As IT searches for its seat at the table, negotiating IT’s
value to the business and the business’s need for the
value IT provides reveals a visible gap in many organizations.
When the CIO acts like a CTO, he or she provides
the technologies needed for the business but does
not engage in a conversation about the strategic needs
for these technologies. IT then continues to provide services
and focus on operational excellence.
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Connecting IT and Business Value Through Balanced Scorecard
1. Nicholas Carr’s “Does IT Matter?” asks the question,
“Isn’t it enough for IT to enable companies to operate
more efficiently or deliver better services, to reduce
costs or heighten customer satisfaction?” [1]. This ques-
tion is the infrastructure question. Carr suggests the
investments in IT have “gone to waste” after the col-
lapse of the Internet bubble. Carr’s thesis is that IT has
become a commodity service and not the basis of a dif-
ferentiated strategic advantage. Like the railroads and
electric utilities, if IT is only a “utility,” it will have dif-
ficulty describing its differentiated advantage.
Instead of “Isn’t It Enough?” It Should Be “Is It Enough?”
If IT is a commodity, what strategic advantages can
a business achieve with it? IT has the capacity to pro-
vide intelligence about the business, to create new and
unique user experiences not available through a tradi-
tional sales force, and to project these capabilities onto
devices and into locations not envisioned when Carr
formulated his thesis. The notion of IT as a strategic
enabler presupposes the successful implementation of
IT as infrastructure.
CHOOSING BETWEEN OPERATIONAL EFFECTIVENESS
AND STRATEGY
As IT searches for its seat at the table, negotiating IT’s
value to the business and the business’s need for the
value IT provides reveals a visible gap in many organi-
zations. When the CIO acts like a CTO, he or she pro-
vides the technologies needed for the business but does
not engage in a conversation about the strategic needs
for these technologies. IT then continues to provide ser-
vices and focus on operational excellence. If the opera-
tions continue to function as the business expects, this
reinforces the notion that IT is providing all the needed
service — the “dial tone” — so why should it change
its approach?
A CORE CONVERSATION MUST TAKE PLACE BETWEEN
THE BUSINESS AND THE CIO
There is another set of questions the business must ask
IT and IT must ask the business. These questions are
the basis of the balanced scorecard approach described
here, but the answers do not depend on a specific
strategy-making method. They are at the root of the
business value of IT.
Is IT a strategic enabler of the business or simply an
operational expense?
Should IT focus on developing new services that sup-
port business operations and customers, or should
it focus on improving the infrastructure so that the
business units can stay focused on the customer?
How much responsibility should IT have in meeting
the business objectives?
What does IT need to do to ensure its place in the
business’s strategy?
Why is there a disconnect between what corporate
strategists want and what IT is actually doing?
One source of disconnect is the failure to realize that the
“value” IT offers is a negotiated entity — and this nego-
tiation of IT’s value must be completed before any dis-
cussion of IT strategy can take place. Any disconnect
between IT’s perception of its own value and the busi-
ness’s perception of IT’s value creates gaps between
strategy, governance, and delivery of the needed IT
services [3].
The CIO must responsibly govern all aspects of the busi-
ness’s information; the facilities that produce, manage,
consume, and protect this information; and the staff that
leads and operates these facilities. As the “I” in “CIO”
indicates, information should be the CIO’s primary job.
Many CIOs are actually CTOs and are focused far too
much on the technical aspects of their job.
25Get The Cutter Edge free: www.cutter.com Vol. 20, No. 7 CUTTER IT JOURNAL
Connecting IT and Business Value Through
the Balanced Scorecard
by Glen B. Alleman
DEFINING THE INTANGIBLES
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Table 1 shows a notional example of a business strategy.
The next step of developing IT and business scorecards
and making the connections between them is not
always well developed. Table 1 replaces the well-known
balanced scorecard perspectives with four notional
balanced scorecard perspectives for an IT strategy:
Financial Perspective becomes User Orientation
Customer Perspective becomes Business Value
Internal Processes becomes Operational Excellence
Learnings and Growth becomes Future Orientation
CREATING THE STRATEGY MAP FOR CONNECTING IT’S
VALUE WITH THE BUSINESS
Connecting both infrastructure and business enable-
ment into a coherent strategy can be done by addressing
the contents of the balanced scorecard perspectives.
