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  • January 13, 2014

Business Value vs. ROI

Author: Rick Beers


Rick Beers is Senior Director of Product Management for Oracle Fusion
Middleware. Prior to joining Oracle, Rick held a variety of executive
operational positions at Corning, Inc. and Bausch & Lomb.

With a professional background that includes senior management
positions in manufacturing, supply chain and information technology, Rick
brings a unique set of experiences to cover the impact that technology can
have on business models, processes and organizations. Rick will be hosting
the IT Leader Editorial on a regular basis.

I still remember a conversation that changed the way I looked at
enterprise systems as if it occurred last week, even though it was 17 years
ago.

I was on the balcony of a
convention style resort in Phoenix during an annual conference held by a
large manufacturing technology research organization. I had recently been
given responsibility for the supply chain technology portion of a global ERP
program and was at the conference to learn more of an emerging (and at the
time heavily hyped) technology known as Advanced Planning and Scheduling (APS).
Systems such as PeopleSoft’s newly acquired Red Pepper and SAP’s APO were
promising to replace the manual processes at the core of existing supply
chain planning systems with automated modeling, detection and response
technology. I was easily convinced. It was sexy, compelling and carried with
it ROI’s in excess of 30%.

While at the conference I was
pulled aside after dinner by a marketing executive at the research
organization after he heard me in a panel discussion extolling the promise of
APS. Out on the balcony, over a glass of wine, he advised “Be careful. Just
because you have a system to tell you what to do doesn’t mean that you should
do it, or even can in the first place. Your legacy manufacturing equipment
and business processes must change to keep pace with the shorter run lengths
and more frequent changeovers that the system will require.” This one piece
of advice opened my eyes to three dynamics that have stayed with me ever
since, and have guided my recent work with Oracle on AppAdvantage:

  1. That
    enterprise technology alone is rarely a determinant of value; rather it
    is the business value that technology enables.

  2. That
    enterprise technology rarely achieves its potential unless it is
    harmonized with its business surroundings: people, processes and
    physical assets.

  3. That the ROI
    of enterprise technology itself cannot be calculated because it is an
    enabler of a business outcome, not the outcome itself.

It’s the last one that was the
most profound and is an issue still today. Our industry (providers, partners
and practitioners) is still in search of quantifiable ROI from enterprise
technology. It’s like the search for the Holy Grail: a worthy mission that
cannot succeed because its basic premise is flawed.

Instead we should focus on business value. In effect, a contract with business leadership that
identifies the outcomes that a technology project will be measured upon and
the steps necessary to deliver them. This has five key components:

  • The Project
    itself described in terms of the business outcome rather that the
    specific systems involved. This creates a culture of business ownership
    and the identification of business owners.

  • An agreement
    on the measurable outcomes that have clear line of sight to the project.

  • An agreement
    by business owners of the processes that need to change and the
    investments required in skills and physical assets that the technology
    will require.

  • Line of sight
    metrics for both the delivery of the technology and the agreed upon
    business outcomes.

  • Clear
    accountability for those outcomes.

Oracle
AppAdvantage,
and the layered framework that it comprises, has
been developed around the delivery of Business Value as opposed to more
traditional technology ROI. In particular, its seven Entry Points are
designed to facilitate Business Value discussions between IT leaders and
Lines of Business leadership. Its visual similarity to a compass is
deliberate; it provides directional guidance based upon desired business
outcomes.

During February and March we
will be conducting Oracle AppAdvantage Executive Roundtables in Asia, the
Americas and Europe that will prompt such dialogue amongst the audience. I
will discuss these in my blog next month.

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