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Look Closer,Look Further:How to Build a Better Business Case for
Improving Information Capabilities
A report prepared by CFO Research Services in collaboration with Deloitte Touche Tohmatsu
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Look Closer,Look Further:How to Build a Better Business Case for
Improving Information Capabilities
A report prepared by CFO Research Services in collaboration with Deloitte Touche Tohmatsu
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OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
Look Closer, Look Further: How to Build a Better Business Case for Improving Information Capabilities is published by
CFO Publishing Corp., 253 Summer Street, Boston, MA 02210. Please direct inquiries to Kate Britt at 617-345-9700, ext. 264
or [email protected]. At CFO Research Services, Sam Knox and Jane Coulter directed the research and edited
the report. Randy Myers conducted the interviews and drafted the report.
CFO Research Services is the sponsored research group within CFO Publishing Corporation, which produces
CFO magazine in the United States, Europe, Asia, and China. CFO Publishing is part of The Economist Group.
October 2007
Copyright © 2007 CFO Publishing Corp., which is solely responsible for its content. All rights reserved. No part of this report
may be reproduced, stored in a retrieval system, or transmitted in any form, by any means, without written permission.
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ContentsAbout this Report 2
Introduction: Think Broadly 3About Information Value
I. An Uneven Grasp of a Source 5of Fundamental Value
II. Why Now?—Regulation, 10Interconnection, and Higher Performance Expectations
III. Business Cases Often Focus 13on What’s Readily Apparent
IV. Think More Broadly, Achieve 17More Effective Information to Manage the Business
V. Conclusion 22
Sponsor’s Perspective 24
1
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About this ReportIn 2006, CFO Research Services (a unit of CFO Publishing
Corp.), in collaboration with Deloitte Touche Tohmatsu
(Deloitte), launched a research program to examine man-
agement information and the role that finance and informa-
tion technology teams play in determining when, where, and
how to improve information capabilities. Through a survey
and interview program, this study explores executives’ views
on the business case for improving information quality.
This report presents the findings of our survey of 443 senior
finance and information technology executives and our in-depth
interview program with executives at the following companies:
• Aleris International, Inc.
• Baylor College of Medicine
• BP p.l.c.
• Eli Lilly and Company
• The Genlyte Group Incorporated
• L-3 Services Group
• Maritz
• Medica Health Plans
• Medtronic, Inc.
• Oldcastle Architectural, Inc.
• SigmaKalon Group
• Visa U.S.A. Inc.
• Visiting Nurse Service of New York
In addition, CFO Research spoke with many executives who
asked not to be mentioned by name in this report.
Deloitte and CFO Research Services developed the hypotheses
for this research jointly, and senior professionals from both firms
collaborated on defining the research program, analyzing the
results, and preparing this report. Deloitte funded the research
and the publication of our findings, and we would like to
acknowledge several Deloitte professionals—Lee Dittmar, Jane
Griffin, Randi Caplan, Alessandra De Mari, Cheryl Strackeljahn,
and Elicia Verderber—for their contributions and support. (As
used in this report, “Deloitte” refers to Deloitte member firms
and their respective subsidiaries and affiliates worldwide.)
At CFO Research Services, Sam Knox and Jane Coulter
directed the research and edited the report. Randy Myers
conducted the interviews and drafted the report. CFO
Research Services would like to thank all of the senior
finance executives who participated in this study.
> Respondent Demographics
CFO Research Services surveyed 443 senior finance and
information technology executives to prepare this report.
Survey respondents hold senior finance or IT positions with
the following titles:
Finance:
• CFO 15%
• Controller 11%
• Director of finance 11%
• VP of finance 10%
• EVP or SVP of finance 3%
• Other (including CEO, president, or managing director) 20%
IT:
• Director of IT 15%
• VP of IT 9%
• Chief information officer 7%
Respondents’ annual company revenues are as follows:
• Less than $500 million 7%
• $500 million to $1 billion 19%
• $1 billion to $5 billion 29%
• $5 billion to $10 billion 14%
• $10 billion to $20 billion 12%
• More than $20 billion 21%
Respondents represent a broad cross-section of industries
including:
• Financial services/Real estate/Insurance 26%
• Auto/Industrial/Manufacturing 15%
• Health care 7%
• Wholesale/Retail trade 7%
• Telecommunications 6%
• Business/Professional services 5%
• Food/Beverages/Consumer packaged goods 5%
• Hardware/Software/Networking 4%
• Media/Entertainment/Travel/Leisure 4%
• Energy/Utilities 4%
• Chemicals 3%
• Pharmaceuticals/Biotechnology 2%
• Transportation/Warehousing 1%
• Other 10%
Respondents are based in a variety of geographical regions:
• North America 77%
• Continental Europe 12%
• United Kingdom 5%
• Asia 5%
• Pacific Rim 1%
Note: Percentages may not total 100 percent, due to rounding.
2 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
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© 2007 CFO PUBLISHING CORP. OCTOBER 2007
How to Build a Better Business Case for Improving Information Capabilities 3
Introduction: Think Broadly About Information Value“As a general rule, the most successful man in life is the man who
has the best information”—so wrote Benjamin Disraeli, the
former British prime minister, in 1880. More than 125 years later,
his view is confirmed in this research program among senior
finance and IT executives at large companies around the world.
Too many companies lack the management information they
need to make business decisions confidently—that was the
main finding in 2005’s IQ Matters: Senior Finance and IT Executives Seek to Boost Information Quality. This report brings
a new and more encouraging message to CFOs and CIOs:
It doesn’t have to be that way. While companies continue
to struggle to gather and analyze the information their
managers need to run the business effectively, executives
who have thought especially broadly about the business
rationale for and impact on management information
report consistently better results and higher satisfaction than
do their less analytical, more tactically oriented peers.
Information management—which we define herein as the
processes, systems, and personnel responsible for collecting,
aggregating, publishing, and analyzing information on
business activities—isn’t a problem of technology limita-
tions. The technologies that companies need to collect
and synthesize data, transform that data into valuable
information, and make that information readily available
clearly exist. It would seem, then, that companies have the
capability to put information at managers’ fingertips.
But the massive investments in IT systems in recent years
haven’t realized their potential, and business managers often
seem to have firmly set aside the technology tools that finance
and IT have built for them. CFO magazine recently reported
that at 57 percent of companies, none of respondents’ non-
financial managers “personally key in their own budgets,” and
in the same survey, a solid majority of respondents said less
than 20 percent of the non-finance users of their budgeting
and planning systems had logged in during the last twelve
months. So much for simply empowering users and putting
information at managers’ fingertips.
What companies are missing, this research program confirms,
is a sound, circumspect, broadly defined business case for
investment in management information. It’s not a matter of
simply investing in IT for finance and business users. Rather, we
find that satisfaction with management information is linked
closely to how companies make the investment decisions that
affect information management and the relationships in place
between IT, finance, and line-of-business managers.
Now, in the second half of 2007, the stakes for high-quality
information management could hardly be higher. Large
companies around the world are buffeted by investors’
greater demand for sustained, predictable high performance
from their increasingly complex operations. Sarbanes-Oxley
compliance is absorbing less management time and attention
today than it has in recent years, but broad regulatory scruti-
ny remains a sustained concern among companies and their
management teams.
While external forces such as investor and regulatory require-
ments weigh heavily on respondents, finance and IT execu-
tives’ core role as “internal partners” to business management
remains at the forefront of their professional activities and
investment priorities. Supporting decisions; managing risk;
and planning, forecasting, and tracking performance—these
and other high-value finance activities remain at the heart of
management teams’ central missions. As stewards of man-
agement information and the systems used to assemble
and analyze it, these executive teams succeed (or fail)
according to the strength and persuasiveness of the busi-
ness case for their information-management investments.
