Tuesday, May 12, 2009

Understanding & Defining Time to Value - A powerful metric for Enterprise IT Success

Time-to-Value (TtV)

Executive Summary:
'Time to value' (TtV) is an important metric for measuring the performance of investments in Enterprise Technology. It is important as it recognizes that in today's modern dynamic business environment a rapid response to changing market forces or environmental demands is critical to survival. Applying TtV to Enterprise IT is an important part of any strategy designed to manage these environment conditions as it incentivises the rapid realisation of the value that can be achieved by the use of responsive acquisition and development methods that focus on delivering business value as soon as possible rather than mere functionality.

In essence TtV measures the responsiveness of a request for value. It is measured from the point a request is made to when the value is realised. Value can be either tangible or intangible. ‘Tangible value’ is the supposed worth, usefulness or importance of something that can be easily or precisely measured. ‘Intangible value’ is the supposed worth, usefulness or importance of something that cannot be easily or precisely measured. Value should be thought of as the antecedent to a benefit - in otherwords the ingredients to a competitive advantage. For example, I may create a website that increases customer loyalty by 20% and this may be of value (worthy, useful, important) however it is not an advantage, in any real sense, unless it makes a difference to my company’s ability to compete. E.g. Generate more sales, or increases the profitability of each sale, or variations of. However increasing customer loyalty may be an ingredient of increasing profitability and when combined with a new product offering it would realize an advantage.

Full Post:
Time-to-value (TtV) is a term that is commonly used in business and to a lesser extent in the academic study of information systems. Whilst its use is common there appears to be no standard definition as author’s definitions commonly vary in demarcation of the point of value and demarcation of the point to begin counting to the point of value. These points typically vary because of variations in what counts as ‘value’ and the point to begin measuring from is often under-determined. This blog offers an analysis of existing definitions and offers a more considered definition of TtV.

Below are three definitions of TtV:
1. (IBM Unknown) states that TtV is the time taken to realise benefits from new strategies, programmes or technologies.
2. (Somerville 2008) states that TtV “is the time after deployment when the system is fully operational and delivering value to the company”.
3. (Ashley 2007) states that TtV “is the effort, barriers, time, resources, planning, change, etc., that the customer goes through before they first see tangible business value from a product or service.”

These three definitions disagree on the demarcation of the point of value. Definition one implies that the point of value is the point where tangible or intangible ‘benefits’ are realized. Definition two suggests the point of value is where the system is (a) fully operational and (b) it is delivering ‘value’. Definition three suggests the point of value is where tangible business ‘value’ is delivered.

The importance of the difference between ‘value’ and ‘benefit’
Interestingly whilst definition two and three use the term ‘value’ to demarcate the point of value, definition ones uses the term ‘benefit’. According to (OED 2009) the term ‘value’ can be defined as something of “real or supposed worth, usefulness, or importance” whilst ‘benefit’ can be defined as “advantage, profit, good”. Which means definitions two and three measure to the point that something of supposed worth, usefulness or importance is produced whilst definition one measures to the point where an advantage or profit is generated. It is clear that these are two different points as something of actual/supposed worth, usefulness or importance is the antecedent to an advantage or profit but not necessarily an advantage/profit in and of itself. For example, I may create a website that increases customer loyalty by 20% and this may be of value (worthy, useful, important) however it is not an advantage, in any real sense, unless it makes a difference to my company’s ability to compete. E.g. Brings me more sales, or increases the profitability of each sale, or variations of. However increasing customer loyalty may be an ingredient of increasing profitability and when combined with a new product offering it would realize an advantage.

The important difference between ‘tangible value’ and ‘intangible value’
Interestingly definitions one and two imply that the point of value is where both tangible and intangible ‘value’/‘benefits’ are realized/delivered whilst definition three only recognizes tangible value. The (OED 2009) defines intangible as “which cannot easily or precisely be measured.” Therefore on the basis of the previous definitions:
• ‘Tangible value’ is the supposed worth, usefulness or importance that can be easily or precisely measured.
• ‘Intangible value’ is the supposed worth, usefulness or importance that cannot be easily or precisely measured.

Whether TTV should be limited to only tangible value, as definition three suggests, is a difficult question as it depends on an organization’s tacit philosophical stance. Some organizations may take an evidence based management (logical positivistic) approach and disregard ‘intangible value’ arguing that if a factor cannot be empirically measured and verified it is meaningless to manage or control because the success/failure of the intervention cannot be known. Other organizations may take the opposite stance arguing that even if an entity cannot be empirically measured and verified its effects may be indirectly perceived and therefore the success/failure of the intervention whilst not known can be tentatively inferred. There is no right or wrong answer to this philosophical debate however I suggest that TtV should not exclude intangible value outright, another concept ‘Time to Tangible Value’ (TtTV) should be used by those of an evidence based (logical positivistic) persuasion.

The importance of defining a start point

We can also see that two of these three definitions under-determine the concept of TtV as the they do not specify from when to begin measuring time. Definitions 1 & 3 do not specify the point to begin measuring value whilst definition 2 suggests it should be measured from time of deployment. I believe this is incorrect as TtV makes more sense as a measure of the time period between a request for value and the beginnings of the delivery of value. For example, the time to value of a car is the time from when it is ordered to the time I can begin getting value from it (e.g. using it). Similarly for a website it is the time between me typing in the web address and the site delivering me something of value e.g. new ideas or soothing images. In the context of Enterprise IT systems, TtV may be more meaningfully measured from the point of project initiation to the point the project is realising value e.g. increasing employee satisfaction.
Are other conditions necessary to express TtV
It is suggested by definition 2 that a system being ‘fully operational’ is a condition for the point of value. This is wrong as it ignores the fact that value can be delivered by partially implemented systems. Take for example any form of iterative development where a partial set of the functionality is delivered each iteration. The system can not be said to be fully operational however it can be said to deliver value otherwise this would erode the whole purpose of iterative development.

Redefining Time to Value
Time to Value (TtV) is the period of time between t1 (where a request for value is made e.g. A project is initiated) and t2 (the point where value is delivered e.g. project delivers value). Value is defined as something tangible, or intangible, of supposed worth, usefulness or importance. In other words value is a placeholder for what you want the system to deliver e.g. create a culture of cooperation, reduce the time it takes to process claims by x seconds, or anything else of perceived worth, usefulness or importance.

Summary
Time-to-value (TtV) is a term that is commonly used in business and to a lesser extent in the academic study of information systems. This post analyzed three definitions of TtV and highlighted general issues with the terms used. Using insights from the analysis it proceeded to offer a new definition that built upon those analyzed. It was also suggested that a new concept of Time to Tangible Value (TtTV) may also be worthy of investigation as this would fit more evidence based management approaches.

As always your comments, thoughts and criticism are most welcome.

References:
Ashley, M. (2007). "Product Bistro: The concept of Time-To-Value." Retrieved 09/05/09, 2009, from http://www.theconvergingnetwork.com/2007/10/product-bistro-.html.
IBM. (Unknown). "Driving ‘Time to Value’ With the Agility of the Midsize Enterprise." Retrieved 09/05/2009, 2009, from http://www-935.ibm.com/services/uk/bcs/pdf/mms_solution_provider.pdf.
OED (2009). Oxford English Dictionary Online, Oxford Univeristy Press.
Somerville, I. (2008). Fitting Software to the Organization: Reducing Time to Value for New Software Systems. Proceedings of the 19th Australian Conference on Software Engineering, IEEE Computer Society.

2 comments:

Unknown said...


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