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A Thesis Submitted in Partial Fulfillment

of the Requirement for the Degree of

Master of E-Business Management

at the

Graduate School of International


Management
International University of Japan

Title:
The influence and effective use of Information Technology

towards maximization of benefits: Factors influencing Benefit

Realization strategies in Japanese companies


By

Student No. 2A8202

Name M.A.H.M. Kabir Ahmad

Faculty Supervisor:

Professor Jay Rajasekera

(Approval Signature)

August 2009

i
Title of the thesis

The influence and effective use of Information Technology towards

maximization of benefits: Factors influencing Benefit Realization strategies

in Japanese companies

By

M.A.H.M. Kabir Ahmad

Student ID: 2A8202

Master of E-Business Management

Supervised By

Professor Jay Rajasekera PhD

Graduate School of International Management

International University of Japan

ii
Acknowledgements
This study paper is a required part of my master program. During the time of research study, it

became obvious for me to take help from different people. In a word without their help, it would have

been very difficult for me to complete this paper. It is a pleasure for me to give my gratitude to them

in my humble acknowledge.

In the first place, all my sincere gratitude goes to honorable supervisor Professor Jay Rajasekera who

helped me lot from initial level to final level of this research study. Above all his encouragement,

guidance and support enabled me to build sound understanding of the research area. I am indebted to

him more than he knows.

I gratefully acknowledge the entire participant to whom I contacted over e-mail. Without their

information, it would not be possible for me to understand the current practice and perspective of

organization in Japan.

Finally, I remember and appreciate the contribution of some of my friends and seniors those who

helped me to build up my concept regarding the thesis as well as collecting information.

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Abstract
In today’s world, IT is the major driving path for change. All the changes are driven by technology.

Almost all the organizations are using IT in their development and day to day business. And IT

Company is spending billions of money in development project. But most surprising matter is that

still many organizations report ROI's from information technology is 1% or less.

Deriving a sustainable value from technological change is the constant challenge for the

organizations. Harnessing the full power of systems, aligning with business perspective whilst

recognizing the importance of people, culture, and external drivers are toughest job. Six-sigma offers

such an approach.

Across the world many companies are considering their investments in business perspective to justify

their expenditure. Some companies also measure whether or not the benefits have been delivered. Yet

most companies still failed to achieve the full potential from their investments in change and IT. For

example, in US and UK the cumulative waste is around £58bn p.a. Now, more than ever, is the time

to realize that the old metrics do not work. A single fixed position doesn’t work for long time: the

world is changing too rapidly. In Japan, Fujitsu is one of the few companies started to use Benefit

Realization (BR) approach to make their initiative all the way from concept to cash.

The gap between what could be achieved and what is being achieved can be minimized by the

continuous and active management of benefits throughout the project or program life cycle. Business

Benefit Realization Management transform the change and IT focus from project-level to business-

level impacts.

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Contents
Acknowledgements........................................................................................................................iii
Abstract...........................................................................................................................................iv
Contents............................................................................................................................................i
Chapter 1: Introduction....................................................................................................................1
1.1 Introduction............................................................................................................................1
1.2 Motivation and objective.......................................................................................................2
1.3 Thesis structure......................................................................................................................2
Chapter 2: Present IT Management: Global and Local Perspectives..............................................3
2.1 IT investment trend: global and local perspective.................................................................3
2.2 Alignment of IT with corporate strategy: pros and cons.......................................................4
2.3 Alignment of IT with corporate strategy: global and local perspectives...............................5
2.4 Current IT investment management in Japan........................................................................8
2.5. HR Aspects of IT in Japan .....................................................................................................11
Chapter 3: Benefit Realization Approach......................................................................................13
3.1 What is Benefit Realization (BR)?......................................................................................13
3.2 Frameworks for benefit........................................................................................................13
3.3 Benefit Realization model....................................................................................................15
3.3.1: Cranfield process model of benefit management........................................................16
3.3.2: Active benefit realization (ABR) approach.................................................................17
3.3.3: A conceptual model for evaluation of IT project:........................................................18
3.3.4: Project Appraisal Method (PAM)................................................................................18
3.3.5: The DMR model for benefit realization......................................................................19
3.4 Utility with BR model..........................................................................................................21
3.5 Issues related with the adoption of BR model.....................................................................21
Chapter 4: Research Methodology.................................................................................................23
Chapter 5: Findings and Analysis..................................................................................................26
5.1 IT mangers’ approach towards BR strategy:.......................................................................27
5.2 Business mangers’ approach towards BR strategy:.............................................................28
Chapter 6: Linking current practices with BR approach...............................................................29
6.1 BR vs. Strategy Map............................................................................................................30
Chapter 7: Conclusion and Future directions.................................................................................32
7.1 Conclusion and Recommendation:......................................................................................32

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7.2 Future research direction:....................................................................................................34
References.......................................................................................................................................iv

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Chapter 1: Introduction
1.1 Introduction

Ongoing developments in information systems (IS) and information technology (IT) have resulted in a

growing need among organizations to build, integrate and acquire the most suitable applications that will

enable them to achieve their corporate strategy more efficiently and effectively (Lin and Pervan, 2003;

Peppard and Ward 2004). This potentially demands huge financial commitment and high risk exposure

which organizations need to recognize and manage in order to justify, prioritize and carry out their

investment in IS/IT.