Satisfaction with managementinformation is linked closely to how
companies make the investment decisions
that affect information management and
the relationships in place between IT,
finance, and line-of-business managers.
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While information management has come to play a greater
role in generating both value and risk, executives report that
their scrutiny of information-management investments
often remains focused on what is most readily apparent—
for example, near-term benefits and hard-dollar returns.
And they often overlook investments’ impact on perform-
ance monitoring, business planning and forecasting, infor-
mation quality, and risk management. In other words, there
is a tendency to focus on cost-cutting at the expense of value
creation.
Analysis of survey responses, however, offers insight into
how a broader view of information investments yields
greater satisfaction, effectiveness, and understanding of
the true cost of management information. To examine the
issue of the breadth of business cases, we divided respon-
dents into two segments—those who usually consider five
or more (out of nine) dimensions when making information-
management-related investments and their less analytical
peers, who consider four or fewer. (See sidebar, page 17.)
The results of this analysis are persuasive. Respondents that
report examining five or more factors when making invest-
ment decisions are more effective and more confident in
their ability to obtain and use performance and risk infor-
mation than their less circumspect peers. In particular:
• Respondents reporting a broad business case are more
effective at gathering information for financial reporting,
monitoring and measuring performance, complying with
regulation, and managing risk, among other activities.
• They are nearly twice as likely (60 percent versus 32
percent) to say they “consistently produce the desired
quality of information for making business decisions,”
and are much less likely to struggle to develop high-
quality information for decision making.
• They have a better understanding of the true cost of
management information and are less likely to waste
time on information-management activities that yield
little value such as collecting irrelevant data and
overemphasizing periodic financial metrics at the
expense of more important measures.
Our analysis reveals that there is no single menu or
“short-list” of investment factors that all companies
should consider when making information-management
investments. This makes sense, given the diversity of
companies, business problems, company cultures, and
current systems captured in this study. Nonetheless, the
information flowing from this research program presents a
compelling case for finance and IT teams to think more
broadly about information-management investments and
their impact on the business at large.
4 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
Executives report that their
scrutiny of information-management
investments often remains focused on
what is most readily apparent—for
example, near-term benefits and
hard-dollar returns.
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© 2007 CFO PUBLISHING CORP. OCTOBER 2007
How to Build a Better Business Case for Improving Information Capabilities 5
I. An Uneven Grasp of a Source of Fundamental Value“Information is power.” “You can only manage what you
measure.” Business leaders cite these and other business
truisms regularly to encourage their peers and subordinates
to focus their attention on financial and operating data and,
more generally, on the information that flows from business
activities. By mastering this data and its meaning, compa-
nies are better able to serve external stakeholders and to
support decision making within the company.
“To compete successfully today,” says Michael Tao,
former SVP of finance at Visa U.S.A., the $1 billion credit-card
payment processor, “companies need to make decisions
faster—yet there’s less room for error than ever before.
That places a premium on having good data, placing
good analysis on top of that data so that you’re making
sense of it, and then making the resulting information
readily available, all the time.” Mr. Tao’s view on the
importance of management information as a source
of value is confirmed in this study’s survey among
large companies worldwide. Queried on the role that
management information plays in generating value,
a near-majority of the study’s 443 respondents say
that management information is a fundamental source
of value to their business, while fewer than one in ten
respondents say it contributes little to generating value.
(See Figure 1.)
Finance and IT executives affirm a central role for
management information and also report good (but
not necessarily excellent) performance in getting the
information they need to serve their internal and external
stakeholders. Executives say they are best at managing
information that is required—a near-majority report “excel-
lent” performance in their ability to report financial results,
and they report strong performance across a broad array of
mandatory information activities (see Figure 2, next page).
What’s troubling, however, is the low percentage of respon-
dents reporting excellence in the information activities that
contribute most to generating and preserving value—
strategic planning, risk management, and investment
decision making.
Behind this reporting of adequate collection of
management information may lie a difficult truth about
how management information is actually collected,
confirmed, and used at large companies. Yes, executives
say they collect data adequately, and at times their
performance in doing so is excellent. A majority of respon-
dents, however, say they struggle to produce and develop
information to make good decisions—or they often
make decisions when under-informed (see Figure 3, next
page). This struggle often manifests itself in the
workarounds and stopgap measures that companies
put in place to produce data from their current processes
and systems. These workarounds—sometimes thought
of as “human middleware”—often represent a vast and
unmeasured cost, managerial burden, and source of
information-quality problems.
Workarounds are frustrating for executives like Martin
Bott, executive director of finance for the Intercontinental
Region and Japan at $17 billion pharmaceutical giant
Eli Lilly and Company. “What I find still very disruptive
today is that I do not have simple answers at my
fingertips where I can just change some parameters
and get self-service answers, ” Mr. Bott says. “I always
have to ask somebody to run a report for me if that
particular question isn’t within the existing, standard
reports.”
> Figure 1. Management information plays a central role in
generating value at large companies worldwide.
Which of the following best describes the role that financial
and operating information and its analysis play in your company’s
generation of value?
Percentage of respondents
48%44%
9%
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Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
Simon Woolley, of BP p.l.c., the $265 billion U.K. oil com-
pany, explains why large companies often have great dif-
ficulty in implementing systems that provide both the
level of detail and aggregated information that man-
agers seek. In the 1990s, he says, “we made a major sys-
tems upgrade to get to the state where we were able to
get our [financial] results out on day three.” The difficul-
ty, says Mr. Woolley (who was a distinguished advisor to
BP when we interviewed him and has since retired), is
that “you have to do it while you keep going. You can’t
stop and say, ‘Well, let’s do nothing for a year and put
in a new system.’ You have to have people doing their day
jobs. You cannot simply stop everything and start again
from scratch because this takes your vital systems offline
for a while. You must design a stepwise transformation
that maintains full operational integrity throughout.”
Queried on the cost of management information, finance
and IT executives say they have a sound understanding
of only the most readily apparent costs of management
information. A solid majority of 60 percent or more
of respondents say they would have ready access to infor-
mation on IT spending—the parts that are codified in IT
budgets and spending with third parties—if called upon
to explain the total cost of management information to
the Board of Directors. But a solid majority also say that
when explaining the total cost of management information,
they would also seek to include the less apparent, embed-
ded costs of unauthorized IT spending and the labor cost
of non-IT staff engaged in gathering and confirming man-
agement information. Sadly, but not surprisingly, this major-
ity says it wouldn’t have ready access to such cost informa-
tion. (See Figure 4, next page.) Accordingly, they lack a com-
plete picture of the total cost of management information.
6
> Figure 2. Companies do well at mandated information management but report a shortfall for higher value activities.
How effective is your company at developing and providing business information for the following purposes?
0 20 40 60 80 100% 120
■ Poor performance■ Adequate performance■ Excellent performance
Strategic planning
Identifying, monitoring, managing,or mitigating risks
Making investment decisions
Supporting Board oversight and governance
Compliance with policies and regulations
Monitoring performance against targets, goals, and objectives
Reporting financial results
Percentage of respondents
> Figure 3. Despite massive investment, companies continue
to struggle to gather information to make good decisions.
In your opinion, which of the following statements best describes
the quality of the information your company uses when making
business decisions?
Percentage of respondents
47%41%
11%
47%: Our company struggles to produce
and develop the desired quality of
information to make good decisions
41%: Our company consistently produces and
develops the desired quality of information
when making business decisions
11%: Our company often makes decisions without
the desired quality of information
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© 2007 CFO PUBLISHING CORP. OCTOBER 2007
How to Build a Better Business Case for Improving Information Capabilities 7
> Medtronic MiniMed Replaces Assumptions with Analysis and People Power to Assert Value
Ask him which is more critical to developing high-quality management information, people or software, and George Montague
doesn’t hesitate: It’s people. Take away their commitment to producing it, or their insights on what information is important, and
no software in the world will produce the management information needed for decision making.
