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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