Figure 1 is a notional example of a map in a different
arrangement than the traditional balanced scorecard,
one focused on IT instead of the general business func-
tions. This strategy map is a visible indicator of the con-
nection between strategic goals and execution. The CSFs
are the measures of performance for these goals. The
process of strategic thinking starts with this cause-and-
Strategies Key Performance Indicators
User
Orientation
Business
Value
Operational
Excellence
Future
Orientation
Be the supplier of choice for IT
products and services
Focus resources on attaining busi-
ness strategies through effective
IT services delivery
Deliver timely and effective services
at or under budget that meet the
value stream goals
Develop internal capabilities to learn
and innovate to exploit future oppor-
tunities using IT
• Customer satisfaction
• User survey score
• Percentage of projects delivered on time
• Total business impact
• IT budget as a percentage of revenue
• Cost impact for each release
• Percentage of budget allocated to new
development
• IT budget versus actual
• Staff utilization
• Staff turnover
• Historical availability
• Number of documented best practices
• Existence of product line architecture
• Total cost of ownership
Table 1 — A Notional Description of an IT Strategy that Includes Both Infrastructure and Business Value Delivery
Stakeholder Perspective
Internal Processes Perspective
Learnings & Growth Perspective
Budget Perspective
Application
Quality
Timely
Delivery
Business
Capabilities
Recognition of
Value
Stakeholder
Relations
Service Attributes Relationships Image
Operations
Management
Stakeholder
Management
Innovation
Processes
Regulatory
Processes
Human Capital
Information Capital
Organizational Capital
Project
Performance
Budget
Management
Resource
Management
Figure 1 — An example strategy map for an IT organization. The replacement of the financial perspective with a
stakeholder perspective is the first step in building the balanced scorecard for IT.
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ANSWERING THE QUESTION “WHAT IS IT’S ROLE?”
We can now answer the questions asked at the begin-
ning of this article in the context of a balanced scorecard:
REFERENCES
1. Carr, Nicholas G. Does IT Matter? Information Technology and
the Corrosion of Competitive Advantage. Harvard Business School
Press, 2004.
2. Guide to a Balanced Scorecard Performance Management
Methodology. National Partnership for Reinventing Government,
US Department of Commerce, 1999.
3. Weill, Peter. “Don’t Just Lead, Govern: How Top-Performing
Firms Govern IT.” MIS Quarterly, Vol. 3, No. 1, March 2004.
Glen B. Alleman is the Practice Director, Strategy and Performance
Management, for Lewis & Fowler of Denver, Colorado, USA. Mr.
Alleman’s role is to define, develop, deploy, and assess the benefit of
strategy and performance management processes for IT and business
clients using Lewis & Fowler’s balanced scorecard, project portfolio
management, enterprise project management, and program manage-
ment office offerings. Mr. Alleman can be reached at Lewis & Fowler,
8310 South Valley Highway, Suite 300, Englewood, CO 80112, USA;
Tel: +1 303 241 9633; E-mail: galleman@lewisandfowler.com; Web
site: www.lewisandfowler.com.
Questions about the Role of IT Answers Using the Balanced Scorecard
Is IT a strategic enabler of the business or simply an operational
expense?
Operational excellence and its associated cost are needed to fulfill
strategy. Strategy is not needed as the basis of operational excellence.
Should IT focus on developing new services that support business
operations and customers, or should it focus on improving the
infrastructure so that the business units can stay focused on the
customer?
This is the difference between strategy and operational excellence.
Without the latter, the former is not possible. If IT is to contribute to
corporate growth, it needs to do both.
How much responsibility should IT have in meeting the business
objectives?
This is the outcome of the negotiation between IT and the business.
What does IT need to do to ensure its place in the business’s
strategy?
IT needs to negotiate its role with the business. IT should participate
in the business performance measurement process, connecting IT’s
performance to the business performance in the units of measure
meaningful to the business (i.e., dollars).
The language used to communicate strategy needs to be in units of
measure meaningful to the business.
It does this by connecting the requests with the enterprise architecture
(EA) through a portfolio management process. This approach should
make use of real options in the decision-making process for each
request, considering its impact on the business benefits of the EA.
Connecting EA and balanced scorecard is well established in the
literature.
By following the strategy from mission, to vision, to the performance
goals, IT should be able to speak to what applications are needed for
the successful fulfillment of the strategy.
Statements about strategy must include future activities — the “out
years” of the strategy. These future-oriented strategies are the ground-
work for the IT technological road map.
The strategic tradeoff discussion starts with the “line of sight”
connection between financial performance, through Customer
Perspective, to Internal Processes, and then to Learnings and Growth.
Along this path, the alternatives — in their monetized measures —
can be discussed between the business and IT.
The organization of IT makes a key contribution to the business. The
conversation starts with determining how IT can best fulfill the short-,
medium-, and long-term strategic initiatives of the business.
If IT is have a “seat at the table,” then business management and IT
management must be seen as peers. The role of the CIO must be
equivalent to the CFO and the COO.
Why is there a disconnect between what corporate strategists want
and what IT is actually doing?
If the correct role for IT is that of a shared service bureau, how can
IT best ensure the requests it receives align with company strategy?
What IT applications should be deployed to yield competitive
advantage?
What technological opportunities should be considered?
Which IT capabilities should be nurtured and which should be
acquired from outside sources?
How should IT activities be organized, and what is the role of the IT
function?
What is management’s role in the IT domain, and what IT
capabilities are required for today’s managers?