Mr. Montague has seen this lesson play out over the four years since he joined the finance team at Medtronic MiniMed, Inc., a
subsidiary of $12 billion Medtronic, Inc. in Northridge, California, that manufactures products for the treatment of diabetes.
When he arrived, the company already operated on a sophisticated enterprise resource planning system—the sort often touted
as an information panacea. Yet, company performance was poor. Sales growth had stalled, money was lost, bills were not
collected, and invoices were not sent. Sales forecasts were unreliable and internal controls were loose. Long the leader in its
market, the company still clung to first place but had lost market share to competitors.
Fortunately, all these problems were reversible, in part by learning to take better advantage of the ERP system that had already
been installed. “People, and their ability to use the system, were more important to our success than the system itself,” says
Mr. Montague, vice president of finance. “Their understanding of what drove the business, and of the information needed to run
the business, was critical.”
By improving the company’s understanding of information analysis, MiniMed was able to improve its sales forecasts and
practices. Approximately half of MiniMed’s revenues come from the sale of supplies to existing users of its insulin pumps. For
some time, the company had been building sales forecasts—and planning all other activities around those forecasts—on the
assumption that customers replenished their supplies every three months. Working with one of his financial analysts, Mr.
Montague examined the sales data and found that customers were actually ordering new supplies, on average, every four
months. Once that information was taken into account, the company’s forecasting became more accurate, allowing managers
to schedule customer-care personnel more appropriately and control spending more precisely, ultimately improving profitability.
Additional analysis of data led to improved forecasting for the sale of insulin pumps. “We now know with a high degree of
accuracy what percentage of our leads will ultimately convert to sales,” Mr. Montague says, “and how long it will take to
convert those leads to sales. This is allowing us to be more disciplined in our sales practices and pricing.”
Continued, next page >
> Figure 4. Companies see third-party costs, but wrestle with the true cost of management information.
If called on by the Board or executive team to explain the total cost of management information at your company,
would you seek to include the following elements in your discussion? Would you have ready access to such information?
Percentage of respondents
0 20 40 60 80 100% 120
■ Would not include incost of management info
■ Would like to include andwould have ready access
■ Would like to include, but would not have ready access
Companywide IT budget (including IT labor,overhead, benefits, etc.)
Spending with third-party researchor consulting firms
Companywide IT spending with third parties
Activity- or process-level details on IT spending
Labor cost of non-IT staff engagedin gathering and confirming
management information
Shadow spending on IT projectsoutside the IT function
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8 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
> Medtronic MiniMed Replaces Assumptions with Analysis and People Power to Assert Value (continued)
Along with improving its forecasting processes, Medtronic MiniMed collaborated with a consulting firm to improve its accounts
receivable processes, revamped its internal controls, and dramatically reconfigured the balanced scorecard it was producing to
help management with decision making. Once a six- or seven-page report, the scorecard has been pared to a single page focused
only on the key metrics that truly drive the company’s business. Among the items omitted were a full page of metrics related to
human resources, which were inappropriate for such a high-level report, and irrelevant financial metrics. “We were basically
translating the income statement into the scorecard format,” Mr. Montague says. “We scaled back to those that are directly tied
to our incentive compensation program, which includes sales growth, earnings growth, inventory performance, and receivables
performance. At the same time, we added some new metrics to track product development milestones.”
Today, Mr. Montague likens MiniMed’s forecasting process to a “well-oiled machine” and says the company’s market share
has rebounded to approximately 70 percent after having slipped to close to 50 percent. Though its management information
processes aren’t yet perfect—the company is still in the process of installing business performance management software, is
contemplating installing a new billing and collection system, and is planning to implement a project accounting module for its
ERP system next year—they have clearly improved. “We now understand what our financial commitments are and what it’s
going to take to deliver on those commitments,” Mr. Montague says. “We have a highly accurate sales forecasting model, and we
make our expense numbers. We develop products the market wants… At this point, we’re firing on all cylinders. Having the right
information was critical for getting the business on track.”
And having the right people was critical to having the right information. “It really is more of a management issue than an IT
issue,” Mr. Montague says. “The IT folks can automate anything, but you need to really think hard about what it is that you have
them work on.”
> Figure 5. Despite cost and value of management information, companies have scrutinized it less than other core
business processes.
In your opinion, how complete is your company's understanding of the total cost—including investments, head count,
third-party vendors, etc.—for the following broad activities?
Percentage of respondents
0 20 40 60 80 100%
■ Excellent understanding■ Adequate understanding ■ Poor understanding
Total cost to produce anddeliver goods and services
Total cost to market and sellproducts and services
Total cost of gathering, analyzing, andreporting information to run the business
Total cost to comply withgovernment regulations
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© 2007 CFO PUBLISHING CORP. OCTOBER 2007
How to Build a Better Business Case for Improving Information Capabilities 9
Cost management is a daunting discipline, of course, regard-
less of the class of spending—indeed, much of the finance
and accounting function is devoted to understanding,
analyzing, allocating, and ultimately managing costs
more effectively. With this in mind, we queried executives
on how well their companies grasp the cost of activities that
are fundamental for nearly any company—the cost to
produce goods and services, to market and sell them, to
comply with government mandates, and to generate
information to run the business. (See Figure 5, previous
page.) Asked to consider all costs—direct, indirect, head-
count, and so on—executives say they are best at under-
standing production and selling costs, but more than
one-third say their companies have a poor understanding
of the all-in cost to comply with regulations and generate
information required to run the business. Thus, despite both
the size of spending on management information and its
contribution to generating value, executives seemingly
haven’t given it the same scrutiny they’ve given to their
processes for offering and selling goods and services.
Respondents’ views on finance and IT’s role in developing
new offerings illuminates how information management
often doesn’t get the attention it may require as a
fundamental source of value. Posed with a hypothetical
question on a new product line, service offering, or growth
initiative, a majority of respondents say their business
unit management usually drives decision making about
how to monitor performance, while a near majority say
the finance function usually plays a “strong role” in
defining performance monitors (see Figure 6). However,
less than one-third of respondents say that performance
metrics are usually defined early in the development
cycle, and even fewer say their IT functions participate in
defining how companies will monitor performance and
how such information will be rendered by current or new
systems. In other words, many companies may be placing
critical growth initiatives at risk when they fail to take
important IT considerations into account early in the
development process.
> Figure 6. When developing offerings to customers, say executives, the owners and providers of information participate
later in the development cycle.
Imagine your company is preparing to launch a new product line, service offering, or other growth initiative. How likely is
your management team to perform the following activities or take on the following roles?
Percentage of respondents
0 20 40 60 80 100%
■ Rarely■ Sometimes■ Usually
The IT function participates in defining information
needs for performance monitoring and
how the information will be developed and provided
Information needs for monitoring
performance are defined early
in the product planning process
Finance function plays a strong role
in defining information required to monitor performance
Business unit management drives decision
making regarding information for
performance monitoring
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II. Why Now?—Regulation, Interconnection,and Higher PerformanceExpectationsInformation about business activities has been at the heart
of scientific management for generations. Frederick W.
Taylor, the so-called “father of scientific management,”
insisted on standardization, oversight, and measurement
of business activities as the core of high-performance
industrial processes, and his thinking has been with us in
one form or another for more than a century. Indeed, much
of companies’ use of automation and managerial oversight
traces its roots to Taylor’s work in the nineteenth century.
Recent research from CFO Research Services, however,
identifies improved information management as not
simply doing more work with fewer resources, more
quickly and more accurately. Rather, companies often
need to reconsider the role that management informa-
tion plays in their businesses in light of changes and
growth in both business complexity and external
oversight. We believe that a combination of regulatory
oversight, complexity tied to a broad array of company-
specific problems, and continued pressure from active
investors and capital markets have brought companies
to a new state—one in which information management
is more critical to a company’s success than ever before.
