The Value Cycle

Abstract

Organizations invest in digital information technologies (IT) to create value for the organization and its stakeholders. They do not (and should not) do it to be up-to-date with the latest technology or to create more interesting work for IT professionals. Shareholders, customers, citizens, and donors put money into organizations to get some value out of them. This is a vital truth that must be understood by people in IT as well as those in other parts of the organization. For business value to be derived from IT investment, it must be possible to clearly articulate what that value is. It cannot be a vague concept that is not measurable. Value must be measurable and must also be measured in practice. Only then can there be accountability for the results as well as learning for continuous improvement. For our purposes, value is the agreed-upon benefit to be derived from applying IT to support the delivery of outcomes customers are willing to pay for or fund. (Customers, in this instance, is used as a generic term to refer to clients, constituents, donors, voters, and other stakeholders for whom value is being created and delivered.) Profit resulting from commercial activity by business firms may be one measure of business value. Other measures could include outstanding public service delivery (such as clear roads in winter, faster ambulance or fire response times) by a municipal government, significant reduction in medication errors in a hospital, or increase in the number of meals served by a not-for-profit or charitable organization. If value is not perceived by customers, they will not pay for or fund it over the long term.