Organizations have difficulty in justifying their investment in IT because they primarily consider capital

return by using financial evaluation techniques. But many researcher (Farbey, Targett, and Land 1994;

Shang and Seddon 2002) have asserted that IT investment should be considered on the basis of business

benefits derived from the project not only capital return. The logic behind this argument supports current

incidents like ongoing incidence of project failure, budget overrun, project cancellation and delay in

project delivery.

All those factors clearly indicate that organization needs to use one or more non-financial techniques that

look beyond purely quantifiable IT benefits. The recent study by Lin and Parven 2003 indicate that it is

rarely an organization using any formal Benefit Realization (BR) model for justifying IT investment.

However it is also noted that organizations using some kind of BR approaches have achieved a significant

level of satisfaction from IT investment. So there is a positive perception on the use of BR methodologies.

1
1.2 Motivation and objective

In the IT field competitive advantage, task efficiency and effective information management are the key

points to consider prior investment. Evaluating and realizing the benefits are the complex job for the

company. Project failures, budget overruns and cancellations are common phenomenon in IT investment

sector. Many researchers argue that some non-financial techniques can be more valuable in business

viewpoint rather than current practice.

Benefit Realization is such a type of approach to facilitate organization to derive benefits from IT project.

It appears, however, that most organizations in Japan have failed to change their practices in part due to

managerial perspectives and uncertainty of the effectiveness of the BR models.

My objective is to look into the underlying models that exist in Japanese companies and relate to the BR

models developed by some of the UK companies. Fujitsu Japan is already in its way to implement a fully

functional BR model. I also would like to have an overview on the current BR strategies being employed

by some major companies in Japan and try to propose a better model for the same.

1.3 Thesis structure

This thesis is organized in seven chapters. The next chapter reviews current IT management practices

throughout globally and locally in Japan, and then the chapter 3 describes Benefit Realization

Approaches. These two chapters outline the potential significance of this study from the business point of

view. The survey method, sample selection and associated information are discussed in chapter 4. Chapter

5 represents comprehensive results with respect to the research objectives. A correlation between current

IT management practices and BR approach are being discussed in chapter 6 and final chapter presents

limitations, recommendations and implications of further study.

2
Chapter 2: Present IT Management: Global and Local
Perspectives
2.1 IT investment trend: global and local perspective

It is already clear that all the technological developments happened mostly for the growing needs of the

organizational business transformation. Side by side organizations’ investment in technological projects is

also increasing. This growth is basically in order to keep up with technological advancement. In recent

time common applications are internet-based system, mobile technology applications, enterprise resource

planning, supply chain management, customer relationship management, decision support systems,

information portals, data warehousing and others. All these applications are mainly intended to shape the

organizations’ business process and decision making.

Today’s organization is much more information driven, so the predetermined perspective to gain financial

benefit from IT applications is also gradually changing towards business benefit. IT innovations and

applications are usually involve huge financial commitment and cost cutting, so improved task efficiency,

improved productivity, availability of timely business information for effective decision making, and

either to gain/sustain competitive advantage, or to maintain business agility are the major drivers for IT

investment from an organizational perspective. But these concepts are gradually changing. Now a day’s

organization not only invests in IT just for a competitive advantage, though for some it is primary for

survival but also sustain their competitiveness in the business.

The widely claimed paradox of IT productivity arises mainly when IT project fails to deliver any or some

of the expected business benefits. Most commonly identified causes are as follows:

• Improper alignment of the organization’s business objective with IT project objective, leading to

inappropriate project selection

• Unrealistic or overly high expectations from IT project

• Organizations’ impatient to wait for long term and yet to be realized IT benefits

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• Use of financial techniques to evaluate IT returns, consider only monetary return ignoring the

intangible benefits of IT

The financial techniques like return on Investment (ROI), Net present value (NPV), Internal Rate of

return (IRR), Cost-benefit analysis and other similar payback approaches for calculating return of IT

projects are failed to consider the long term and intangible benefits accrued from an IT investment.

Researchers, therefore, suggest that organization needs to look beyond such financial techniques in order

to effectively justify their investment. This paper will address the above mentioned issues whether

Japanese organizations’ can utilize any non-financial techniques which are more suitable for IT

investment project evaluation from both business mangers’ and IT managers’ perspective.

2.2 Alignment of IT with corporate strategy: pros and cons

‘Aligning IT with business’ or ‘Aligning IT with corporate strategy’ depends on better understanding of

corporate strategy and selection of suitable technology that may enable the organization to achieve its

corporate strategy. Therefore a clear understanding of corporate goal and IT needs are a must to secure

the maximum benefits from IT investment.

The key factors of gaining success from IT investment are to have a clear business strategy & model, and

an information strategy that supports those. The success of the business and information strategy depends

heavily on the use of technologies. The organization who fails to realize the above mentioned issues leads

to ineffectiveness in obtaining business benefits from IT.

Based on the review of relevant literature, there are several factors that underlie ineffective IT-business

alignment, like:

• Lack of awareness of non-financial evaluation techniques

• Mismatch between IT and business perspective

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• Difficulties in defining role of IT and Information in organization

• Lack of support from business management in handling IT task

As a result, sometimes IT manager “oversell” the IT project to organization that ultimately bring lower

return from investment. Sometimes unrealistic high expectations results lower level of perceived benefits

than those organizations’ that are associated with realistic benefits. As a result at the end of the day

business manager failed to gain expected benefits and start to consider IT as a cost & utility center, and

notice only when the machine doesn’t work properly.

