Test 1 Study Guide

Question 1

Define IT value, and describe it.

Answer 1

IT value is the worth or desirability of a thing, which is a subjective assessment based on how a business views the thing in question.
IT value is tied to the business value, and is defined generally by measures like ROI or key performance indicators.

Question 2

What four things is IT value a function of?

Answer 2

IT value is a function of people, processes, and technology. It’s also a function of organizational value.

Question 3

What are the three components of IT value?

Answer 3

The three components of the IT value proposition are:

• Identification
• Conversion
• Realization

Question 4

What is the “W” effect in delivering IT value?

Answer 4

The “W” effect in delivering IT value is the trend in profits realized after implementing a new IT change.
In the first 12-16 months, there’s a distinct lack of benefits as the business adapts to the tech. The next six months see small increase as simple efficiencies are gained. Then, as usage grows, complexity does as well, which brings an increase in cost. Once past this state, then benefits finally begin to be realized.

Question 5

What are the best practices for identifying value?

Answer 5

There are four best practices for identifying IT value:

• Joint business-IT structures to recognize and evaluate opportunities.
• A means of comparing value across projects.
• A portfolio approach to project selection
• A funding mechanism for infrastructure

Question 6

What are the best practices for conversion?

Answer 6

The best practices for conversion are:

• Having available adequate and qualified IT & business resources.
• Training in business goals and processes
• Embracing multifunctional change management
• Having an emphasis on higher-level learning and knowledge management,

Question 7

What are the four critical success factors for IT strategy development?

Answer 7

The four critical success factors for IT strategy development are:

• Revisiting your business model.
• Have strategic themes
• Get the right people involved
• Work in partnership with the business

Question 8

What are the barriers to effective IT strategy development?

Answer 8

There are six barriers to IT strategy development:

• Lack of a supporting governance structure for enterprise-wide projects
• Inadequate enterprise-wide funding models
• Poorly integrated processes for developing IT and business strategies
• Traditional budget cycles
• Unbalanced strategic and tactical initiatives
• Weak strategizing skills

Question 9

What are the five modified scorecard business metrics?

Answer 9

The five modified scorecard business metrics are:

• Customer loyalty index
• Associate loyalty index
• Revenue growth
• Operating margin
• Return on capital employed

Question 10

Define operating margin.

Answer 10

Operating margin is the operating income earned before interest and taxes for every dollar of revenue.

Question 11

Why is it important to have common goals?

Answer 11

Having everyone on the same common goals builds a strong team across the organization.

Question 12

What are the three approaches traditionally taken to linking IT to business metrics?

Answer 12

The three approaches taken to linking IT to business success are:

• The Balanced Scorecard
• The Modified Scorecard
• Strategic Imperatives

Question 13

What is a balanced scorecard? Why is it good?

Answer 13

A balanced scorecard is a set of metrics brought together to measure progress against the entire enterprise’s business plan. With this approach, IT is a separate business unit, and has its own scorecard linked to the business plan.

Question 14

What is a modified scorecard?

Answer 14

A modified scorecard is like a balanced scorecard, in that it is a set of metrics, but these metrics are designed to be oriented on the business’s vision statement.

Question 15

What is a strategic imperative?

Answer 15

A strategic imperative is one of several strategies created after identifying key environmental factors affecting the company. Once they’re identified, each area of business then determines initiatives that will impact that imperative, and create metrics to target them

Question 16

What are the characteristics of the business-IT relationship?

Answer 16

The relationships of the business-IT relationship are:

• IT has to keep proving itself
• The business is often disengaged from IT work
• Business expectations of IT change continually
• The relationship is affected by the interaction of many people/processes on many levels
• Clarity is often lacking around expectations and accountabilities
• There are many “disconnects” between IT and business

Question 17

What are the four assumptions made by business about IT?

Answer 17

The four assumptions made by business about IT are:

• IT is a necessary evil
• Business can do IT better
• Business and IT are equal partners
• IT is support, not a partner

Question 18

What are the four foundations of a strong business-IT relationship?

