5 rules for effective IT investment planning: making a poor choice when it comes to investing in IT not only can be costly, it can prevent your organization from achieving optimal operations. In worst-case scenarios, poor investments may even impede your organization's performance—possibly, for years to come

Healthcare Financial Management, Dec, 2004 by Lynn Harold Vogel

With so much on the line, what can you do to increase your likelihood for success? Hospital executives are best served by following the five steps for effective IT investment presented below.

1. Decide where you want to go as a business before you decide on your IT investments. IT strategic planning is but one step in the overall process of making investments that enable an organization to realize the goals of its vision, mission, and business strategy. Most organizations have vision statements that are fairly high level describing what the organization wants to be. Organizations also tend to have separate mission statements that describe the purpose of the organization. Combined, the vision and mission statements give a fairly lofty picture of why the organization exists and how it expects to justify its existence.

Unfortunately, such statements tell us little about where an organization fits into the organizational or competitive landscape and what specific initiatives it wants to undertake to distinguish itself. That's the task of business strategy--a necessary precursor to strategic planning focusing on IT investments. First an organization decides what it wants to do as a business: only then can it proceed to ask the IT strategy question: What IT investments should we make to enable us to be successful with our business strategy?

2. Plan for IT as you would for any significant investment. Healthcare organizations often approach strategic planning for IT as an isolated business exercise. Periodically, the CEO or the COO determines that for all the resources committed to IT--both capital and operating--the organization doesn't have a clear idea of where it is going. So an external consultant is called in create an IT strategic plan. The plan serves to guide specific system selections over the succeeding several years. Frequently, the plan sits on the CIO's shelf and is reviewed only when a major IT decision is to be made.

What's wrong with this picture? IT strategic planning cannot be done effectively when it occurs as an isolated exercise. We often talk about information systems as "enabling technologies," but if IT planning is a set of tasks without specific and formal connections to an enterprise's vision, mission, and strategic business planning processes, then it is not clear what the technologies are even supposed to enable. No wonder so many IT investments fall short of expectations!

Consider how complex and time consuming the process is for initiating a major construction project. Needs and expectations have to be identified, and executives need to obtain buy--in from major constituencies (the board of trustees, physicians, other staff members, and, at times, the community at large). Costs and benefits also need to be identified, evaluated, discussed, and reviewed during the construction process.

The process of weighing IT investments should be of similar importance. All too often, organizations find the technology part of IT planning so intimidating that they relegate the process to second-class status. But as our organizations are increasingly affected by IT investment decisions, we need to develop the mechanisms for planning for IT just as we would for any significant investment.

3. IT strategic planning isn't just about technology. Senior executives often are intimidated by the techno-jargon that CIOs use to describe their work. One result is that the IT strategic planning process, as noted earlier, is carried out separately from other business planning processes or is assigned to a committee focused solely on IT. Strategic planning for IT investments is not just about which system to buy or which technology to use, although many strategic plans seem to have this focus. IT strategic planning is complicated by almost constantly changing healthcare business and technology environments. And while many executives consider themselves quite up to speed on the business environment issues, few devote the necessary time and energy to the technology side. Sadly, many CIOs find comfort in this deficiency. If a CIO can't explain why a technology investment is needed in terms that non-IT executives can understand, then you probably have the wrong CIO.

4. How you decide can be more important than what you decide! Earlier this year, Peter Weft, director of the Center for Information Systems Research (CISR) and a senior research scientist at MIT's Sloan School of Management, and Jeanne W. Ross, principal research scientist at CISR, published IT Governance: How Top Performers Manage IT Decision Bights for Superior Results. The book draws on the experiences of more than 250 for-profit and not for-profit companies in 23 countries. The authors concluded, "Effective IT governance is the single most important predictor of the value an organization generates from IT."

In health care, we tend to give responsibility for IT strategy to dedicated committees that do not have the authority to implement what they recommend, and that are often disconnected from other planning processes. One of the cardinal rules of effective decision-making in any arena is that responsibility and authority need to be hand in hand. An effective governance structure for IT decision-making provides this connection and is essential if we are to realize true value from our healthcare IT investments.