So making IT manager aware about the organization’s strategy is extremely important and critical to

overall success of organization. Basically organizations who highly welcome IT participation in overall

business planning produce better result than those organizations with less participation.

In fact IT and business are equally responsible for making an IT project successful. Making right

investment decision is an important factor. Apart from the financial measures, pre-investment appraisal

technique like Technology Acceptance Model (TAM) can be used to consider the pros and cons of any

proposed project.

2.3 Alignment of IT with corporate strategy: global and local


perspectives

Based on the literature review in this arena, prioritization of IT initiatives is influenced by two

interdependent factors-economic and human factors that can lead to ineffective decision on IT

investment. The economic factors encompass the financial situation of the organization and its ability to

invest in desired technology. Human factors include:

• Organizational culture

• Managers’ and employees’ resistance to change

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• User groups competence to use a particular technology

• False promise and unrealistic expectations

• Managerial attitude towards technology and its management

To select the appropriate IT project, developing a sound business-IT strategy by collaborating IT and

business management is the key. In addition stakeholders’ knowledge, attitude, and experience are also

crucial factor.

Peppard and Ward (2004) developed a new model that incorporates a new component called ‘IS

capability’ emphasizing the influence of IS capability across a range of strategic and operational activities

of organizations (figure 1).

Figure 1: The new IT alignment: IS capability and organizational performance (Source: Pappard & Ward,

2004)

The model extends the view of aligning IT with business and suggests proliferation of IT value

throughout the organization. Performance of IT in each area contribute to create new business avenue,

provide support, contribute to the business strategy and in turn produce better organizational performance.

6
This model may not guarantee the success of evaluation of IT but to avoid the failure complication

organization needs to monitor the IT value chain closely and consistently by creating a paradox of IT

productivity. To monitor & manage the IT project effectively and to mitigate the potential risk, it is

important to understand the different categories of IT project and their role in every phase.

IT project can be strategically classified into four categories (figure 2):

• Strategic

• High Potential

• Key operational

• Support depending on the project’s contribution to business value

Figure 2: The Application Services Portfolio and IT Infrastructure (Source: Pappard, 2003)

The infrastructure depicted in this figure indicates the impact on the infrastructure by the capabilities of

those IT applications in the four areas. Commonly finance manager and others at the board level in an

organization are responsible for IT spending and to maximize productivity that eventually improve the

financial performance of the organization. But collaboration between high level business and IT

personnel can enable them to understand each other’s objective, problems and limitations.

7
A popular press article “Connecting IT investment to Value, 2003,” instantiates a common problem faced

in US organizations with regard to evaluating IT investment. It is reported that not even 12 percent of

organizations are able to provide information regarding technological spending. Furthermore it also

reported that 72 percent of organizations do not effectively tie IT investment with business strategy and

goals. So still it is a big problem for organization to collaborate IT strategy with business strategy

effectively.

2.4 Current IT investment management in Japan

Japan is already known as knowledge based society and a R&D hub. It’s even applicable for almost every

organization regardless the sector. ICT is considered as most dynamic, largest and prospective sector in

Japan in terms of market scale having annual average growth rate by 5.4% and total IT investment market

by 120 trillion yen in 2005 (source: JETRO market overview 2005). ICT sector is playing a key role to

align business with IT regardless the sector and contributing to create a ubiquitous network society.

Having high rate of technological advancement, Japans’ competitiveness underlie in IT investment mostly

known as R&D. The following figure (figure 3) represents a general picture of ICT industry that enable

us to understand the area and the scope of IT investment & its importance in Japan. The Economist

Intelligence Unit reports that overall index report of Japan is 72.7 that is still behind of US by 4.7 but

superseded US as number one in terms of R&D environment.

Solutions Terminales
-Food traceability -Digital TV
-Home security -Mobile phones, PHS
-Online shopping -Car navigation Systems
-B2B electronic marketing -Wear able terminales
-Online games -Information Appliance
-E-mail, video mail -Ubiquitous terminal
-E-government and e-municipalities -Electronic tags
-Video and music delivery -DVR, video
-Distance education -Game machines
-Electronic books -PDA, mobile
-ERP (Enterprise Resource Planning) -Phone, Fax
-SCM (Supply Chain Management) -Network robots

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-CRM (Customer Relationship -PCs
Management) -Sensors
-Videophones
-Telemedicine
-ITS (Intelligent Transport Systems)
-Disaster monitoring
-Employment systems
-Electronic data exchange
Platforms Networks
-Digital rights management -Cable Internet
(DRM, etc.) -Cable TV
-Authentication -Optical fiber
-Accounting, accounts settlement -Home networks
-Time stamping -Fixed line networks
-Security -Wireless LAN
-Privacy -Bluetooth
-Systems infrastructure -Terrestrial digital broadcasting
-Positional information -Transport related systems
(DSRC, etc.)
-Satellite broadcasting
-Satellite communications
-Electronic tag networks
-Sensor networks
-Next-generation mobile phone
Networks, DSL

Figure 3: Structure of Japan’s ICT Industry (Source: “Advisory Body for the Realization of a Ubiquitous

Network Society - Final Report, “Ministry of Internal Affairs and Communications, Japan)

The scale of the market is enormous, and it is still growing steadily. It is also expected to grow in a

variety of areas in future.

