A closer look at a portfolio approach: The Bedell method

11 Nov

Investment decision making remains a complex management process mainly due to the magnitude of interacting socio technical variables, which sometimes may be difficult to quantify financially. The portfolio approach aims to quantify these variables through techniques such as the Bedell method which I will be examining in further detail. The Bedell method connects business value to IS through a systematic approach (the portfolio) used by many companies/businesses. There is less work required in contrast to a complete financial approach because there is no extensive research needed prior to analysis as it is based on team management assessment of the existing organisation. However this type of method requires an in-depth knowledge of the team management system.

The method answers three important questions on three different levels of the organisation as seen in the diagram…

(1) Should they invest?

(2) What should they invest in?

(3) Why information systems should be developed?

The purpose of Bedell’s method is to calculate the effectiveness of portfolios for IS on the three levels using limited amounts of data. The most important characteristic of the method is that the IS should be equal to the strategic importance i.e. it’s cost effective where it has a high quality and is functionally adequate.

As mentioned before the investment decision making is a complex management process due to the magnitude of interacting socio technical variables. In order to calculate the socio technical variables, the organization has to establish the logical organizational, business processes and activity boundaries. When the organisation design has been decided, the starting variables have to be determined by studying the current importance of each business process and activity to the organisation, potential importance of IS to the business and the effectiveness of each IS to an activity.

The variables are determined based on the importance in obtaining the strategic goals of the business processes measured between 0-10. This is accomplished through IS management in co-operation with the organisation based on their judgement of how cost effective, technical quality and functional appropriateness the information system is.

By using the available information, the organization can calculate the variables through the following 10 steps:

Step 1: Determine the importance of all organizational business processes to the organization

Step 2: Determine the importance of all activities carried out in the business process

Step 3: Determine the effectiveness of the systems that are in place to the activities

Step 4: Calculate the effectiveness of the single systems and the total of IS

Step 5: Determine the potential importance of the IS to the business processes and calculate the focus factors and the potential importance of the IS to the organization

Step 6: Determine whether or not to invest in IS as a whole

Step 7: Determine which business processes to make IS investments in

Step 8: Determine which activity to invest in for the business process

Step 9: Select investment proposals

Step 10: Prioritize investment proposals

Bedell’s method can not only be used for support in new decision making investments but also to existing ones in the allocation of resources to businesses in operation. However there are some negative aspects in using the Bedell method. One of its major faults is that it is unable operate with systems serving multiple activities in multiple businesses processes. Another disadvantage is when the effectiveness of information systems is calculated the results are neither clear cut facts nor objective. (Schuurman, Egon Berghout and Philip Powell, 2008)

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3 Responses to “A closer look at a portfolio approach: The Bedell method”

  1. ronnoc90 November 12, 2012 at 9:40 am #

    Hi Lucid21, good post 🙂

    I would tend to agree with Buschle and Quartel, 2011, in that IT investment decisions should be made with the help of IT portfolio valuations, and hear lies the strengths of the Bedell method, however it does have its limitations. “This method originates from time where enterprises were structured according to classical silo architecture.” The authors propose an alternative e valuation method that combines the enterprise architecture with an extension of the Bedell method, to be used in the modern environment. I am hoping to expand on this in my next blog post.

    • lucid21 November 17, 2012 at 6:22 pm #

      Hi ronnoc90 Thanks for the comment,
      I agree completely with an “evaluation method that combines the enterprise architecture with an extension of the Bedell method”. I isolated the bedell method so that I could highlight its benefits/drawbacks. I agree that it has its “limitations” hence when I said “one of its major faults is that it is unable operate with systems serving multiple activities in multiple businesses processes. Another disadvantage is when the effectiveness of information systems is calculated the results are neither clear cut facts nor objective”. However according to Schuurman 2008 portfolio and multi criteria methods are generally more successful than financial approaches. The portfolio approach requires limited effort because most analysis is based on management team assessments of the current organisational setting rather than extensive prior research. However again stressing the bedell method definitely does has its limitations.

Trackbacks/Pingbacks

  1. Towards a generic IS implementation evaluation? « So Opinionated … - November 26, 2012

    […] while others have outlined different methodologies that are in use (https://sopinion8ed.wordpress.com/2012/11/11/a-closer-look-at-a-portfolio-approach-the-bedell-method/; […]

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