Government oversight of company activity bears heavily
on finance and IT organizations. The Sarbanes-Oxley
Act certainly disrupted finance and IT groups in recent
years—sometimes for better, sometimes for worse. But the
regulatory burden on companies extends beyond this
highly visible regulatory regimen. According to a CFO
Research Services survey in November 2005, 70 percent of
finance executives reported complying with five or more
broad types of regulation, as shown in Figure 7.
10 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
> Figure 7. Finance executives say their compliance mandate includes far more than just Sarbanes-Oxley.
0
20
40
60
80
100%
One or more
Two or more
Three or more
Four or more
Five or more
Six or more
Seven or more
Eight or more
Nine or more
Ten or more
Eleven or more
Twelve
Cumulative percentage of companies subject to any combination of:
■ Sarbanes-Oxley Act ■ Import-export regulations ■ HIPAA ■ Federal and state privacy regulations ■ Basel II ■ Environmental regulations ■ International accounting standards (IAS 32/39) ■ FDA regulations ■ U.S.A. Patriot Act ■ Labor regulations ■ ISO standards ■ Industry-specific regulations
(Source: CFO Research Services survey of 185 senior finance executives, November 2005.)
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© 2007 CFO PUBLISHING CORP. OCTOBER 2007
How to Build a Better Business Case for Improving Information Capabilities 11
The regulatory mandate on large companies is a cumula-
tive burden—that is, no single regulatory regimen causes
all companies to endure disruption and reallocate resources
to overcome it. Rather, it is the cumulative effort to gather,
verify, and report financial and operating information—and
to alter a company’s processes for doing so quickly—that
causes finance and IT organizations to devote so much time
and attention to regulation.
The root cause of poor management information often
traces back to management’s failing to demand, and make
use of, the highest quality information, say executives
interviewed for this study. “We don’t put our best
resources into that area,” concedes the CFO of one Mid-
western company. Absent a commitment to management
information as a core business process, many companies
operate with neither a cohesive information strategy nor
a single executive responsible for its implementation. The
well-documented result is that many limp along with a
grab bag of unrelated systems and procedures incapable
of providing the insights management needs to make
informed decisions.
“I think a lot of computer programs are put together as a
knee-jerk reaction to a problem, rather than as a holistic
solution to the company’s needs,” says the compliance
director of a Fortune 200 insurance group who asked not to
be mentioned by name. Adds Norbert Smith, finance
director with SigmaKalon Group, a $500 million paint man-
ufacturer in the Netherlands, “You’ll even see different parts
of a single company using the same system differently. The
system won’t have been rolled out by one global project
team that says, ‘This is how you have to work now.’ Then,
when people from one country want to compare figures to
another country, you have a problem.”
In our 2005 study of information quality (IQ), respondents
identified disparate processes and systems as the source
of IQ problems. Many companies found themselves
wrestling with multiple information systems and, in some
cases, decades of process complexity and inertia. Asked
to identify the drivers of poor IQ, nearly half the survey
respondents—45 percent—cited disparate, nonintegrated
IT systems and the variability of business processes as
acute problems that constrain management’s ability to
work effectively and focus on high-value activities.
This complexity is often a natural outgrowth of companies’
focus on growth—organically or through acquisition—and
cost control in the near term, both of which are essential to
deliver shareholder value. But the long-term effect of this
focus, without a parallel effort to improve management
information, may well lead to the state we’ve found in this
research program: Companies rely on information as a fun-
damental source of value, but they lack the information they
need to make good decisions. They struggle to get what
they need from their systems using shadow spending and
human, often labor-intensive, workarounds. They have a
poor understanding of what they’re really spending on
gathering and managing the information they need to run
the business, and they risk making decisions based on
unreliable information.
On the surface, this somewhat grim state of management
information at large companies stems from the diverse
systems that companies have in place to manage their
flow and analysis of data. But management teams are not
really victims of circumstances beyond their control.
That is, they are responsible for the investments they
do and don’t make—and for how they make them—
in their efforts to improve management information
and serve internal and external stakeholders.
The root cause of poor management
information often traces back to manage-
ment’s failing to demand, and make use of,
the highest quality information, say
executives interviewed for this study.
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> Compliance and Competition Spur Visa U.S.A. Management to Make Information a Top Priority
Credit-card payment processor Visa U.S.A. Inc. has always been a technology-driven company. Each year, its computer systems
successfully process more than $1.1 trillion in Visa card transactions. Still, the company’s vaunted technological prowess didn’t
always translate into management information prowess.
“Internal information systems were an area of under-investment for us for a while,” concedes Michael Tao, who was Foster City,
California-based Visa’s SVP of finance when we interviewed him. “Like many other companies, we tended to do everything in
spreadsheets. It was difficult to keep track of the different versions of those spreadsheets and that made it difficult to keep track
of data. When a request for information came in from a senior executive, or if there was some sort of rush to prepare something
for the Board of Directors, we would have to pull in a bunch of people to try to understand what we had done before and what we
needed to do now to produce the desired information. We really needed to find a way to produce that single version of the truth,
not just for what goes into our financial reports but also for the other aspects of running our business. And we had to get away
from struggling with all the reconciliation activities we typically went through.”
The company began to do just that more than a year ago by installing a business performance management software system.
“The goal was to really leapfrog a lot of the evolutionary steps that some other companies may have gone through and catch up
quickly,” Mr. Tao says. “We put in a data architecture that allows us to get to information very quickly, store one version of our key
data, and give people faster access to the information they need. It also allows us to adopt a more forward-looking planning
process.”
One of the keys to making all this happen, Mr. Tao says, was a directive from Visa U.S.A.’s then-CFO R. Neil Williams that this had
become the organization’s top objective for that year. “There was a small group of us who believed very strongly that this was
essential to our future,” Mr. Tao recalls. “In the back of our minds we knew we were at risk because we couldn’t see some things
that were happening in the business; we didn’t have the information available. That was a great concern to our CFO and several
of the people who report to him. We also knew we needed to shore up our budgeting, forecasting, and financial planning
capabilities, and get the right level of internal controls in place, in order to comply with the Sarbanes-Oxley Act. And we knew
we needed to do all this quickly.”
To overcome internal resistance to the new system—Mr. Tao says there was a fairly high degree of institutional inertia working
against change—the company lobbied opinion leaders and sought to give key people a role in helping to design how the system
would be implemented.
Today, that work is paying dividends. Where Visa U.S.A. once produced annual forecasts, for example, it now produces rolling
forecasts on a quarterly basis that look 18 months into the future. And despite having to assist in the forecasting process four
times as often, the business units are pleased because, thanks to the BPM system, they’re actually expending less time and effort
on the process. Next up, the finance team is looking to improve its project accounting capabilities so that business managers can
track results more closely and, ultimately, make more informed and more timely decisions about how they use
their resources.
Mr. Tao describes the work Visa U.S.A. has been doing as a step toward making management information a fundamental source of
business value, as well as a foundation for the company to manage against difficult conditions. “Management information can be a
genuine strategic advantage,” he says. “To compete successfully today, companies need to make decisions faster—yet there’s less
room for error than ever before. That places a premium on having good data, placing good analysis on top of that data so that you’re
making sense of it, and then making the resulting information readily available, all the time. You never know when a decision will
hinge on a certain piece of information.”
12 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
Management information plays a central role in value—but our survey
results show that many companies have yet to make a comprehensive business case for
better information management.
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© 2007 CFO PUBLISHING CORP. OCTOBER 2007
How to Build a Better Business Case for Improving Information Capabilities 13
III. Business Cases OftenFocus on What’s ReadilyApparent Management information plays a central role in value—
but our survey results show that many companies have
yet to make a comprehensive business case for better
information management. Companies often focus on
what they can see, rather than on the dimensions of
investments that will yield better information, lower risk,
and more manageable costs.