Field FY2008 FY2013 CAGR


(%)*2
(billion yen)

Broadband lines 1,256.2 1,472.9 3.2


Of the above, only 581.6 922.8 9.7
optical fiber lines
BtoC EC 6,225.5 11,715.3 13.5
Internet advertising*1 575.2 841.3 7.9

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Online billing/payments 222.0 456.2 15.5
Information security 369.2 548.7 8.2
Wireless broadband 13.1 382.6 96.4

Figure 4: Projected market scale of main ICT fields (Source: “Japan’s Major IT Markets: Scale and

Trends through 2013”, December 2008, Nomura Research Institute, Ltd)

Note: *1: The forecast for Internet advertising is based on calendar years, rather than on fiscal years.

*2: CAGR (Compounded Annual Growth Rate) refers to the average annual growth rate during the period

between fiscal 2008 and fiscal 2013.

The above-mentioned facts clearly indicate the potentiality of IT investment market in Japan. Unlike

global market, Japan is a fertile land for IT. So an organization needs to concentrate on project investment

to meet the business needs by creating fast value for organization. But gaining shareholders’ confidence

and credit situation of an organization are important factors for success. It is a constant challenge to sort

out the best opportunities in order to streamline the operation. It is also appears that both private and

public sector organizations are highly involved and interlinked with IT investment.

Similar to international organization, the main driver for IT investment in Japan is still cost reduction,

improved quality of service, competitive advantage, product efficiency, efficiency in information

management, and to improve decision-making strategy. There are likely to be increased number of IT

deployments in organization including e-commerce, e-business, mobile technology, multimedia

applications, ERP, supply chain management, CRM, storage system and data warehouse. But keeping up

with the technology has become the main challenge for the organization. Increased competition, tougher

regulatory issues, and changing consumer demand have also put pressure on Japanese organizations. For

example, the mobile platform is heading to fourth generation technology; broadband platform using Wi-

max and all businesses is collaborating with these two platforms that require huge financial commitment.

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2.5. HR Aspects of IT in Japan
It is evident from the analysis that the trend towards investing to IT is to utilize the most appropriate tool

or IT innovation according to business strategy. Not all those aspects are beyond the risk. HR attitude is

also a crucial factor for success/failure of IT investment.

A survey conducted by Fuji Xerox in 2004 addresses some ongoing challenges related to management of

IT projects (Caunce, 2004). Questions were put to 200 CIOs and CFOs from top 400 businesses intended

to identify the major causes of failure. It is reported that the major causes are unclear objective, high

expectations, lack of collaboration and failure to fulfill expectations. Around 50% of the respondents

agreed with the above mentioned causes. One-third of the respondents suggested that investment fails if

technology fails to increase competitiveness. The same study also suggested that the misunderstanding of

business objective and changing expectations also lead to project failure.

One of the key reasons to IT evaluation paradox is ineffective IT management. Davis and Thomson

(1995) identified critical issues in IT management according to IT manager, consultants and academicians

in an effort to benchmark them against international studies. The purpose was to inform IT community

about the key issues and to help them to prepare themselves to handle more effectively and efficiently.

These issues (figure 5) ranked from the IT community viewpoint mainly addressed the HR aspect of IT.

Issues Rating
IT and Business alignment 6.40
IT staff skills 5.70
Competitive advantage 5.57
End user computing 5.41
Telecommunications 5.39
Security and control 5.16

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Identifying projects 4.99
Measuring IT effectiveness 4.86
Open systems 4.71
Application proliferation 4.63

Figure 5: Issues of IT management (Source: Davis et al. 1995)

It also indicates the prominence of issues in Japan just as other countries in the world. Understanding the

impact of various factors identified by studies globally in managing strategic information system, the

current study will focus on identifying the link between current IT practices and organizations’

perspective in relation to those issues.

Therefore, the next chapter will address the effective IT management issues from non-financial

measurement viewpoint under the level of benefit realization method.

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Chapter 3: Benefit Realization Approach
3.1 What is Benefit Realization (BR)?

Most commonly, IT evaluation process falls under three categories. The first is to evaluate in terms of

cost, the second is in terms of benefit and the third & important one is to balance benefit against cost. BR

is such an approach to measure IT investment to balance between cost and benefit.

Benefit realization or benefit management is an approach used to identify, prioritize and optimize

business benefits arising from IT projects, which cannot be done effectively through traditional financial

techniques. It is also known as value management. So it is important to change the attitude of

organization focusing on business benefit rather than only financial benefit.

Benefit realization is also defined as the process of organizing and managing such that potential benefits

arising from the use of IT are actually realized. Benefit realization model basically helps organization to

keep track of the processes involved in successful IT management and increase their ability to identify not

only the monetary returns but also the business benefits.

To cope up with the technological advancement and growing need of consumer, the investment in IT are

increasing for as organization but in most cases with low return on investment and more project failures.

A study cited by Thorp highlighted that 87% of the project were completed late, 57% were over budget,

and 45% failed to deliver expected benefits. Similarly In an average 70% of the IT projects ran either over

budget or beyond schedule. So it is an important aspect to consider IT investment from non-financial

viewpoint to gain full potential from IT investment.

