All enterprises, large or small, private or public, for profit or not for profit exist to deliver value to their stakeholders, be they owners or shareholders of private companies, recipients of services from not for profits, or taxpayers.
In the last few years, the nature of enterprise value—and how to achieve it—has become a subject of much discussion. The current global economic situation should be a catalyst for even more focus on this topic. Beyond the current situation, the increased interest in value management has been driven by a number of factors including:
- The poor track record of capturing value;
- The changing nature of value, with a greater contribution coming from intangibles;
- The increased complexity of value creation, resulting in great part from the pervasive use information technology (IT), and globalisation; and
- Increased transparency, often driven by regulation such as the Clinger-Cohen and Sarbanes-Oxley acts in the US.
More on Value management
The impact of such wishful thinking is particularly visible in the case of investments involving IT - investments that are increasingly no longer about technology but about organisational change. The failure to realise business value from investments in IT-enabled organisational change is a symptom of a wider malaise - one that presents managers with significant new challenges.
The track record for implementing any major change successfully is terrible. The success rates of business process reengineering, and mergers and acquisitions, two examples of major change, are no better than those quoted for investments involving IT.
Root causes for this poor track record include:
- Failing to recognise that the leadership challenge today is one of continually implementing change - major cultural change
- The inability to define or articulate clear and focused strategies to set the direction for change - with clear and shared understanding of the value driven outcomes that the strategies are intended to achieve
- Failure to acknowledge, surface, and come to grips with, indeed often denying the complexity of strategy execution
- Mere measurement of value creation, rather than tight linking of the measurement to the actions required to achieve the outcomes – “focusing on the scorecard rather than. the game”
- Lack of senior management attention or commitment - abdication of accountability for value to lower organisational levels, often without clear operational targets
- Governance processes that are woefully inadequate to manage what is, in most cases, “an uncertain journey to an uncertain destination” resulting in: not knowing what to measure along the way; not surfacing and tracking assumptions; and not sensing and responding to changing circumstances in a timely or well-considered manner
Find your next job with computerworld UK jobs