A broad view of the business case for better information
management takes into account the business rationale for
management information investments—that is, the busi-
ness advantages for making such investments—as well as
the economic rationale for investing in information manage-
ment, which is often cast in terms of cost/benefit analysis.
The broad business case for information management
takes into account the business impact of these
investments—not only the immediate costs and the
short-term business advantages, but also the costs and
advantages associated with these investments over
the long term, as they ripple through the business.
The survey results show, for example, that while respon-
dents have a clear view of the IT costs directly associated
with information management—that is, the costs asso-
ciated with third-party software, IT equipment, services,
maintenance, etc.—many respondents struggle to gain a
view into the true cost of information management across
the company (see Figure 8). When asked how frequently
they have considered a wide array of information-manage-
ment costs and business advantages when making infor-
mation-management investment decisions over the last
three years, respondents most often cited “impact on IT
> Figure 8. Executives report focusing on what’s visible and available when making information-management
investment decisions.
In the last three years, how frequently have you explicitly considered the following factors when evaluating investments
in better information management?
0 20 40 60 80 100% 120
■ Seldom considered explicitly■ Occasionally considered explicitly■ Frequently considered explicitly
Impact on interactions with suppliers
Early identification of risks to value
Early identification of opportunities
Impact on non-IT costs
Impact on customer acquisition/retention
Impact on quality of business information
Impact on ability to comply with policies
and regulatory requirements
Impact on customer satisfaction
Effect on employee productivity
Impact on IT costs
Percentage of respondents
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costs” as a factor they “frequently considered explicitly.”
Indeed, a solid majority—57 percent—of respondents said
they frequently considered the impact on IT costs of infor-
mation-management investments.
While the impact on IT costs is, of course, a critical
element of considering investments in information
management, IT cost is also the factor that’s easiest for
companies to assess, evaluate, and consider when
making these investment decisions. “In our business,
it’s fairly easy to get the IT component of producing
management information,” says Rick Ramos, SVP and
CFO at $1.5 billion sales and marketing services company
Maritz. “It’s more difficult when it starts to embed itself
in processes—that’s a holy grail. If the capturing and
producing of management information reaches its
highest point when it’s embedded [in processes], then
that’s where the costs actually become the most difficult,
but that’s also where information is of its greatest value.”
Respondents were far less likely to consider the impact of
non-IT costs on these decisions—only 31 percent of
respondents said they frequently considered non-IT costs
when making information-management investment
decisions. While non-IT costs are less visible in this
context than those directly associated with IT, that
shouldn’t mean they’re less important. The lack of
visibility into the non-IT costs of information manage-
ment may, in some cases, place an otherwise valuable
initiative at risk.
Companies seem to struggle just as much with evaluating
the potential benefits of IT management investments.
While 47 percent of respondents say they frequently con-
sidered the effect of information-management invest-
ments on employee productivity over the last three years,
and 43 percent of respondents say they frequently consid-
ered the impact of such investments on customer satis-
faction, only 26 percent of respondents say they frequent-
ly considered the early identification of opportunities
when weighing these investments—and fewer still say
they frequently considered the early identification of
risks to value.
These survey results, viewed as a whole, indicate that
companies have historically weighed the factors that
are easiest to identify when evaluating investments in
better information management—balancing, for example,
IT costs against potential improvements in employee
productivity and increased customer satisfaction.
Where companies have fallen short, however, is in their
identification, evaluation, and assessment of less
visible—and often more forward-looking—factors such
as the impact on customer acquisition and retention, the
early identification of business opportunities, and
the early identification of risks to value.
Similarly, many companies fail to explicitly consider the
impact on interactions with suppliers when evaluating
investments in better information management. Such was
the case for a global insurance conglomerate when it
implemented in-house operating systems to capture
information on premiums more quickly. While seeking
to improve this vital information to increase customer
retention, the company encountered external resistance,
says the company’s compliance director. “We’re now
requesting a lot more from the insurance brokers before we
accept the policies and, initially, the brokers were very, very
hesitant in actually providing us the information. We’ve
probably overcome those [barriers] now but initially, they
would actually try and shop the business around before
they came to us, of course,” he says. “On the positive side,
the system which we’ve actually put in place is no longer
just a single-company system, it’s being used by other
companies within the insurance group as well.”
14 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
“In our business, it’s fairly easy
to get the IT component of producing
management information,” says Maritz’s
SVP and CFO. “It’s more difficult when it
starts to embed itself in processes—
that’s a holy grail.”
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© 2007 CFO PUBLISHING CORP. OCTOBER 2007
How to Build a Better Business Case for Improving Information Capabilities 15
Survey responses demonstrate that the need to consider
a broader array of decision-making factors—in addition
to the core balancing of IT cost against productivity
improvement—is widely felt among finance executives
(see Figure 9). When asked which of the investment
decision-making factors their companies should have con-
sidered more fully when evaluating information-manage-
ment projects, 46 percent of respondents said their compa-
nies should have considered the early identification of
opportunities more fully (compared with only 26 percent of
respondents who said their companies frequently consid-
ered this factor when making investment decisions, in
figure 8, page 13). Similarly, 45 percent of respondents said
they believed their companies should have considered the
early identification of risks to value more carefully when eval-
uating information-management improvement projects—
while only 22 percent of respondents said they frequently
consider risks to value when making investment decisions.
Survey results also indicate that many companies are
emphasizing regulatory compliance matters at the expense
of more forward-looking factors when evaluating IT invest-
ment projects. Forty percent of respondents say their com-
panies frequently consider the impact of the project on the
company’s ability to comply with policies and regulatory
requirements—a natural outgrowth, no doubt, of a height-
ened regulatory environment and tightened governance
standards over the last several years. But only 28 percent of
respondents said they believed their companies should haveconsidered the impact of the project on the company’s
ability to comply with policies and regulatory requirements.
Companies have a firm grasp on the impact of these
projects on internal governance policies and regulatory
requirements—but survey responses indicate a strong
desire among senior finance executives to expand the
business case for information-management initiatives
beyond compliance matters.
> Figure 9. Despite all their analysis, executives wish the y’d considered many dimensions more fully when improving
information management.
In retrospect, which of these factors do you believe your company should have considered more fully when evaluating
projects to improve information management?
Percentage of respondents
0 20 40 60 80 100%
■ Considered adequately■ Should have considered more
Impact on ability to comply with
policies and regulatory requirements
Impact on interactions with suppliers
Impact on IT costs
Impact on customer acquisition /retention
Impact on customer satisfaction
Impact on quality of business information
Early identification of risks to value
Early identification of opportunities
Impact on non-IT costs
Effect on employee productivity
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Mr. Ramos, of Maritz, says that his company has reaped the
benefits of a broader business case. “We tied forecasting
systems to relational databases of our actual results,” he
says. “We’ve been able to really use our forecasting system
to go back and pull actual data, which allows us to make
better business decisions. We not only get better forecast-
ing data, we’ve been able to actually get better information
to make decisions better about our clients, about our
industries that we work in, and our particular businesses
that we have.”
When queried on a broad range of factors for making IT
investment decisions, respondents are most likely to say
their companies “certainly would consider” the IT project’s
contribution to operating cost savings (49 percent) and the
project’s contribution to revenue growth (48 percent). (See
Figure 10.) Far fewer respondents—only 35 percent—say
their companies are likely to take operating and regulatory
risks into account, and fewer still say their companies
are likely to take into account forward-looking factors
like the impact on performance monitoring, customer
retention, and the potential for improvements in
information for forecasting and business planning.
16 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
> Figure 10. Top-line and cost contributions prevail in IT investment analysis.