3.2 Frameworks for benefit

After reviewing literature in the respective area it is understood that management culture, experience,

technological expertise and size of the organization determines the perceived business benefit from IT

projects. Organization needs to be aware of what to expect, and how and when to harness those benefits

13
from their projects (Shang & Seddon, 2002). To gain full potential, a widely suggested approach is the

targeted approach rather than generic approach because in most case benefits are being distributed

throughout the value chain of the organization (Mahajan & Vakharia, 2004). This can be done by one or

more benefit frameworks such as strategic, organizational, and technological framework (Farbey, 1994).

The use of these three frameworks can help organization to realize and prioritize the benefit at each

particular level. At the same time it enables organization to increase the benefit discovery scope even

after project completion it can help to extend the scope of obtaining unexpected benefits.

Having a similar objective, Shang and Seddon (2002) recommended a new benefit framework that

encompasses the views of several researchers. The framework focuses on five different dimensions that

can be the main driver for measurement of investing in IT project.

Dimensions Sub Dimensions


Cost Reduction
Cycle time reduction
Operational
Productivity improvement
Quality and customer service improvement
Better resource management
Managerial Improve decision making and planning
Performance improvement
Support business growth
Support for business alliance
Building business innovations
Strategic
Building cost leadership
Generating product differentiation
Building external linkage
Building business flexibility for current and future changes
IT infrastructure IT cost reduction
Increased IT infrastructure capability
Changing work pattern
Facilitating organizational learning
Organizational Empowerment
Building common vision

Figure 6: Benefit frameworks (Sources: Shang and Seddon, 2002)

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The given framework works like an indicator for finding the scope of benefit in order to develop more

relevant and accurate benefit charter. It also highlights the probable tangible and intangible benefits for

organization.

Despite the disadvantage of not having proper means to quantify the intangible benefits, this framework

can still be an effective tool to consider the value of IT from non-financial perspective. An enhanced

concept of benefit framework is discussed in the following section.

3.3 Benefit Realization model

As just described, benefit framework creates a platform for benefit identification but to manage the

realization of desired benefits it is important to have a structured approach. A benefit management or

benefit realization (BR) model contributes to the effective IT management that encompasses a series of

activities and techniques based on the concept of total quality management (Ward & Peppard, 2002). In

fact, BR model is a descriptive approach for handling and obtaining perceived business benefits.

Several IT researchers (Gunasekaran et al., 2001; Ward & Peppard, 2002) have developed different

models that may facilitate benefit delivery. Most widely known BR models are:

• Cranfield process model of benefit management (Ward & Peppard, 2002)

• Active benefit realization approach (Remenyi & Sherwood-Smith, 2002)

• A conceptual model for evaluation of IT project (Gunasekaran et al., 2001)

• Project appraisal model (PAM) (Serafeimidis & Smithson, 2003)

• DMR (Thorp, 1999, 2001)

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3.3.1: Cranfield process model of benefit management

The IS research centre of Cranfield School of Management in association with few industry experts from

some UK-based organization developed the Cranfield process model of benefit management. The

underlying purpose of the model is to identify the benefit of projects, to allocate responsibilities in proper

way, and to recommend tools and techniques in managing the projects in order to analyze the successes

and failures of IT project with proper identification.

Figure 7: Cranfield process model of benefit management (Source: Ward and Peppard, 2002)

The model describes six iterative processes beginning with aligning business and IT objective together by

analyzing probable benefits that technology can bring. It aims to help constant checking of gaps between

expected and delivered benefits at every stage and also helps to take required changes in action plan if

needed. Users’ and other stakeholders’ perspective are also taken into consideration in stage four enabling

organization to continue with further change management process.

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3.3.2: Active benefit realization (ABR) approach

The ABR model for IT project designed by Remenyi & Sherwood-Smith (1998) aims to increase business

benefit delivery from information system as well as reduce waste & ‘time to market’ of appropriate

information systems to support the business.

Validation
5 6 7
Decision to 2 3 4
1 2 2 2
proceed 2 2 2
Review Development
Production System Evidence
Initialization Agreement & Of updated
of development collection
of Project to proceed Learning Pictures
Picture

• Formative Review Future/


Development of: • Variance Maintenance
• Determination of Project
Business opportunity BP • Determine trade-off
.Validated opportunity FP
• Determination of PP
Primary stakeholder Involving
.Opportunity/solution primary
Lexicon Stakeholders
Abandon
Project

Key

Flow of process from activity, to activity

involves Determination of
Involves ie. Installation
business opportunity
phase
etc.

Figure 8: Active benefit realization approach (Source: Remenyi & Sherwood-Smith, 2002)

The ABR program includes seven major activities enabling organization to record all activities

throughout the lifecycle of a project starting from the very beginning of the project implementation and to

make informed decision about the implementation of the project by making a correlation between

delivery capacity and required action for corporate strategy with a solid consideration of financial impact

on organization. It helps organization to check the project performance continually so that the project can

be terminated before reaching to worst situation. This model also emphasizes active participation of

stakeholders in evaluation process and enables them to realize business benefits.

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3.3.3: A conceptual model for evaluation of IT project:

A group of experienced academics in the IT and management arena developed and successfully

implemented this model in a European multinational organization. They claims that this model considers

strategic direction of organization, intangible benefits and non-finance performance measures that was the

major lacking of existing models of IT project evaluation (Gunasekaran et al., 2001).

