Keeping Score of Your ROI from IT Investments

Which information technology will give me the best returns?

Many clients ask us that question. Frankly, there is no magical formula applicable to all businesses. For one business, investments in collaboration technologies yield a great benefit while another firm in the same industry might derive the greatest benefits from investments in implementing a tightly integrated financial management system.

Step back from trying to determine how IT can provide your firm with a strategic advantage. Instead, simply focus on tangible business concerns. One of the tools popular with many executives is the Balanced Scorecard approach, which was developed in the 1980s by Dr. David Norton and Dr. Robert Kaplan from Harvard Business School.

The Balanced Scorecard technique asks us to look at our business from multiple dimensions rather than a simplistic financial one. Similar to a pilot using multiple instruments to ensure proper flight operations, Norton and Kaplan proposed using four distinct dimensions to ensure business success—customer, financial, process and people. Defining strategic and operational business initiatives around these four dimensions provides a balanced and holistic approach toward growing the business.

Using the Balanced Scorecard methodology for technology planning and selection decisions, managers and business owners can ask themselves four simple questions in regards to any potential technology initiative:

1. Can it enhance our customer experience? A major driver for many technology projects is to make it easier for your customers to do business with you. Whether they want to know their outstanding balance or order status on a 24/7 basis, ask yourself how your technology investments will help your customers perform their tasks better and cheaper. Making life easier for your customers results in increased customer loyalty.
2. Can it improve our financial performance? Yes, the bottom line is still important. However, many system providers promise drastic cost cutting through the use of their products, which leads managers to be skeptical about whether they can truly deliver. Properly selected and deployed systems, nevertheless, can have a substantial impact on a company’s financial health. Technologies such as bar coding and document management, for instance, can reduce the need for low-skill workers while improving quality levels.
3. Can it streamline our business processes? Well-designed systems should reduce duplication of efforts by creating a single-point-of-entry environment—the capability to enter information once and have it be accessible and used by many. More efficient processes allow you to get work done faster, smarter and with fewer errors. The same concept of internal operational efficiencies can be applied to making your external processes, such as dealing with suppliers, more tightly integrated and efficient.
4. Can it increase our employees' capabilities? Good people demand good tools. Employees like to work with the latest technology and tools in order to get their work done more productively and keep up with the demands of the marketplace. No one likes to work with old, discontinued technologies. Having highly reliable and up-to-date systems will increase employee productivity and morale, and reduce turnover.

A major advantage of using a methodology such as the Balanced Scorecard for planning and selecting of IT projects is that you are starting from a pure business perspective, not a technological one. This approach enables you to focus on the larger business value proposition and avoid being intimidated by technological jargons and complexities.

I can assure you that when you consider implementing IT solutions by utilizing the above four dimensions in a rather tangible way, you will have yourself a winning proposition!

Sassan S. Hejazi can be reached at Email or 215.441.4600.