The Business of IT
Crafting a Business Plan
This is probably old news to many readers, but you can’t make an IT purchase or investment these days without a good justification for it. Making purchases merely for the sake of possessing the latest computing innovation is a retired theme. Unfettered, unplanned technology was once considered the route to marketplace
domination and growth. This concept ended with the dot-com implosion and resulted in the squeeze on IT. Today, there must be real value returned to the business from IT projects.
With tightening budgets, how can an IT investment be justified? The answer lies in making a business case incorporating a comprehensive, unified technology solution. What would this look like? What are the vital elements to making a business case? How do you employ a business plan model to justify an IT project? What should you look for when integrating the right technology solutions within the business case? I will give you some ideas to consider for making your case.
A successful business or organization must generate quantifiable value for stakeholders, which includes employees, customers, partners, suppliers, and owners. This value must be clearly defined and measured with continuing adjustments for improvement.
In an increasingly connected world, a business must enable effective collaboration with internal and external networks, thus maximizing relationship interaction in real time. Who wants to wait for a service, an answer to a query, a product delivery? Who wants a delayed project or inaction due to communication breakdown? With the advent of the Internet and the ever increasing speed of globalization, the competition can be next door, or on another continent. Therefore, a business must create differentiation in this competitive environment. How does an organization separate itself from the crowd?
Furthermore, a business must be agile: it must be continually aware of the internal and external environment and be able to quickly select and then implement a business initiative from an array of choices. In doing so, the business takes advantage of its strengths and corrects its weaknesses to harness new opportunities. These opportunities allow growth with new markets, new customers, new products and new services. A business must also assess and mitigate threats including competitive forces. All this is done with an emphasis on productivity and efficiency improvements while managing operational costs and risk.
A technology investment has to foster that agility, resulting in faster time to market, instant response to customer needs, anticipation of competitive threats, higher productivity, improved efficiency, and lower operational costs and risk.
So far, I have discussed the drivers behind business success and how IT must support and align with these drivers. In fact, if this does not occur, IT becomes a cost overhead whose existence can not be justified! Taking a business plan approach will give you the business case for ensuring business success. This translates into IT success.
Creating a Business Plan
It is vital to link IT investment with increased business value—differentiation, lower costs, market focus, collaboration, and innovation. A business plan approach meets this need.
The basic elements of an IT business plan are outlined in Figure 1. What is the objective of your plan? The mission and vision statements describe what the business does today and what it wants to become in the future. Make sure you clearly explain how your IT project supports this overall goal. You’ll need to spell out the links between the IT investment and the business objectives, specifically how the IT objectives support the strategic direction of the business—there must be alignment.
Figure 1 Business plan elements
||Outlines links between the investment and business objectives.
||The business outcome and how IT will support this goal.
||The current business and how IT enhances this business mission.
||The market to be captured and value to the business.
||The products or services IT offers to capture the business opportunity.
||The customers (or potential customers) to be served.
|Integration with IT
||Alignment of products and services with technology resources.
||The list of competitors, along with strengths and weaknesses.
||Strengths, Weaknesses, Opportunities, Threats.
||The existing infrastructure and the projected resources required.
|Metrics for IT success
||The aspects of the plan that can be measured.
||The time frame for return on investment.
Your statement of the business opportunity should explain how IT enables or supports the new business opportunity and what value it will return. What is the specific business model? What products and services does the business offer in return for revenue? How big is the potential market and what amount can be captured as a result of improvements in IT? How does IT grow this business model? You should explain how IT investment can improve workflow and business process within the stated business model—improve operations, lower costs, increase efficiency, enable collaboration, power communications, scheduling, and messaging. All of these can drive lower costs or higher productivity. Don’t forget to call out innovation in the operation of the business that can be achieved through IT.
Furthermore, you should talk about your target markets. Consider how your IT plans enable the business to increase penetration into existing target markets or new markets. Discuss what delivery systems are being used for products and services, and how IT support can provide better service and delivery to those markets.
This should lead directly into an examination of how your business’s products or services are integrated with IT technology What specific products and services are keyed on the integrated and unified technology platform? How does IT support the products or services? How does this tie into the business objectives? This is your launchpad for suggesting how IT can improve service management, project delivery, and internal and external relationships. IT enables business change—improving service level expectations, providing effective oversight, prioritization, regulatory compliance, privacy, and security. All of these points should be addressed by your business plan.
Your competitive analysis covers the landscape in which your business is competing. Who are you competing against? What are their strengths and weaknesses? Point out how your competitors are employing technology and how they have improved their market position. Does IT provide your business with a competitive edge over its rivals? Explain how IT improves your business agility, enables growth, speeds entry into new markets, supports new customers, enhances service to existing customers, and so on. How does technology provide differentiation and advantages for your business? How does IT increase the barriers to entry for competitors?
A SWOT analysis takes a formalized look at the strengths, weaknesses, opportunities, and threats related to your business. What are the external opportunities and threats to the business? How does IT improve the internal strengths of the business to take advantage of new external opportunities? How will IT overcome internal weaknesses and position the company to engage new opportunities as a result of these efforts? How are external threats reduced or mitigated through IT investments?
Make sure to consider the resource requirements for an IT investment before, during, and after implementation. This includes people, hardware, and infrastructure. What existing knowledge or infrastructure can you take advantage of, and what will you need to budget for? How long will it take to recover the costs of new training or equipment? If there are advantages of new investments beyond your specific business plan, be sure these are noted as well.
To know whether your business plan meets your expectations, you should spell out in advance the metrics for success. What aspects of your plan can be measured? How often will you measure for success and what will you do if you are not supporting the objectives effectively? What are the backup plans if unexpected disruptive forces are encountered?
No business plan is complete without financial projections. What is the total cost of ownership and how will that cost be justified in new business opportunities? And what is the value of these opportunities? Where and in what ways will the return on investment be realized in achieving business success? What are the time frames for return on investment? How does IT improve the financial goals of the business through revenue and profitability growth and lower costs?
There are no guarantees that your plans will actually work. But making the effort to think about and develop a business plan puts you in the driver’s seat. You will have thought through all of the potential issues and either revised your plan or outlined contingencies. You will also have a clear idea of the costs and benefits involved, including the costs of not proceeding. Finally, there’s no way to know whether you’ve succeeded or failed miserably without some sort of yardstick to measure against. Those metrics will come in handy for showing the boss how important your plan was for the business come bonus time.
Stephen Ibaraki is an award-winning Professor of Business and Technology and a 35+ year veteran of business and IT. He currently serves as Vice-Chair for the international Network Professional Association (NPA).Contact Stephen at www.StephenIbaraki.com.
© 2008 Microsoft Corporation and CMP Media, LLC. All rights reserved; reproduction in part or in whole without permission is prohibited
For an ongoing dialogue about the business of IT, I recommend the IT Managers Connection at blogs.technet.com/cdnitmanagers
. There are also a number of business plan related resources available from the Microsoft Web site. The Small Business Center provides a tutorial on writing a business plan at microsoft.com/smallbusiness/resources/startups/business_plans_
, and Office Online (office
) has a number of business plan templates in addition to those provided with the 2007 Microsoft Office system.