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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

81188_CFO.qxd 10/10/07 1:10 PM

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%



• 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:


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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.



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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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:


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


> 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?


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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> 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?


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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> 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?


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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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?


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.



> 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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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.

81188_CFO.qxd 10/10/07 1:10 PM

> 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.”



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.

81188_CFO.qxd 10/10/07 1:10 PM



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


81188_CFO.qxd 10/10/07 1:10 PM

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.”



“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.”

81188_CFO.qxd 10/10/07 1:10 PM



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?


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

81188_CFO.qxd 10/10/07 1:10 PM

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.



> 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?


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

81188_CFO.qxd 10/10/07 1:10 PM



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.

81188_CFO.qxd 10/10/07 1:10 PM

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.



> 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

81188_CFO.qxd 10/10/07 1:10 PM



> 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%


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


> 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 >

81188_CFO.qxd 10/10/07 1:10 PM



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.”

81188_CFO.qxd 10/10/07 1:10 PM



> 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%


four or fewer factors


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.

81188_CFO.qxd 10/10/07 1:10 PM


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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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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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

[email protected]

Jane Griffin

Principal, Deloitte Consulting LLP

404-631-2506

[email protected]

> 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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