These are top-line measures that determine shareholder value and drive enterprise goals. For-profit businesses determine shareholder value by factors such as revenue growth, market share growth, margins, and operating expenses.

These are measurements of business functions that apply across the entire organization. Business performance metrics (BPM) include increased employee productivity, higher customer satisfaction, increased revenue, reduced days of inventory, and reduced employee turnover.

These are measurements for individual projects and specific operations as indicators of BPM success, including application hits per day, percentage utilization, percentage completion, and error rate reduction.

The senior management team must create specific business measurements to ensure that all activities match enterprise goals.

Business managers must define the metrics of their projects. In addition, operations should conform to the business performance metrics.

The importance of reconciling top-down guidance with bottom-up alignment cannot be overstressed. When this exercise is never really accomplished, the misalignment of expectations can be enough to cause the company to fail. When those who are paying for initiatives are not in agreement with those who are implementing them, projects can fail in spectacular ways.

KPIs are another poorly understood concept. Although a KPI ought to be well defined, as a little thought will reveal, the term incorporates a fair amount of ambiguity. What makes one metric more important than any other? It is only in the context of business goals that the concept of “key” becomes understandable.

A well-known management principle is “You cannot manage what you do not measure.” Key performance indicators are critical to any business process improvement initiative. KPIs, then, become the specific measurable indicators that report progress toward organizational goals and objectives. They evaluate the critical success factors of your organization that are defined within the framework of the goals and objectives of the overall business, enabling management to measure improvements and take action. For example, KPIs for sales might include average discount by region, average sales by salesperson, or average order size. Figure 6-7 illustrates another, yet different set of sales KPIs.

Figure 6-7. Key Performance Metrics for Sales

So, to recap, metrics are important for the following reasons:

On the following blank page, using the Business Performance Framework, write down the key metrics used in your organization to measure business performance.

Organizational impact assesses the business value of the initiative to the organization. You can measure organizational impact in a variety of ways, including return on investment (ROI), customer satisfaction, cultural impact, and the cost of not implementing the initiative (lost opportunity).

Ease of implementation (and adoption) refers to the degree of difficulty to implement the initiative and gain adoption. This dimension considers a variety of factors, including project cost, complexity, process change required, availability of skilled resources, availability of systems and data, likely rate of adoption, and training and support needs.

Your project portfolio selections are often a trade-off between these two factors. Your choices should be based on a combination of factors, including these:

After completing the PPM exercise, you now have a list of potential projects, each of which will improve the delivery of value to customers and each of which is acceptable to key stakeholders. How do you decide which ones to do? Generally, projects that can be delivered quickly with measurable benefits provide faster results and lower risk. Because some important projects might also be large and complex, consider breaking these projects into phases that can be delivered rapidly. Figure 6-14 maps the smaller components of a large E-Commerce Initiative against business value and ease of implementation.

Figure 6-14. Mapping Project Value Impact Against Ease of Implementation

Always try to keep projects short and simple with small development and management teams. As the project length and scope increases, so does the risk of failure.

Another important point, which we addressed in our previous books on virtual business processes, is the idea of incrementalization. Incrementalization means that small projects that can deliver measurable returns will pave the way for additional similar sized projects. If each provides a benefit, the organization can often achieve true transformation without the risk and complexity of attempting to change things all at once.

As you select projects, keep in mind that without executive sponsorship, a project will likely fail even if all the other stakeholders are satisfied. The Sun CAP approach seeks to identify an executive sponsor early in the process of project selection.

To identify and select the IT initiatives that you can implement quickly and easily, you need to involve both business leaders and IT professionals. Your IT department or an IT consultant can help you scope and plan projects.

In addition, you need the following people:

Developing business strategies for IT initiatives requires that business and IT managers work together as a team.

Oasis has reviewed the suggestions and decided that the initiatives fit within the following iValue matrix quadrants shown in Figure 6-16.

