This is why it's important to present the benefits from a business perspective as well as an IT perspective.
IT-specific balanced scorecards
An effective measurement of IT strategy demonstrates the strategy's contribution to the organization's business objectives. This means it clearly identifies the value or returns that the organization gets out of its investments in IT-enabled business initiatives. A balanced scorecard is a useful tool for this kind of measurement.
The balanced scorecard approach aims to evaluate something using multiple perspectives, not just the financial perspective. This gives a balanced picture of a particular action's performance, and identifies its consequences throughout the organization. Commonly used perspectives are financial, learning, internal, and customer.
The balanced scorecard approach to measuring an IT strategy has several perspectives to consider:
- business – The business perspective looks at IT's contribution in terms of measurable value and financial returns, in addition to how effectively it's aligned with overall business strategy.
- Innovation – The innovation perspective looks at how effectively IT is innovating and developing the capabilities required for future organizational needs.
- user – The user perspective looks at how effectively IT meets the requirements of the users of IT, and the strength of links between the IT Department and other departments within the company. These users could be regarded as the "customers."
- operational – The operational perspective focuses on whether IT is providing high-quality, cost-effective IT projects and processes while minimizing defects and maximizing availability.
When implemented fully, an IT-specific balanced scorecard is a valuable tool for performance management and governance. It's particularly useful when it's linked to a corporate balanced scorecard. In addition, IT-specific balanced scorecards are often broken down into more detailed scorecards for separate IT teams, such as development and operations.
When measuring the effectiveness of an IT strategy, there are four key steps. The first step is to define the metrics and measures to be used. The second step is to monitor the results to determine whether the expected performance is being achieved. The third step is to compare the performance to benchmarks and best practices. The fourth step is to control for variances, which means adapting the strategy to take into account internal or external events that impact the strategy. Measuring a strategy's effectiveness helps identify present and potential problems, and gives a clear indication of the strategy's performance level.
Our broad array of IT courses will help a learner work on all of the metrics required to be successful in implementing and executing an IT Strategy in his/her organisation.