The study of business value seems obvious at first—after all, over the course of our careers, we’ve all seen which activities create value and which ones waste everyone’s time.
But what if our grasp of what business value really is, is not quite right to start with? In his new book, The Art of Business Value, the indomitable Mark Schwartz shows us that understanding business value is not as simple as it seems.
I recently sat down with Schwartz to ask him a few questions about this elusive concept.
Gene Kim: Why do you think defining business value is so elusive?
Mark Schwartz: For a long time we’ve thought of the IT organization as a solution-provider to something called “the business,” as if IT was a contractor or some kind of arm’s-length participant in business activities. In this model, IT’s contribution to business value was taken to be its control of costs – nothing more. It was the business’s responsibility to understand business value and decide what requirements were valuable. So IT didn’t have to think much about it. But that model changes now as we push value delivery down to autonomous teams, drawn largely from the IT organization.
GK: What were some moments in your own distinguished career as a technology leader that led to to the conclusion that business value wasn’t as obvious as we typically think?
MS: I think that when I was in the startup world I learned to think skeptically of business cases presented by eager entrepreneurs. I hear similar business cases presented all the time to justify corporate IT investments, and my instinctive reaction is to question the assumptions – and usually they are assumptions about what is valuable. “This feature is essential: it will save time and improve the user experience!” OK, so what? How should we compare different options for spending our limited resources? How can we value our spending on information security? In a sense, we hope that it will never have value – in other words that we won’t be attacked by a bad actor. And then coming to government … it is so hard to make value decisions. We can spend money to reduce the probability of a terrorist attack. How do we know how much to invest? How can we measure if we the investment was successful?
GK: What were the top three lessons you’ve learned in terms of how we should think about and create business value?
MS: The first thing I think we have to do is to stop thinking of business value as a metric, and think instead about business objectives or outcomes that will satisfy a stakeholder. In a closely held private company we need to think about what makes the owners happy, not about some universal metric; in a nonprofit we have to think about mission outcomes. Second, we can’t think about value as a point-in-time quantity: there is value in creating real options for the future, and there is value under different possible scenarios, where we don’t yet know which scenario will develop. Finally, that IT capabilities do not deliver business value per se: the business value is delivered through the use of those capabilities – so after deployment we have to see how or whether the value is being harvested, and make adjustments through a feedback loop.
GK: Finally, what has surprised you the most about the way people see business value? In both good and frustrating ways?
MS: I was blown away when I realized that the idea of business value was so central to Agile thinking, but that no one seemed to be talking about what it is. I couldn’t tell if that was because everyone thought it was obvious – which it is not – or that they were uncomfortable discussing it, or what. Ultimately, when you ask how the CIO and the IT organization deliver business value, you are asking fundamental questions about how IT fits into the enterprise and what role it plays, and in the end you are asking what a business organization is in the digital age. Those are big questions. Why isn’t everyone else talking about them?