Figure 6-16. Oasis’ Prioritized iValue Matrix IT Initiatives

Based on the iValue analysis, Oasis has decided that initiatives 1 and 4 align best with the strategic objectives of its business.

Oasis knows that both of these are large undertakings for its business and, as such, it has decided to develop a project roadmap. The project roadmap will enable it to better identify benefits to be received through the life of the projects. The roadmap might also help identify quick wins, which can enable some of those benefits to be realized earlier.

This project roadmap will give Oasis a better understanding of how these two initiatives could be implemented in smaller, manageable milestones. Oasis has looked at how these two initiatives might be implemented over time. This will also enable accurate measurement of the progress of the projects.

As you can see, armed with relatively simple tools, you can develop an IT portfolio and use it as a basis for analyzing a value chain and then building a project roadmap. Remember that this process is not a one-time exercise. It is a process that constantly evaluates the opportunities for process improvement. The danger is that projects that slip will quickly be overtaken by new opportunities and new projects. That is why having a plan for incrementalization is important to achieve continued success and measurable benefits rooted in the goals and objectives of the firm.

In this section, you will examine what a business process is, why it is important, and what the key considerations are for implementing business process management in your organization.

You will investigate two things:

Business process management has become a central focus for automation in the past couple of years. The reason for this has to do with the sophistication that IT has achieved by integrating technology into the business. A few years ago, IT management technology was concerned with the management of networked applications. It was not long before business leaders noticed that this kind of infrastructure management could also be applied to the management of business processes. At that point, infrastructure management systems began to become aware of the business process.

Automation of business process management is only possible, of course, if business processes can be rationalized and managed in a formal way. Although you can address business process management in several ways, this section looks at it in a way that is consistent with Six Sigma process improvement approaches. This will include a review of business process management principles and will apply a Six Sigma approach called DMAIC to the analysis and improvement of such processes.

BPM provides the ability to gain visibility and control over information flows or transactions that span multiple applications and people, in one or more organizations. BPM consists of people, processes, and technology, which are combined to enhance the value of business processes throughout an extended enterprise or organization.

As W. Edwards Deming discovered during World War II, standardizing BPM promotes quality, improves productivity, lowers costs, and frees up resources to focus on innovation and value. It also unifies the focus of the organization, whether the focus is on creating profit, monitoring and fulfilling consumer needs, or growing the business.

BPM provides benefits for all the stakeholders of an organization, as shown in Figure 6-17. Process reengineering should always be done with the customer as the primary focus. Figure 6-18 shows the four beneficiaries of Process Management. Here the critical benefits are consistency and predictability:

Figure 6-17. Business Process Management Benefits

Figure 6-18. Four Beneficiaries of Business Process Management

One of the key strategies of networked virtual organizations (NVO) is to continuously standardize business processes, data, and IT infrastructure both inside and outside the organization. For example, some companies might have different ways of handling customer orders depending on whether the orders came in over the web, over the phone, in the mail, or in a store.

This creates an inconsistent customer experience, which can negatively affect customer satisfaction and repeat business. That inconsistency also makes it difficult for the company to quickly gauge customer response to new items or sale prices, thus making it next to impossible to create a just-in-time inventory management system run by the company suppliers.

As can be seen in Figure 6-19, BPM provides a context in which to evaluate the impact of Internet-enabled IT projects. Does the project improve the quality of the outcome? Can you actually measure the impact in a statistically meaningful way?

Figure 6-19. BPM Context for Evaluating Internet-enabled IT Project Impacts

The focus on measuring the outcome of BPM led to the development of formalistic approaches to BPM that depend on metrics. One of these is called DMAIC.

DMAIC is an acronym that describes the five steps of BPM:

DMAIC is a term that has come into widespread adoption through the auspices of the Six Sigma statistical quality analysis approach. Organizations utilize DMAIC for BPM when a process is not performing well and the causes of the process problem and its solution are not well understood.

To improve processes, you must first evaluate and measure them by profiling any important and poorly performing processes. Processes that have established KPIs are often better candidates for improvement because they can be measured before and after the process improvement implementation.

