Expanding the business case to new approaches

26 Jan

When developing a strategy/framework for supporting business cases it is first important to separate the cases depending on their investment type. In their 2002 paper on the subject Ross and Beath note the extraordinary potential of IS/IT such as re-engineering processes, introducing online products, cost-cutting through automation of services and new approaches to customer segments. However with those seemingly limitless opportunities comes undue pressure on other aspects of the firm such as required capital, IT expertise, management focus and capacity for focus.

This brings me back to the crux of the Ross and Beath argument; that traditional business case models (that focus on traditional metrics such as return-on-investment against capabilities) are no longer sufficient.

Before IS cases can be further broken down, the management team must first decide what it is they are seeking, be it strategic objectives which highlight the trade-offs between short-term profitability and long-term growth or technology scope, which distinguishes between shared infrastructure and business solutions.

To decide this process the authors outline four types of investment:

1 Transformation

With the migration to new online applications and systems many firms find that they do not possess the necessary capability. Therefore Transformation Investments often involve a change in the core competencies which would otherwise hinder the long term success of the firm. Delta Airlines provide an example of this by tearing down their silo systems to create a new integrated one.

2 Renewal

This is more of an organic investment which occurs when the original transformation investment becomes redundant, therefore it is often less costly than transformation and deals in cases such as capacity expansion, maintainability and reducing support structures.

Process improvement   

Process improvement investments are less risky than other investments due to it focusing on operational outcomes of existing processes, process must build on existing IT infrastructure. So when Delta Airlines introduced their new online boarding system, management were expanding and simplifying technology that already existed.

Experiments

Ross and Beath say “New technologies present companies with opportunities or imperatives to adopt new business models.” Successful experiment can result in in can in organizational process and capabilities and can lead to more experiments down the road. Stationary supplier Staples experimented with a switch from catalogue advertising to web-based, when this experiment was deemed a success extra intranet applications were added such as a web based helpdesk.

By first deciding which type of investment you want teams can develop a more comprehensive and justifiable IS business case with clear advantages to the firm.

Source: New Approaches to IT Investment. By: Ross, Jeanne W., Beath, Cynthia M., MIT Sloan Management Review, Winter2002, Vol. 43, Issue 2

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One Response to “Expanding the business case to new approaches”

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  1. Smart leaders create better cases « So Opinionated … - February 3, 2013

    […] pointed out by myself here and Mr. steepletoes business cases aren’t a box ticking exercise, they uncover hidden costs, […]

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