When making IT investment decisions, how likely is your company to explicitly consider the following factors in its decision?
Percentage of respondents
0 20 40 60 80 100% 120
■ Unlikely to consider■ Likely to consider■ Certainly would consider
Customer retention or satisfaction
Improvements in information for
forecasting and business planning
Impact on performance monitoring
The operating or regulatory risk added
or mitigated by the project
Improvements in timeliness, accuracy, or
reliability of operating information
The strategic, operating, or risk impact
of not implementing the system
Impact on financial reporting and disclosures
The project’s contribution to revenue growth
The IT project’s contribution to
operating cost savings
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© 2007 CFO PUBLISHING CORP. OCTOBER 2007
How to Build a Better Business Case for Improving Information Capabilities 17
IV. Think More Broadly,Achieve More EffectiveInformation to Manage the Business
Respondents that consider the broadest range of invest-
ment factors are more successful than their less analytical,
more narrowly focused peers at realizing the full value of
information projects in almost every context. We segment-
ed all respondents according to the number of critical fac-
tors they consider when making investment decisions
(see sidebar, “The Broad versus Narrow Business Case for
Information-Management Investments,” below). When we
compared responses from those who say their companies
certainly would consider five or more investment factors
with those who certainly would consider four or fewer
investment factors, a clear pattern emerged: Companies
that think broadly when evaluating the business case for
information investment—that is, companies that consider
the full range of costs, business advantages, and risks
across the enterprise when evaluating these investments
(as opposed to confining their view to short-term tactical
objectives)—achieve better results.
We asked respondents how effective their companies are at
developing and providing business information for a variety
of purposes. Those who said their companies consider
five or more investment factors were more likely, across the
board, to say their companies are “highly effective” at
developing each type of information than those who
consider four or fewer investment factors (see Figure 11,
next page). Companies reporting a broad business case
are, in other words, generally more effective at gathering
information for financial reporting, performance manage-
ment, regulatory compliance, and risk management.
> The Broad versus Narrow Business Case for Information-Management Investments
In an effort to reveal how business-case analysis contributes to information management, we segmented survey responses based on
executives’ approaches to decision making. We analyzed responses to the question, “When making IT investment decisions, how likely is
your company to explicitly consider the following factors in its decision?” The following answer choices were included:
• The IT project’s contribution to operating cost savings
• The operating or regulatory risk added or mitigated by the project
• The project’s contribution to revenue growth
• The strategic, operating, or risk impact of not implementing the system
• Improvements in timeliness, accuracy, or reliability of operating information
• Impact on financial reporting and disclosures
• Impact on performance monitoring
• Customer retention or satisfaction
• Improvements in information for forecasting and business planning
We divided respondents into two groups: Those who explicitly consider five or more of these factors frequently and those who explicitly
consider four or fewer. This segmentation of respondents exposes a relationship between considering many factors when making
investment decisions and the broad business cases that yield better outcomes. Our research thus strongly suggests that companies
that consider a broad array of strategic, operating, and other metrics are enabled with the high-quality management information they
need to produce the best results.
Companies that considerthe full range of costs, business advan-
tages, and risks across the enterprise
when evaluating these investments
(as opposed to confining their view
to short-term tactical objectives)
achieve better results.
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Broad thinkers are far more likely than their less analytical,
more narrowly focused peers to report a high degree of
effectiveness at developing information for historical
reporting and compliance purposes. For example, 50 per-
cent of broad thinkers say their companies are highly effec-
tive at developing information for compliance with policies
and regulations, as opposed to only 26 percent of their
counterparts who take a more narrow view. The contrast
is just as stark when respondents address more strategic,
forward-looking activities. Thirty percent of broad thinkers
say their companies are highly effective at developing
information for strategic planning, while a mere 10 percent
of their counterparts say the same. Similarly, when
respondents considered information for risk management,
36 percent of broad thinkers report that their companies
are highly effective at developing information for risk
management purposes—as opposed to only 14 percent
of their narrowly focused counterparts.
Broad thinkers are also far more likely than their narrowly
focused peers to have a positive view of the quality of
the information their companies use to make business
decisions. Respondents whose companies seek to formu-
late a broad business case for IT investment decisions
are nearly twice as likely as their narrowly focused counter-
parts to say that their companies consistently produce
and develop the desired quality of information when
making business decisions (see Figure 12, next page).
At the same time, respondents whose companies are
more narrowly focused—that is, respondents who say
their companies certainly would consider four or fewer
IT investment factors—are far more likely than their
more broadly focused peers to say that their companies
struggle to produce and develop the desired quality of
information to make good decisions.
18 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
> Figure 11. Those who develop a broad business case for information-management investments are much more likely to
report “highly effective” results.
How effective is your company at developing and providing business information for the following purposes?
“Highly Effective”
0 10 20 30 40 50 60 70 80%
■ Certainly would consider
four or fewer factors■ Certainly would consider
five or more factors
Information for strategic planning
Information for identifying, monitoring, managing, or mitigating risks
Information for making investment decisions
Information to support Board oversight and governance
Information for compliance with policies and regulations
Information for monitoring performance against targets, goals, and objectives
Information for financial reporting
Percentage of respondents saying they are “highly effective” at developing each type of information
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How to Build a Better Business Case for Improving Information Capabilities 19
> Figure 12. A broader business case tracks closely with high-quality management information, and with less difficulty in
gathering the information required to make good decisions.
In your opinion, which of the following statements best describes the quality of the information your company uses when making business decisions?
0 10 20 30 40 50 60%
■ Certainly would consider
five or more factors ■ Certainly would consider
four or fewer factors
Our company often makes decisions without
the desired quality of information
Our company consistently produces
and develops the desired quality
of information when making business decisions
Our company struggles to produce
and develop the desired quality
of information to make good decisions
Percentage of respondents
> Aleris International, Inc. Reaps Results of Thinking Broadly as a “Data-Driven Company”
By the end of 2003, both Commonwealth Industries and IMCO Recycling looked to be going nowhere fast. Aluminum-sheet producer
Commonwealth hadn’t posted a profit since 2000, and while aluminum-recycler IMCO had just posted its first profit since 2000, both
companies had watched their stock prices churn in a narrow range over the prior two years. Hoping that together they could add up to
more than the sum of their parts, IMCO acquired Commonwealth in December 2004. Rechristened Aleris International, the new compa-
ny moved its headquarters to Beachwood, Ohio, and quickly demonstrated that with the appropriate approach to information, one plus
one can sometimes equal three.
In addition to realizing cost savings by combining back-office processes, the new management team that took over $2.4 billion industrial
manufacturer Aleris International, Inc.—CEO Steven Demetriou and CFO Michael Friday—hoped to improve the company’s fortunes by
placing a new reliance on management by information. “We wanted to dramatically turn around the business,” recalls Ted Lehmann, who
was brought in to serve as vice president of finance in the company’s rolled products group. “That was driven by a management philoso-
phy that Steve [Demetriou], Michael [Friday], and all of us who have worked together here had, which is that we needed to become a
data-driven company.”
After the merger, Demetriou and Friday instituted monthly business reviews in which the management teams of all the company’s
operating units would have to account for their unit’s current performance and explain their forecasts and business plans for the future.
“As that process was implemented, it drove home our core belief that we are a data-driven organization, and that it is management’s
responsibility to own the integrity and quality of that data and thus be able to then make intelligent decisions from that data,” Mr.
Lehmann says.
A typical review would begin with a business unit walking senior executives through its P&L statement and changes in working capital.
Next would come a review of the profitability of product lines and major customers, as well as the business unit’s performance and
prospects in the different markets where it competed. That would segue into a discussion of the business unit’s supply chain and the pro-
ductivity and efficiency of its operations.