As can be seen from Figures 6-20 and 6-21, you can think of DMAIC as a continuum of steps that flow into each other. The process is actually circular rather than linear, in the sense that after an improvement is made, it is subject to evaluation and further improvement. The DMAIC steps include the following concepts and should answer the following questions.

Figure 6-20. DMAIC Circular Continuum

Figure 6-21. DMAIC Process Flow

Define the problem and its scope from the customer view, and evaluate the cost versus the benefit of fixing it.

Measure how the process is currently performing. Collect past and present data about the process so that you understand the problem better.

Analyze the causes of missed process performance by distilling the collected data. Determine the source (the root causes) of the problem.

Improve the process to address the identified causes. Evaluate solutions for customer and organizational impact, implement worthy solutions, and monitor results.

Improve the process to address the identified causes. Evaluate solutions for customer and organization impact, implement worthy solutions, and monitor results.

Control (monitor and adjust) the process to sustain the improvements. Confirm the continuing effectiveness of the solutions, and document the date for future uses.

When looking for process improvement opportunities, start by defining the value for the customer and the stakeholder. Set clear goals that measure the time, quality, and financial impact before you define the process.

After defining the process, establish the policies and procedures that consider customer and stakeholder issues. Where possible, policies should be flexible to accommodate how people like to work but should be well defined and not subject to interpretation.

Finally, after implementing systems and measurement systems, inform and educate the stakeholders about the new process, its benefits to the organization, and its benefits to them. Stakeholders should also know about the policies and how they will be enforced.

BPM, using a DMAIC approach, is a powerful way to implement a process of continuous improvement, as shown in Figure 6-22. Companies like Cisco have successfully used DMAIC to radically speed up the development and improvement of technology. Of course, the entire process improvement cycle depends on being able to implement changes quickly and effectively. Although the BPM approach defines where such implementation needs to take place, it has little to say about how such implementation can be done effectively. This is the domain of the project life cycle, discussed next.

Figure 6-22. BPM Utilizing DMAIC for Continuous Process Improvement

This section examines a few common barriers to successful project execution and introduces concepts that are crucial to it. You will learn about the following:

PLM is an approach to IT project implementation that recognizes that any IT project has common steps that must be accomplished before the project can be successful. Figure 6-23 shows the three core metrics of PLM. It incorporates a formalized approach to project management that includes a significant amount of oversight. It is the extensive oversight requirement of PLM that has been criticized as being so cumbersome that it slows down implementation.

Figure 6-23. Project Life Cycle Metrics

Nevertheless, as you will see, the formalization that PLM brings to the implementation process can ensure success to complex projects. In fact, the recognition of this capability has led to its adoption within the ISO 9000 standards for quality certification.

Project life cycle management begins and ends with project management. Project management is the application of knowledge, skills, tools, and techniques to promote activities to meet the project requirements. As shown in Figure 6-24, project management is a proven discipline used to deliver consistent, predictable, and repeatable results by doing the following:

Figure 6-24. Project Management Process Flow

Success with project management should guarantee that the selected technology works, the business problem is solved, and the investment is contained. PLM resolves one of the major issues of project failure: scope creep. By clearly defining a project, its timeline, and its deliverables, you eliminate scope creep from the beginning.

As IT budgets continue to rise as a percentage of overall spending, organizations are under great pressure to manage risk and budget. In 2003, the Standish Group found that only 34 percent of the projects that were evaluated succeeded, and most failures were caused by poor project management. However, the most critical skills required for effectively managing a project are not always apparent or developed in an organization. A project management discipline is needed to develop most critical skills required for effectively managing a project.

The objective of developing this discipline is to provide the end-to-end project delivery and project management processes, standards, best practices, and tools to enable the organization to achieve higher levels of performance and organizational impact.