Figure 9: Conceptual model for evaluation of IT project (Source: Gunasekaran et al., 2001)

Hence this model was developed to address such perceived limitations. It comprises five dimensions of

evaluation; utilizing strategic, tactical, operational, financial and intangible investment appraisal

techniques. The prime difference with other models is that it suggests specific benefit measure enables

organization to confirm (or refute) benefit delivery.

3.3.4: Project Appraisal Method (PAM)

PAM is another set of tools having three main dimensions of evaluation of IT investment project,

(Serafeimidis & Smithson, 2003) as follows:

• Financial cost benefit analysis

• Risk assessment and risk management

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• Strategic and intangible benefit appraisal

Three main outcomes of this approach are a financial model of the cost & benefit, a risk management plan

and a benefit profile incorporated into an IT project development lifecycle. The financial model enables

and encourages sensitivity analysis of investment project by calculating measures such as the project

payback period, the internal rate of return, and the net present value. The risk management plan helps to

estimate the probability of risk and to calculate their potential impact by identifying main risk based on

the feedback of users or stakeholders. The benefit delivery plan highlights the intangible benefits

compared to main organizational objective after assessing the initial business process.

3.3.5: The DMR model for benefit realization

It’s a product of DMR consulting group designed to address the issues of IT benefit realization and

benefit management suggesting that business process may have to undergo a series of iterative changes

and actions. This is needed because unless organizations are not putting best efforts to retrieve expected

business benefits the greater value from IT investment project cannot be obtained (Thorp, 1999, 2001).

The challenge goes to IT manager combining on time action and budget requirement.

Figure 10: DMR’s benefit realization approach (source: Thorp, 2001)

19
According to Thorp (2001), the main aspects of DMR’s BR approach are as follows:

• In order to link all IT projects with business objectives it is necessary to group all projects under

one umbrella called business program management.

• While grouping deferent projects, probable series of changes in process should be managed

proactively rather than considered as an implementation problem.

• It focuses on managing individual project in single portfolio to ensure its contribution to strategic

goal.

• Further, a full cycle business governance approach is emphasized to manage each project,

program and portfolio in order to obtain business benefit from each one of these.

The result sought: to achieve the ultimate benefits it is necessary to sort out
intermediate outcomes in the chain
Outcomes

One or more results contributed by actions


Initiatives

The roles played by elements in the Result Chain, either initiatives or


Contributions intermediate outcomes, in contributing to other initiatives or outcomes.

Assumption for perceived outcomes or initiatives. Need to consider risks


that may act as hindrances.
Assumptio
ns
Figure 11: The core element of the result chain (source: Thorp, 1999, 2001)

20
The most challenging part of the implementation of DMR approach is to implement a full fledge business

program. A business program is different from technology project. It’s a combination of various projects

and involves people in each project. So it is necessary to establish a relationship between each project and

people who are involved. Cultivating a different mindset of taking technology change as an organizational

change is another challenge. To address this issue DMR developed a result chain by utilizing four main

elements- outcomes, initiatives, contributions and assumptions (figure 11). A business program developed

by using these core elements provides a guideline for manager to locate benefits and encourages them to

proactively think in different ways of obtaining benefits and deciding whether they are doing right thing

in right way.

3.4 Utility with BR model

After reviewing the literature in respective arena, it is clear that BR is considered as an iterative process

that requires clear understanding of business needs, identifying both tangible and intangible needs,

selecting appropriate technology, managing execution and exploiting innovative business opportunity that

technology can bring. The BR techniques logically link the process associated with benefit identification,

prioritization and so on to better optimize the outcomes from a particular IT project by ensuring benefit

delivery.

The models discussed in previous section are the same fundamental concept. There are some differences

in details however. The most common element in all models is the ongoing need to take stakeholders’

perception into consideration and making the BR a part of organizational strategy. The integrated BR

strategy can create a link between business and IT. As a result the collaboration between IT and business

management can be improved through active BR process.

3.5 Issues related with the adoption of BR model

Even though formal benefit realization techniques are available however organizations are not happy with

the efficiency & effectiveness of existing models and organizations in UK & US expressed a mixture

21
perspective about BR process such as complicated to implement, confirmed by few international studies

(Gunasekaran et. al., 2001; Lin & pervan, 2003). Some organizations also think that BR was simply waste

of time and resources.

The situation regarding BR in Japan is not so popular like US & UK. This is relatively a recent

phenomenon in Japan. Though there is nothing called “Benefit Realization of IT” except few cases

however we can see some practice closely related to BR like measuring IT effectiveness, identifying

project, competitive advantage etc. The important job is to create awareness about BR approach in Japan

since BR approach can combine several functions into a single entity rather than spreading it across a

range of activities.

Few studies highlighted some factors related with the adoption of BR strategies in organization and most

of them are related with organizations’ varied perception towards using particular model (Thorp, 2001;

Lin & Pervan, 2003):

• Management attitude towards IT, considering IT as technical issue

• Failure to understand business benefits from IT project

• Lack of benefit measurement and business benefit ownership

• Organizations’ resistance to change

22
Chapter 4: Research Methodology
A full context of the study has provided in the previous chapters highlighting the relevance and the

importance of BR from holistic view point but it is relatively a new phenomenon in Japan. The ultimate

objective of this study is to analyze the Japanese organizations’ perspective regarding Benefit Realization

strategy and to create awareness among them by showing the relative advantage of Benefit Realization

being a part of organizations’ overall strategy.