While the new protocol was, in Mr. Lehmann’s words, a “painful exercise” for business unit managers who weren’t accustomed to that
level of rigor and scrutiny, it was also accomplished with surprisingly little new technology. “Some of the information was already there
but just wasn’t being used or put into a process where it was sufficiently highlighted,” Mr. Lehmann says.
Continued, next page >
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20 Look Closer, Look Further:
OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
Companies that think broadly when evaluating information
investment factors also have a far better grasp on their com-
panies’ practices and policies for addressing financial, IT,
and operating risks than their less analytical counterparts.
Broad thinkers are more than twice as likely as their less
analytical peers to say that their company’s management
team would be well-prepared to discuss the company’s
practices and policies for financial risk assessment and IT
risk assessment. But broad thinkers are nearly three times
as likely as their more narrowly focused peers to say their
company management is well-prepared to discuss its
practices and policies for operating risk assessment. Those
who think broadly about investments are, in other words,
better prepared to explain risk management policies and
practices in every critical business context. This means that
their companies’ policies and practices are more likely to be
systematic, well documented, and transparent—all of
which translates, ultimately, to better control over the
company’s risk exposure.
The discipline that broad thinkers bring to discrete
projects also accompanies their assessment of the total
cost of management information. Broad thinkers have
a much better understanding than their less analytical
counterparts of the true cost of information management
(see Figure 13, next page). Not only do broad thinkers have
a better grasp of the overall IT budget, but they also have
a better understanding of companywide IT spending
with third parties, spending on third-party research and
consulting firms, the labor cost of non-IT staff, and even
shadow spending on IT projects. Overall, broad thinkers
are more prepared than their less analytical peers to dis-
cuss these elements of the total cost of management
information with the Board or the executive team.
> Aleris International, Inc. Reaps Results of Thinking Broadly as a “Data-Driven Company” (continued)
The review process was one that Mr. Demetriou and Mr. Friday had imported from their previous jobs, in which they were running a spe-
cialty chemicals company. “What we’ve found is that as you go through these processes you always end up discovering some key source
of information or key item you should be watching that nobody really thought of in the past,” Mr. Lehmann says. At Aleris, for example,
the company had switched from LIFO to FIFO accounting immediately upon completing its merger. At first, nobody noticed the adverse
impact this had on the company’s hedging strategy for aluminum prices. By systematically reviewing its monthly performance, however,
the anomaly was quickly caught and corrected.
Soon, Aleris’s performance had been corrected, too. After posting a $23.8 million loss in 2004, the company booked a $74.3 million profit in
2005. Although rising aluminum prices contributed to the improvement, Mr. Lehmann says the earnings gain would have been dramatic
even without that development. The next year, Aleris was acquired by private investment company Texas Pacific Group for $52.50 a share,
or more than three times what its stock had been selling for immediately after the merger was completed in 2004.
Mr. Lehmann says the role of Aleris’s top executives in pushing for a new focus on management by information was critical to the compa-
ny’s turnaround—and to overcoming the resistance of business unit managers unaccustomed to the practice. “It’s human nature to be
resistant to change,” he says. “Institutional inertia was a challenge for us. But we overcame it through the unrelenting focus and rigor we
applied in insisting, at the very highest levels of the organization, that this is how we were going to operate, and that the business units
would have these very detailed, data-driven business discussions with the CEO every single month.”
“Whenever our CEO talks about what it takes be a successful leader, he says you’ve got to be data-driven,” Mr. Lehmann concludes.
“He lists it as number one or number two on any leadership slide he’s ever shown.”
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How to Build a Better Business Case for Improving Information Capabilities 21
> Figure 13. Those using a broader business case report better understanding of the cost of management information.
If called on by the Board or executive team to explain the total cost of management information at your company, would you seek to include the following elements in your discussion? Would you have ready access to such information?
0 20 40 60 80 100%
■ Certainly would consider
four or fewer factors
■ Certainly would consider
five or more factors
Shadow spending on IT projects
outside the IT function
Labor cost of non-IT staff engaged in
gathering and confirming
management information
Activity- or process-level details
on IT spending
Companywide IT spending
with third parties
Companywide IT budget (including
IT labor, overhead, benefits, etc.)
Spending with third-party
research or consulting firms
Percentage of respondents who would like to include such information in the total
cost of management information and would have ready access to this information
Those who think broadly about investments are better prepared to explain
risk management policies and practices in every critical business context. This means
that their companies’ policies and practices are more likely to be systematic, well
documented, and transparent. All of this translates, ultimately, to better control
over the company’s risk exposure.
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OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
Look Closer, Look Further: 22
V. Conclusion This survey and interview program confirms the central
role of management information in generating business
value at large companies around the world. Executives in
the IT and finance functions say they often struggle to
gather the information they need — especially when
making decisions that affect business performance. And
their difficulties often lie not in poor quality systems, but
in how they have articulated, analyzed, and built their
business cases for information-related investments.
The encouraging news flowing from this study, however,
is that companies that are especially analytical and cir-
cumspect in their thinking about the impact of their IT
investments report better results. After segmenting
responses into two groups —those who consider five or
more investment factors frequently when making IT
investment decisions, versus those who consider four or
fewer—we find those who considered five or more fac-
tors report greater effectiveness in gathering and analyz-
ing information, a better understanding of the true cost
of management information, and other business benefits.
It’s unfair to insist on an explicit causal link between a
one-size-fits-all business case and better management
information. The interview program among senior finance
executives reveals that each company considers its busi-
ness case for management information investments in its
own way. Nonetheless, breadth and inclusion—informed
by a rich understanding of strategic and operating
requirements—is clearly a guiding principle among the
executives we interviewed.
At the Visiting Nurse Service of New York (VNSNY), a billion
dollar not-for-profit, Sam Heller, the organization’s finance
chief, cites recent investments in IT equipment for clinical
staff as evidence of how a pure financial ROI analysis can
lead to under-investment in strategically and operationally
important projects. In the last several years, says Mr. Heller,
this nonprofit health-care organization has invested in suc-
cessive waves of handheld devices to help its thousands of
nurses and field staff capture accurate patient data. “We
tried to prove the financial ROI on this and we couldn’t,” says
Mr. Heller, “but we went ahead for strategic reasons.” Why?
“Well, from a clinical perspective, we have improved patient
care, we’ve collected a vast amount of patient data, and
we’ve learned more about patients and how to treat them.
From a payment perspective, Medicare uses the data that’s
collected in determining how to pay us. And we can then
look at this information and determine how we can improve
our recordkeeping to obtain more accurate reimburse-
ment.” He also cites the longer-term value of data integrity
and process discipline that is provided by the handheld
devices, which in turn have lessened VNSNY’s regulatory
compliance burden.
Additionally, VNSNY’s broad business case for the invest-
ment also considers the impact on employees and how new
technology will affect their day-to-day activities—for bet-
ter or worse. “Change management was a major, major
issue for us, of course,” says Mr. Heller. “We had to work with
a large number of nurses—over 2,500—moving from
manual recordkeeping to using a computer. So the issues
ranged from the weight of the computer and finding
the right travel case, to training nurses on how to use this
new piece of equipment.” By considering and preparing
for these factors, suggests Mr. Heller, VNSNY has
improved its operating processes and performance,
the quality of its management information, and its
ability to comply with regulations.
This research program shows
that a combination of broad analyses, a
focus on the business problems solved
by IT investments, and a collaborative
approach can yield higher-quality
information for managers to run
their businesses.
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How to Build a Better Business Case for Improving Information Capabilities 23
Martin Bott, at the drug maker Eli Lilly and Company,
ties success in developing IT business cases to end
users’ decision-making requirements. He cautions
against “not spending enough time up front in your data
definition and database design.” He calls for “really
understanding what questions [you] want to find
answers to from a system and, therefore, designing
the database according to these business needs.” He
continues, “For me, the key to success is to really
anticipate [that], if this is a management decision-making
tool, we must not confuse it with a financial accounting
system. A financial accounting system that drives
statutory reporting, tax returns, and so on needs to be
at a very different precision level than a management
information tool, which can be at a much higher level.
