Thursday, December 31, 2009 | Last Updated Friday, February 12, 2010 15:02 Pacific/Honolulu
TechKnote #0401001
Realizing Value Through Incremental Development
by Donny C. Shimamoto, CPA
Donny has a BBA in Accounting and MIS. He gained a broad range of experience in financial & systems auditing, project management, application development, and business process redesign working at PricewaterhouseCoopers LLP. In 2001, he founded IntrapriseTechKnowlogies LLC—dedicated to enabling small and medium sized organizations to leverage enterprise technology and knowledge management strategies.
1 Introduction
Technology is no longer a nice-to-have for any organization. It is now a requirement for strategic initiatives and maintaining a competitive edge. Constant improvements in hardware and software are decreasing the cost of computing power and putting more powerful technology within reach of small and medium-sized organizations (SMOs).
One of the challenges SMOs face is that they often lack the cash flow required to invest in a technology initiative that doesn’t provide any short term value. The techknowlogy principles applied to overcome this challenge are (1) Technology Planning, (2) Incremental Development, and (3) Performance Management.
1.1 TechKnowlogy Principle: Technology Planning
Adequate planning is the key to success for any organizational initiative—technology is no exception. Technology Planning covers three major aspects: (1) Strategic Alignment, (2) Timeline Management, and (3) Initiative-level Budgeting.
Strategic Alignment includes aligning the technology initiative with the organization’s tactical (short-term) plan and strategic (long-term) plan. This ensures that the initiative provides value within a reasonable payback period and that it also contributes to the attainment of the organization’s long-term goals.
Timeline Management is the practice of establishing milestones for measurement of project progress and to support business planning. Because many technology initiatives involve the automation or enhancement of a business process, the timeline for technology projects must take into consideration any potential business process impacts, requirements, and constraints.
Initiative-level Budgeting is the creation and maintenance of a budget that covers the entire technology initiative. This budget is used to assess whether the value provided by the initiative justifies the cost of the initiative. It is also used to ensure that sufficient funding will be available when the project requires it.
It is important to remember that the initiative-level budget is only an estimate. The components of the estimate have varying levels of reliability depending on how well the scope and requirements of the individual component have been established. The more defined the scope and requirements, the more reliable the estimate for the component.
1.2 TechKnowlogy Principle: Incremental Development
Incremental Development is the practice of breaking up a long-term initiative into smaller (three to five month) component projects with realizable value provided by each component. This reduces the overall risk of an initiative by limiting the scope (reduction of technical risk through decreased complexity) and level of effort (reduction of financial risk through smaller cost and shorter return on investment) of each component.
1.3 TechKnowlogy Principle: Performance Management
Performance Management is the practice of establishing metrics (qualitative and quantitative) for a given process, setting a performance standard, and then continuously monitoring (measuring and adjusting) the process to ensure that it meets the standard.
In the context of a technology initiative, Performance Management helps to validate the value that a project is providing. In the intraprise setting, technical projects are often centered on process improvement and thus the success of a project can be measured by its ability to provide value to a process (i.e. helping a process to meet or exceed the performance standard).