This study previously discussed different factors having significant influence on the adoption of BR

model worldwide. Among them particularly awareness, use and effectiveness seems to be the key factors

in Japan. Therefore this study focuses on analyzing the impact of these three factors from IT and business

managers’ perspective.

The research paradigm chosen for this study is explanatory and descriptive. Understanding the present

situation regarding Benefit Realization approach in Japan and analyzing their perspectives from general

viewpoint is the ultimate objective. Since not many companies in Japan are using BR strategy so it

becomes difficult to analyze its effectiveness and also their perspective. Therefore, supporting documents

have been collected from company websites, articles and different blog posts. As for the pilot survey, e-

mail has been sent to some selective organizations but it suffered from low response rate and unclear

thought about BR strategy. So this study attempted to fulfill research objective depending on different

publications and information available in company websites.

It is observed that a significant portion of employment in Japan has been provided by SME sector. This

portion is also as important as large organization. Since Japan is technologically advanced country, most

of the company has somewhat technology orientation. But surprisingly still they perceive IT as a

technology issue. Most of the case SME does not make the effective use of IT due to inappropriate plan

and lack of knowledge of what IT can do in terms of deriving business benefits. They usually fear of

losing market share and wasting money to integrate IT and business for long term benefits. It is also

23
observed that usually project failure rate in SME sector is higher than the large organizations just because

of inadequate knowledge of IT project management keeping align with business objective. Therefore this

study also targets to build awareness among SME along with large organizations regardless the industry.

Different conceptual models have been discussed in previous chapter after reviewing extant literature.

Later on it also has been discussed what are the main hindrances of adoption of BR models that started

with organizations’ attitude towards implementing BR model. In order to analyze these issues this study

tries to draw an overall pictures regarding BR and current practices that are given below based on which

the finding of this study has been discussed.

1. IT �Business relationship 2. Current IT management


IT project selection Issues related with IT
Determine role to IT Positive, negative impact
Contribution of IT to business value Role of IT head

3. Business value
Crucial factor with current
Business
practice
Benefit from
Business benefit of IT
IT

4. BRM
5. Recommendation for BR
Awareness, usages and
Issues related with BR
effectiveness
Suggestion to use BR
Use of BR models

Figure 12: Current IT practice, a concise framework

As mentioned previously the objective of this study is to understand and analyze the current business

practices and their perspective towards BR strategy. So the target population (figure 13) has been chosen

among organizations that are using IT in their business regardless the industry. It was not so easy to find

secondary information however this study tries to focus on the following industry sectors:

24
Industry sector No of organizations
IT, Business 3
Automotive and manufacturing 2
Finance, Banking 3
Communication and Media 2
Total 10

Figure 13: Chosen industry sector

25
Chapter 5: Findings and Analysis
As I discussed before the main objective of this survey is to analyze the factor that influence the adoption

of Benefit Realization models in Japan after assessing the current practices and perspectives regardless

the industry. To meet the study objective this chapter discussed IT managers’ and business/finance

managers’ view on their current practice and BR awareness & interest in obtaining business benefits from

IT project.

In Japan most organizations are seeking best uses of their IT investment. In line with this trend a long

back only Fujitsu and IIB bank implemented BR strategy in their overall business practice contributing

significant improve of their business performance as well as derived business value. They considered

large scale IT investment as a capital investment and implemented BR model in their practice in order to

convert all concepts into cash. It is already proved that BR takes an organization far beyond from

traditional investment cycle that includes;

• Business case development

• Project, program and portfolio management

• Change management

• Investment decision making

• Accountability

• And result tracking

The benefit management approach replaces the traditional cycle and gives a bigger perspective

throughout the result chain. To implement this approach they altered four key areas and adopted a new

approach;

• Business cases for investment programs

26
• Investment program management

• Modeling techniques for the Benefits Realization process

• Measurement systems and accountabilities

Though they have a long success history however this kind of practice still is not common in Japan. The

interest for BR is just growing for the low success rate of deriving overall business benefits from IT

investment project. Most of the case they consider IT from technical viewpoint and evaluate IT

investment project from traditional approach like ROI, cost-benefit analysis etc. rather than counting

overall business value.

5.1 IT mangers’ approach towards BR strategy:

Generally, IT managers think that IT investment is a strategic decision for the organization and it has a

significant role in the organization. But unfortunately justifications of the IT investment proposal are

always being done by the business manager. Business management is also doing the reviewing of the IT

project. In most case, IT manager works as an implementer of an already taken decision. Business

management consider IT project from the standpoint of cash return rather than considering its’ overall

business value. They implement it to improve the process efficiency and to satisfy information needs of

the organization.

On the other hand, IT mangers think that the derived perception need to change and it should be

considered as strategic decision & integral part of Business Process Re-engineering. Therefore, it is

important to adopt a constructive approach to determine the business value from IT investment project.

Also management process need to link up with business value to IT. So it’s all about the perception of

organization. Therefore changes require to current thinking process of the organization towards

measuring IT project.

27
5.2 Business mangers’ approach towards BR strategy:

Generally business manager evaluate and review the IT investment project. They usually think that IT

takes a big portion of organizational budget. So it has to produce quick cash return. Though they think

that it has a significant contribution to improve the business process however, it needs to be justified from

immediate cash return rather than counting overall impact on business value. So the main bottleneck of

implanting BR model belongs to the attitude towards using it. Integrating IT investment appraisal &

justification with overall business value measurement is often considered as wastage of time & energy. IT

is just for process improvement and to satisfy information needs of the organization. It is also noticed that

some of their current practices is also more or less similar with BR model but in a small scale.