Answer 18

The four foundations of a strong business-IT relationship are:

• Trust
• Interpersonal Interaction
• Credibility
• Competence

Question 19

What are the four main methods of strengthening competence?

Answer 19

The four main methods of strengthening competence are:

• Develop business knowledge in IT staff
• Link IT’s success criteria to business metrics
• Make business value an required consideration in IT decisions
• Ensure effective execution of all IT activities

Question 20

List and describe the three components of the IT value proposition.

Answer 20

The three components of the IT value proposition are:

• Identification - Identifying opportunities and determining if they are right for exploration and planning.
• Conversion - Design and development.
• Realization - Follow-through, support, etc.

Question 21

List and describe the five principles for delivering value.

Answer 21

The five principles for delivering value are:

• Have a clearly defined portfolio value management process - AKA, track projects.
• Aim for chunks of value - Don’t have a billion projects.
• Adopt a holistic view of IT value - Holistic = part of the whole. See IT as a part of business.
• Share ownership of IT initiatives - Have good executive sponsorship, and make sure both sides work for each other.
• Experiment more often - Try things, experiment with risk, and follow-through.

Question 22

Compare and contrast the historical view, the current view and the future view of business and it strategies.

Answer 22

Historical View - IT strategy should support the business strategy. IT had limited understanding of business.
Current View - IT strategy should integrate with business strategy. IT is flexible, fast, and complements business.
Future View - IT strategy must be dynamic, focused on creating strategic capabilities to support a variety of shifting business objectives..

Question 23

List and describe the Four Critical Success Factors.

Answer 23

Revisit your business model: Keep refining it until it is clear and describes the value you want to deliver.
Have Strategic Themes: Group your programs together by theme; this allows interdependencies to become apparent, and to better support the vision.
Get the Right Folks Involved: Sr. Management, stakeholders, etc.
Work in Partnership with the Business: IT projects should sync with business objectives.

Question 24

List and describe the 5 Dimensions of IT Strategy

Answer 24

Business Improvements - Streamline business processes. Low-risk investments with medium-term payback.
Business Enabling - Transforms or Extends a company’s business. Adds new actions or functions related to existing ones.
Business Opportunities - Experiments, prototypes, on a small-scale, to test new concepts/tech. High risk.
Opportunity Leverage - Working with successful prototypes
Infrastructure - You gotta have it.

Question 25

Define revenue growth.

Answer 25

Revenue growth is the percentage of this year’s total revenues compared to last.

Question 26

Define operating margin.

Answer 26

Operating margin is the operating income earned before interest and taxes for every dollar of revenue.

Question 27

Define return on capital employed.

Answer 27

Return on capital employed (equity) is the earnings before interest and tax divided by the capital used to generate those earnings.

Question 28

What is a Balanced Scorecard?

Answer 28

A balanced scorecard is a scorecard that uses four dimensions:
- Customer perspective
- Financial perspective
- Internal operations perspective
- Learning and growth perspective
Each metric measures progress against the enterprise business plan, with IT as its own business unit, and its own scorecard.

Question 29

How does a Modified Scorecard differ from a Balanced Scorecard?

Answer 29

A modified scorecard uses five metrics, linked to the vision statement, as opposed to measuring progress against the enterprise business plan. It also has the effect of keeping the employee eye on the vision and mission.

Question 30

List and describe the Building Blocks of a strong business-IT relationship.

Answer 30

There are five building blocks of a strong business-IT relationship. They are:

• Competence - Having up-to-date technical knowledge, awareness of the value of IT in ROI, and the ability to understand the business and develop plans based on it.
• Credibility - That IT can be counted on to do what it says it will.
• Interpersonal interaction- Appear competent, clean, communicate well, look like you give a shit.
• Trust - Employ transparency, clear communications.

Question 31

List and describe the five sets of attitudes and behaviors for developing professionalism.

Answer 31

The five sets of attitudes and behaviors for developing professionalism are:

• Comportment: Appearance, manners, method of conduct.
• Preparation: Appearing competent and organized.
• Communication Skills
• Judgment: Show common sense.
• Attitude: Give a shit.