Translating technology into business valueVegard Ottervig on
How can you use technology to reach your business goals in faster, safer, and more effective ways?
Don’t float around without connection to reality—instead make sure that your organisation’s technology and software are translated to real business value.
This is easier said than done, of course, but here are some things you should keep in mind when attempting to justify, demonstrate, or actually perform the connection of technology to business purpose, KPI’s, and revenue.
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Leadership issue, not technology
First, it is important to remember and realise that achieving business value is primarily a leadership issue, not a technology issue. It is your organisation’s leadership, board of directors, C-suite, and management who point the direction and pave the way to success (or not).
Second, do not just buy technology—like a new marketing suite or a complex piece of software—on the sole ground that it exists or appears to be fresh and new. Technology should always be used for a purpose, and in this case it means to support your organisation’s business processes. Your job is to convince your leadership why the organisation needs a specific technology.
CIOs are both a part of the leadership in an organisation and delve into the more technical and IT sides of things. McKinsey suggests that CIOs that successfully grasp the business value from IT broaden their scope of action beyond the technical realm.
The CIOs could consequently demonstrate tech-generated value in core business priorities and core IT performance, optimise investment value (together with measuring operations value), discovering common ground between IT and business, seek alliances with finance, HR, and other departments, and build better governance.
The business-minded technologist
To better appreciate the function of translating technology into business value, 3coast has created an elegant analogy: Even though everyone has learned to read and write, this does not necessarily make them into authors. In the same way, just because someone knows technology does not make them into business people.
To translate technology into terms a business owner understands requires that the technologist has identified the business pain points and areas where technology can make the processes and products more efficient. Connecting the world and terminology of the business operator and the convoluted details of the technologist is essential. The mentioned CIO might be the right person to perform this particular task, but given that he is a busy person, he might delegate the task to a more fitting candidate.
Also, embrace digital transformation, as this phenomenon is a driver behind making an increasing number of core business processes digital, and therefore making it profoundly important to demonstrate the business value of the underlying technology.
Innovation vs. maintenance
The age old question of whether to assign assets to innovate upon your existing products or to simply maintain them because they work here and now is a classic one. If your goal is to increase revenue, you will get no new business value by managing old business processes.
What you need is a renewed focus on innovation, an innovation platform, and—if the circumstances require it—a change in the organisation culture and mentality.
In terms of translating innovation to business value, consider this: of the Fortune 500 firms from 1955, only 60 remained in 2017, according to AEI. What fueled this drastic change? Mainly new technology and whether or not companies, both new and old alike, were able to innovate upon the new possibilities.
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More business benefits
The Houston Chronicle lists up additional benefits you can take into account when making your case for benefits by translating technology to business value:
- Benefits to communication
- Improved workplace efficiency
- Competitive advantage over rivals
- Cost reduction and economic efficiencies
New and innovative technology tools like Slack and Google Docs can drastically increase the communication and cooperation within your organisation, thus making you more efficient and valuable to the bottom line. Similarly, acquiring better tools for ERP and CRM can gain you competitive advantage over your competitors, by leveraging customer journeys and allocate resources optimally.
Making a business case
In their book In Search of Business Value, Robert McDowell and William L. Simon claim that it’s the business side that needs to take responsibility for building a business case for technology—in contrast to McKinsey’s emphasis on the CIO. The business unit leader needs to team up with IT and justify technology spending, and he needs to own the project and make it a business project, not a technology project.
A benefit analysis should be performed, and whether it’s ROI, net present value, or another standard is up to the team to decide—but they all need to stand united. Furthermore, the business case needs to stay in touch with the current technology trends, and must be updated accordingly if it is to be viable.
Finally in regard to a business case, you must demonstrate value after the fact. After having determined a value standard, you should perform follow-up audits regularly to identify strengths and weaknesses, and whether the technology has lead to a net benefit for your organisation in terms of increased revenue, saved time, and optimised resources.
An audit should also review how well the change management process was handled, and you should keep the project owners accountable, thus motivating them to optimise performance continuously.
Measuring business value
Even though business value may consist of several different factors, and may vary from organisation to organisation, Vincent Bieri in Forbes lists three key measurements of true business value according to the viewpoint of a CEO or a corporate board:
- How well technology increases revenue
- If technology can lower costs
- How technology improves productivity
Identifying the value of technology entails that you discover the right metrics that show its effects on revenue, cost reduction, increased productivity, differentiation, and client satisfaction. These metrics need to be immediate, accurate, and completely tied to end users.
Translating technology to business value is certainly not an easy task, but keeping in mind that it’s primarily a leadership issue and not a technology issue, may help you find a way to start. Building bridges between IT and business units is a logical next step, while simultaneously weighing the relationship between innovation vs. maintenance. Bringing in more benefits, making a business case, and discovering a robust method of routinely measuring business value are the final steps.