IT Value Chain: The Strategy to Portfolio Value Stream

I heard a leading analyst once tell a group of IT professionals that they do not work in IT, but rather the business of their firm—banking, insurance, manufacturing, etc. Do you feel this way? If so, the strategy to portfolio value stream should be important to you. The goal for this value stream is to derive an IT strategy and a service portfolio that optimize business advantage. This value stream is focused on IT strategy creation as well as ongoing governance of the planned and operationalized service portfolio. From a functional perspective, the first steps in this value stream involve creating an IT architecture and evaluating incoming demand. This next step involves breaking the incoming demand into strategic and operational components, with strategic demand being all the new stuff and operational demand being requests for the existing stuff. Given this, this value stream is concerned with the portfolio’s quality of management, the innovation that is being produced for the portfolio, the quality of new solutions being identified, and the effectiveness and efficiency of spend for services and innovation.

 

What are the goals for strategy to portfolio?

 

To consider your organization as being successful with this value chain, you need to be able to see month-over-month improvement in each of the aforementioned areas. You want to see that initiatives are prioritized more and more against enterprise need. Want a clue as to whether this is happening? First, determine what the three to six distinctive capabilities are that set your company apart from its rivals. Next, ask your IT organization to relate its investments to these capabilities. From a total-picture perspective, you want to know that the entire mix of investments (existing services and new investments) are aligned to business strategy—those three to six distinctive capabilities. With this completed, you want to know that services perform to business requirements. Ask yourself here how well IT performs against service-level agreements. At the same, time determine if IT budgets are transparent and allocated fairly. This means that costs need to be tallied by business initiatives or services. Here’s a clue: If your bill is harder to understand than your cell phone bill, then you have no financial transparency.

 

Measuring whether improvement is indeed happening

Your IT organization should be “continually improving” how it operates. It should be actively measuring its improvement. To do this, industry-based practice recommends a balanced scorecard be used for IT management. This is how most businesses measure themselves too. Here are some key performance indicators (KPIs) to measure whether the improvement is taking place in the strategy to portfolio value chain. Look first at the number of applications by lifecycle category. If applications tend to be later in their lifecycle, then your IT organization is not investing in extending your business’s competitive advantages. At the same time, I would look at the number of applications in the service portfolio. If this number is high, then you have IT sprawl and, eventually, ballooning costs. You’ll recognize sprawl if you find thousands of applications. One IT organization I know of could blame itself and the business for this. They kept two versions back of Siebel running, even though the new version had been running smoothly for 16 months. Each unneeded app is a sinkhole for millions of dollars. Ask yourself how much applications cost from end to end. Every year, these sinkholes prevent your IT from driving additional competitive advantage. With this, you want to make sure projects are aligned with business objectives—and as important, that business service costs are being reduced quarter over quarter or eliminated entirely.

 

Conclusion

The strategy to portfolio value stream is about how well you drive business advantage. Leaders can demonstrate alignment and agility at meeting changing business needs through responsive differentiated business capabilities.

 

Related links:

Blog post: Making COBIT 5 part of your IT strategy

Finding your true value

Solution page: IT Performance Management

Twitter: @MylesSuer

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About the Author
Mr. Suer is a senior manager for IT Performance Management. Prior to this role, Mr. Suer headed IT Performance Management Analytics Product ...


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