The failure rate for IT investments continues unabated. For many of us, it is hard to accept that despite more than 60 years of combined industry experience with IT projects, the ability to deliver the expected benefits from them has not improved at all.

Of course, the reasons why IT projects fail and the factors that contribute to failure (as well as success) are well-established. They include not having appropriate leadership, not understanding what’s involved, not managing organizational changes effectively, poor steering committee, weak governance processes, and focusing exclusively on technology deployment. Indeed, I am often asked by clients to review failed or underachieving IT investments and in most cases I could write my report without doing any investigation: the reasons are usually the same.

At the fundamental level, we seem to have a “knowing-doing” gap. We know what needs to be done to improve success levels, but the doing just doesn’t happen. I have conducted research on why this is so, but the details of these findings — including a perception that it is too difficult, and the notion that the digital literacy among business managers is poor – are probably best left for another blog post.

More to the point here is how to reverse the trend. I was recently asked whether there was one thing that organisations could do to improve the success rates of their IT investments, and thus IT projects. For me, the answer is clear – build better business cases. I don’t just mean to improve the quality of the business case itself and what it contains, but also to improve the quality of the process used to build the case.

The Limitations of Templates

The importance of the business case for an IT investment was brought home to me with some recent work at the U.K.’s National Health Service (NHS). To help CIOs build business cases for their proposed spend, the Department of Health and vendors provide templates, partially completed, for an array of different technologies. These can be downloaded and completed with relevant information, usually with minimal involvement of stakeholders.

While this sounds helpful, the result can be an eloquent and well-constructed business case document with strong rationale for the proposed investment (that the vendor has developed), but with no stakeholder buy-in or understanding of what it will take to deliver the expected benefits. Indeed, the first time stakeholders often hear about the new IT investment is when the project actually begins. It’s clear to me that the quality of such a process to build the business case is low.

I have also found that such business-case templates focus primarily on costs and benefits for their analysis, with only financial benefits considered. Furthermore, there is no description of exactly how each of the benefits is going to be achieved, including the assignment of responsibility for ensuring that whatever is necessary for each benefit to occur actually happens. And, the responsibility is not likely to rest with the CIO alone. Remember: Apart from pure infrastructure, IT investments are really investments in business change enabled by IT.

These observations led me to build a framework mapping the quality of the business case, against the quality of the process of constructing this case --i.e., what is the commitment to the case. Four possible scenarios are summarised in the figure below:

While these scenarios are self-explanatory, the one that often provokes debate is the ‘Blinkered Business Case.’ This situation arises when there may be better projects to invest in, but they are either not considered or not identified-- often because investment decisions are made in a very politicized environment or because portfolio management is weak (usually due to the lack of an IS strategy). While stakeholders may be committed --‘supportive’ is probably a better term -- to the investment decision, they are reluctant to enter into what one of my colleagues has referred to as the “Zone of Uncomfortable Debate (ZOUD)” during discussions about the proposed investment.

Leaving Your Comfort Zone

The ZOUD is where difficult issues lurk. In the contrasting “Zone of Comfortable Debate (ZOCD),” stakeholders often play with techniques and have fun generating options. Straying into the ZOUD threatens relationships, and when tensions are heightened, the usual response is to retreat into the ZOCD.  These can be culture issues that are never discussed because they are too sensitive. But once a project gets going, these types of issues inevitably emerge and failure is really the only possible result. Investments in this quadrant subscribe to the “magic bullet” thesis: We know we have problems (which are uncomfortable for us to discuss) but the technology will sort them out for us. 

Using this framework to analyse investments, shows that many are doomed to fail or at least underachieve, right from the outset. Along with my colleague, Professor Don Marchand, at IMD Business School in Lausanne, Switzerland, I have used the phrase “Designed to Fail” to describe such investments and have written a lengthy article about this phenomenon based on our research. (Send me an e-mail if you would like a copy here on Smart Enterprise Exchange or at: j.peppard@cranfield.ac.uk ).

The business case should be seen as a living document and not something that is produced for the purpose of investment approval. It should accompany the investment through its lifecycle. Any changes, for example in project scope, should be evaluated in the context of the impact they may have on the business case, particularly the expected benefits.

In addition to poor business cases and processes, I also worry that investment committees are undereducated with respect to IT. This makes them ill-equipped to deal with IT investment decisions. While they are generally comfortable discussing costs, benefits (in financial terms), time, scope and budget of projects, they too often have little understanding of what constitutes value (in the context of IT) or how it can be achieved. 

These executives need to step out of their comfort zone to understand the complexity of IT investment decisions and their impact on the organisation. That change, along with the steps described, should go a long way toward rationalising investments that add true value to the organisation.

Joe Peppard is a Professor at the Cranfield School of Management in the U.K.

He holds the Chair in Information Systems and is Director of the School’s IT Leadership Programme. He is also Adjunct Professor at the University of South Australia. Professor Peppard has published widely in academic and general business  and management journals and in 2009, he was awarded the Stafford Beer Medal by the OR Society for his  research. His most recent books include Strategic Planning for Information Systems (Wiley) and Customer Relationship Management: Perspectives from the Marketplace (Butterworth-Heinemann). His book The Essence of Business Process Re-engineering (Prentice-Hall),originally  published in the mid-1990s, has recently been translated into Chinese,  having already appeared in Spanish and Polish editions. He is currently  working on a book Creating a Value-Adding IS Capability: Delivering High Performance, Liberating Business Value. He is a Senior Editor of the Journal of Information Technology and an Editorial Board Member of European Management Journal.
His consulting is focused on advising organisations on  IT and strategy-related matters and how to unlock business value from  their IT investments.

He is also a member of Smart Enterprise Exchange.