With the discussion of both viewpoints, it seems that there is a need to link up current business practice

with BR approach. The next chapter discussed the need and process of linking current practice with BR

approach.

28
Chapter 6: Linking current practices with BR approach

In 4th chapter, this study used a framework to analyze the current practice of organization and what need

to be done in order to gain maximum business value from IT project (Figure - 12). This study also

discussed about different BR models and perceptions regarding adoption of BR model.

Based on the discussion it is clear that the key factor for the adoption of BRM in Japan are awareness,

effectiveness and use. Organizations are not yet fully aware about the potential benefits of using BRM. It

is not like that the organization has given lower status to BRM than other traditional approach, they are

simply unaware. IT not only improves operational efficiency but also bring business value to

organization. The important factor is connecting IT with business from holistic viewpoint. It is just like

value creation chain throughout the entire organization. Recognizing the contribution of IT in all areas is

necessary in order to change their attitude towards BRM. Since the awareness level is low, ample

opportunities are waiting in the market depending on awareness creation. To derive full business value,

organizations’ need to perform the following task:

Selection of
IT project

IT innovation Business value

Evaluation
based on
derived Monitoring
Effort benefits
benefits

Business Goal

Figure 14: Tasks need to accomplish in order to gain benefit from IT project

But before going to implementation stage every organization needs to improve their learning about other

metrics that can ensure business delivery. If organizations’ start learning about BR models they can

29
realize their effectiveness and side by side it will increase awareness followed by use. The main theme

can be drawn in the following diagram:

Awareness

Knowledge Knowledge
increase increase

Increase Effectivenes
Use
s

Figure 15: Issues of BR and its relation

6.1 BR vs. Strategy Map

BR models have already been discussed elaborately in chapter 3. In essence, the main purpose of BR

strategy is to create business value from IT investment. To gain business value, BR should be in the par of

organizations’ overall strategy. Given the focus on BR models, organization needs a path to go for BR

practice. Strategy map can be a process to create awareness for BR strategy. It describes how organization

can build strategic themes based on growth and productivity (Kenneth W. Witt). It creates a way for

organization to describe and communicate strategies. It represents the visual picture of the whole

organization that represents overall organization concisely. The fundamental of a strategy map includes

six iterative processes that are determining objective, determining dominant value proposition, key

financial strategies, key customer related strategies, key internal business process strategies, and key

learning & growth strategies. It mainly converts intangible assets into tangible outcomes.

30
Figure 16: A Strategy Map (source: Robert S. Kaplan and David P. Norton)

Strategy map gives a clear path to derive value and BR is the execution of value deriving process. Given

this comparison, it is clear that strategy map creates an avenue for BR strategy to connect and derive

maximum business value.

31
Chapter 7: Conclusion and Future directions
7.1 Conclusion and Recommendation:

The ultimate objective of this study was to identify key factors influencing on the adoption of BR strategy

in Japan. To achieve the objective this study came across the evaluation of current practice, their

awareness level and perception. From the whole discussion and analysis, it is apparent that the approaches

generally used in Japan are inapt. They failed to quantify business delivery form IT investment often

resulting to project failure. It is also noticeable that most of the organization in Japan are using IT and

spending huge for IT project but still lacking from formalized approach. They still consider IT as a tool to

improve process efficiency. It is also observed that most of the organization does not use any systematic

approach to increase perceived benefits. But all those factors are indirectly related to gaining business

benefit. Here BR strategy is a solution for aligning IT and business strategy effectively. But despite of

low awareness level regarding BR approach most of the organization in Japan depends on traditional

approach that is not enough to derive whole business value. Even though some of their techniques are

similar with BR model such as periodic meeting, feedback, and implementation review however it needs

to be fully integrated from strategic viewpoint.

Considering the current situation it is recommended for the organization to use an organized approach

like:

• Use of investment appraisal techniques prior to IT investment

• Use of benefit delivery plan and track benefits periodically

• Regular use of in-house model

• Build awareness regarding BR approach

It is also observed that organizations are seeking a formalized approach for IT investment appraisal. Here

any of BR models can be the solution of deriving full business value from IT investment. But awareness

32
level inside the organization is the bottleneck of implementing BR strategy. So it becomes evident to

increase awareness. Attending seminar, talking courses can be the solution for them to increase

awareness regarding BR approach because they need to understand clear position of IT and business

strategy in an organizational framework, and which factors need to consider to integrate those two

strategies. So in light of discussion of BR models, awareness level, and perceptions, this study

recommend organizations to use the following framework that will help them implementing a full fledge

BR model:

Understanding and selecting


appropriate technology

External environment
Business + technology

Business + Business Strategy


technology Internal Business environment
IT strategy BR strategy

Should be an integral part of


business strategy Collaboration of Business
Need deeper understanding of and IT for business benefit
external environment

Figure 17: BR strategy and positioning

33
7.2 Future research direction:

The current study can be considered as the baseline research for the adoption of BR model. It identified

several avenues for future in-depth analysis.

First, this study can be extended with extensive survey with different organizations by interviewing of IT

as well business staffs.

Second, it can be done from different category of organization like large, SME, private, international etc.

Finally, developing hypothesis and conducting research can be another direction. This research can be

used as the basis for future.

34
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