Data mapping, data definition, answering questions such
as, ‘What is it that I need? In what dimension do I
want to be able to aggregate and analyze data?’—
these are the keys to success in my mind.”
At Baylor College of Medicine, Brett Sweet, its SVP of finance
and CFO, sees a consultative approach among finance,
managerial, and clinical staff as an essential way to con-
verge on a sound business case for IT investments. Faced
with prospective investments that carry an unknown return
and have an unmeasured impact on operations, risk, and
information quality, Mr. Sweet calls for collaborative con-
versation and discussion of how and why to allocate capital
to IT investments. He says, “What we’ve done is, when peo-
ple say, ‘I don’t know. You’re asking me to do something I
just don’t know. It’s not a willingness issue, it’s a capability
issue. I just don’t know how to answer that question.’ The
best way we found is just to say, ‘All right, well, we’re going
to sit side-by-side and do it. We’re not going to do it for you,
but I’m going to sit with you.’ We’ll use the questioning
method where we just do it through a series of questions.
‘What would you want to know if someone came to you and
asked for this money?’ We lead them through a series
of questions to what types of information you would
need to essentially sell this idea.”
So while finance executives say consistently that there’s
no single analysis path that all companies should take
to reach good information investment decisions, this
research program shows that a combination of broad
analyses, a focus on the business problems solved by
(and perhaps created by) IT investments, and a
collaborative approach yield high-quality information
for managers to run their businesses.
The interview programamong senior finance executives reveals
that each company considers its business
case for management information
investments in its own way.
Nonetheless, breadth and inclusion—
informed by a rich understanding of
strategic and operating requirements—
is clearly a guiding principle among the
executives we interviewed.
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OCTOBER 2007 © 2007 CFO PUBLISHING CORP.
24
Look Beyond the Obvious to Justify Investments to ImproveInformation Capabilities
Companies are unhappy with their information quality (IQ).
This sentiment was shown to be pervasive in our first
formal study on information capabilities, IQ Matters. But, if
companies know that they don’t have desired information-
management capabilities, why aren’t they doing more
about it? While there is intensifying concern that compa-
nies don’t have the information they need, inertia—by
and large—remains the dominant force restraining
significant investment in information process and system
improvements.
In this, our second survey on information-management
issues, Deloitte Touche Tohmatsu and CFO Research
Services set out to better understand how this inertia could
be overcome. More specifically, we sought to identify the
leading practices in building a business case to improve
information quality. Survey respondents revealed that
there was no singular factor that helped justify the actions
and investments needed to enhance their companies’ infor-
mation capabilities. But study results did reveal a profound,
overarching theme: Companies that think broadly when
evaluating the business case for information investment—
considering the full range of costs, business advantages,
and risks across the company, as opposed to confining
their view to narrow perspectives in IT or finance—
are more likely to overcome the inertia and realize
improvements in information quality.
This insight offers tremendous encouragement to those
who are concerned about information quality, but have
been hesitant or unable to secure the funds to do
something about it. The message here is to “look again.” In
building your business case, extend beyond the obvious
to include the potential for value creation, as well as cost-
cutting; look more broadly and more closely until you gain a
clear understanding of all of the costs and all of the
consequences of maintaining the status quo in comparison
to investing to improve information quality.
Building any business case is a matter of examining two sce-
narios: 1) the costs and consequences of what you’re doing
today, and 2) the costs of getting where you want to be and
the benefits you can reap once you arrive. This “current ver-
sus future” framework can be a helpful starting point for
developing a broadly based business rationale for your
information-improvement initiatives.
The Path Forward
1) Determine the total costs, both direct and indirect, of
producing information the way you do now. When queried
on the cost of information management, survey respon-
dents reported that they have a sound understanding of
only the most obvious costs, such as IT and third-party
spending. But IT costs are only part of the story. What
companies tend to overlook are the embedded and often
fragmented labor costs associated with searching for, col-
lating, verifying, and analyzing data. These expenditures
typically include significant labor costs and “shadow” IT
spending to turn data into the information required to make
informed decisions.
2) Outline the far-ranging consequences of continuing the
status quo. A majority of respondents said they struggle to
produce and develop information to make informed deci-
sions. They don’t have the information they need, where
they need it, when they need it. Obvious consequences of
maintaining the status quo, then, are the risks of: (a) not
knowing what is truly happening in the business, (b) not
knowing that action is necessary, and (c) making bad deci-
sions. There are also the risks of making financial misstate-
ments, poor relations with external stakeholders, the inabil-
ity to forecast accurately, dissatisfied employees who are
tired of not having the information they need to do their
jobs, and the continual costs and headaches of dealing with
unexpected problems that can quickly turn into crises.
Sponsor’s Perspective
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25
3) Determine the benefits of the proposed information-
management improvements. Many companies inadver-
tently weaken the business case for IQ improvement by
focusing only on the dimensions that are the easiest to iden-
tify, such as cost-cutting and productivity improvement. A
common mistake is to calculate ROI based only on how a
particular project will reduce IT costs, as opposed to taking
a broader view of how improved IQ can help the company
achieve its strategic objectives. Examples of these less-
apparent, yet valuable, benefits include faster strategic exe-
cution, improved performance monitoring, enhanced busi-
ness agility, earlier identification of opportunities, improved
risk management, improved customer acquisition/retention,
and more accurate business planning and forecasting,
among others.
View Information as a Strategic Asset
Companies are concerned that they don’t have the timely,
accurate, and insightful information they need. This is far
from surprising in our experience. The reason is that
information capabilities have not received the same level of
attention and investments as automating business
processes. Good information management is not a natural
byproduct of transaction automation. Information quality
requires the same intense focus that has been afforded to
business-process enhancement in the past. Now is the
time for information to be embraced as the strategic asset
that it is. And just like any other strategic asset, it needs
to be protected and managed in a way that increases
returns. The only difference is that the returns on IQ
improvement should not be measured simply in the form
of near-term, hard-dollar payback, but also in terms of
long-term value creation. Those who broadly assess how
improved information quality can help the company
achieve its strategic objectives will be more likely to
overcome the inertia that suffuses the marketplace and
to gain an information edge over the competition.
For more information, go to
www.deloitte.com/us/consulting
To continue the conversation about building a better
business case for improving information capabilities,
contact:
Lee Dittmar
Principal, Deloitte Consulting LLP
215-446-3692
Jane Griffin
Principal, Deloitte Consulting LLP
404-631-2506
> About Deloitte
Deloitte refers to one or more of Deloitte Touche
Tohmatsu, a Swiss Verein, its member firms, and their
respective subsidiaries and affiliates. Deloitte Touche
Tohmatsu is an organization of member firms around
the world devoted to excellence in providing profes-
sional services and advice, focused on client service
through a global strategy executed locally in nearly 140
countries. With access to the deep intellectual capital
of 150,000 people worldwide, Deloitte delivers services
in four professional areas — audit, tax, consulting, and
financial advisory services — and serves more than 80
percent of the world’s largest companies, as well as
large national enterprises, public institutions, locally
important clients, and successful, fast-growing global
growth companies. Services are not provided by the
Deloitte Touche Tohmatsu Verein, and, for regulatory
and other reasons, certain member firms do not pro-
vide services in all four professional areas.
As a Swiss Verein (association), neither Deloitte
Touche Tohmatsu nor any of its member firms has any
liability for each other’s acts or omissions. Each of the
member firms is a separate and independent legal
entity operating under the names “Deloitte,” “Deloitte
& Touche,” “Deloitte Touche Tohmatsu,” or other
related names.
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