As noted earlier, formalized project management has a relatively poor record for success. In the context of IT, this is understandable. IT evolves so quickly that, if a project is longer than about six months, technology improvements begin to erode the value delivered by the project. The expectations of executives and other stakeholders, which are set not by the project but by what the market is doing, begin to either add requirements or withdraw support. This is why project management bodies such as the Project Management Institute (PMI) are actively seeking to redefine project management processes for IT.

In addition to the extreme sensitivity of IT projects to the timeline, there are other barriers to success for such projects as noted below and shown in Figure 6-25. The barriers to project success rise from many sources, but the organizations themselves often create obstacles.

Figure 6-25. IT Project Execution Barriers

The most common barriers to project success are these:

Of course, you should not take any of this as an indictment of IT project management. Although only about 34 percent of projects achieve true success, it is still true that IT projects are virtually impossible without some form of project management. The key is to understand, up front, that IT projects that are seeking to achieve a transformation of any part of the organization are likely to be hard to do. Rather than drop such projects, it is better to focus on those things that can promote project success within the context of sound project management.

The good news is that you can do many things to ensure project success. Many of these principles for project success, shown in Figure 6-26 as well as noted here, directly address the barriers to success:

Figure 6-26. Principles of Project Success

So, with project management as a basis for discussion, you can now answer the question of how this relates to the idea of project life cycle management and how project life cycle management can ensure the success of Internet-enabled IT applied to business processes.

Change management is an organized, systematic application of the knowledge, tools, and resources of change that provides organizations with a key process and incentives to achieve their business strategy. As it relates to new, Internet-enabled business process, change management includes the following activities:

Organizations cannot properly formulate the steps to successful change without understanding the key principles driving effective change management. Figure 6-28 illustrates some of the principles of change management.

Figure 6-28. Principles of Change Management

Although they are not exhaustive, the following are some of these principles:

Of these, probably the most important principle is the first one: leadership. Effective change must have sponsorship from the leadership of an organization. If leaders do not explicitly and openly support a change, it is unlikely that anyone else in the organization will.

Many organizations have track records of “the next big thing.” This is a dynamic where once a year the leader announces a new initiative. It involves a flurry of activity in which many teams are formed to implement the new initiative, with numerous executive speeches and workshops. Ultimately, the noise dies down and the initiative is forgotten. By the end of the year, no one remembers what it was. Such business practices can be destructive, eat up resources, and ultimately drive morale and productivity into the ground. If leaders are not willing to support a change and continue to do so, it is better not to attempt it, because it will fail.

A successful change management program will occur over several phases and several years. As such, these steps might be different depending on the organization and the scope of the change. Figure 6-29 illustrates the basic steps of a change management program.

Figure 6-29. Basic Steps of a Change Management Program

These steps are explained next:

By planning change management in steps according to key principles, an organization can make adjustments in response to how well its stakeholders are embracing the changes. An organization can additionally revise its change management plan to utilize new and improved technologies.

Although organizations might implement new technologies, applications, and processes, these things will provide no benefits to the organization unless they are widely adopted and used. Change management must ultimately concern itself with adoption of a technology. As noted previously, this starts with the leader; however, a successful adoption strategy requires not only executive support, but strong leadership and organizational priority. In all cases, a successful strategy must effectively communicate the benefits of adoption. As defined in Figure 6-30, effective adoption exists when a significant portion of the target audience is actively employing the tool or technique and achieving agreed-upon goals and measures.

Figure 6-30. Definition of an Effective Adoption

Adoption strategies are an important part of change management to drive acceptance and the use of new initiatives. They typically include pilot tests, training, education, marketing, and communications.

Organizations achieve effective adoption through a continuous adoption planning process that entails an unending cycle with four phases:

By utilizing a continuous adoption planning process, illustrated in Figure 6-31, organizations can effectively deploy their resources.

Figure 6-31. Continual Adoption Planning Process

As you can see, just as in constant improvement and project life cycle planning, change management involves a constant adoption cycle where adoption goals are set and evaluated. As adoption proceeds, the metrics used give important clues not only to the success of change, but also to problems with the technology that can be addressed in other parts of the project life cycle.