As we live in a Global Society, which identifies with Business and Enterprise business with Brand, is the ideal business could be something like Coca Cola, Microsoft, Sony?  Or it might be more in line with Google, Amazon or IKEA? An ideal business is a business that moves a lot of money, right?, Which provides benefits and generate more value and business. So, perhaps the ideal business is intrinsically linked with money, could be the HSBC, Santander, the Chasse Manhattan Bank?, Perhaps an Investment Fund, an insurer? Well, in light of recent events with its own name as Lehmann Brothers or Merryl lynch, that the road may be another A company of online auctions? You may something about the spectacle and entertainment, as this is the entertainment company, Pixar, Time Warner, Paramount? Something more cool, admired and liked, Apple, MTV, Nike? A business with the glamor of Armani or sofiticación Bentley?

Big business all of them. Companies that operate large-scale, led by the giant among giants: Wall Mart. Not all profitable, of course. No simple, but global no doubt. The majority of them suffering from what we might call the Babel syndrome, characterized by trying to cover everything and touch the sky. Most of Marks mentioned here are contained in the Ranking 2008 "Best Global Brands" that produces an annual Interbrand. Ah!, But the ideal business could not have anything to do with any of them. Mies van der Rohe, the great German architect, said at once, when asked about the secret of perfection that reflected the great works:

"Perfection is not a question of dimensions, but of proportions."

If there is a perfect business, will surely be a business balanced proportions. Balance means harmony. If there is a perfect business, to be sure, it will mark a banner recognized, valued, well positioned, associated with strong values and an emotional connection with the public. When the big consulting firms develop their rankings of most valuable companies, always take into account the importance of the brand, the reasons for consumer purchases and likelihood of revenue from the brand in question. These parameters determine the value of the Business of Enterprises, of Brands. Serve as an example the ranking of the 50 most valuable brands in Latin America produced by Interbrand and AméricaEconomía.

The 2.0Internet has changed quite a few of the parameters with which we were accustomed to measuring and valuing the business. Among other things, has transformed into businesses (sonadamente lucrative cases) projects and initiatives that would not be crazy adventures and fanciful short time ago (delusional and ridiculous remain so, despite everything, but we have to take off his hat before the skill that some people have had to make these crazy ideas their way of life).

The most representative of this phenomenon are the Blogs. A very recent phenomenon, considering that hatching can put the world in 2006. Blogs are now a world in themselves, a new territory that puts us face a different reality, influential and constantly growing, every day 120,000 new blogs are created and 17 new post is published every second. U.S., Japan, the United Kingdom and Germany are the leaders of the blogosphere.  Statistical data of the blogosphere is the most interesting, and analyzing a bit better we can understand the magnitude of change we are experiencing and that goes beyond the technological impact. It is a social change, and certainly a transformation of the business-economic parameters.

Though not all blogs on the Internet as much as 2.0 now it seems. In any case, since they are the major "stars" of the moment, as they were in their day websites, e-commerce, flash applications, virtual communities, video streaming or the messenger, let's say 4 things on the blogs:

• Anyone can write a blog, but it is always nice to have something interesting to explain.

• Your blog can be read worldwide, but, keep in mind, it's possible anybody like it.

• With your blog you might get rich, but does not create everything you read about the easy money on the Net.

• Yo publish and to maintain a blog is completely free, as long as you consider that the time devoted to your task of blogger has absolutely no value.

There is life and business beyond the blog. However, it seems that whatever the business or the business idea or the perfect business plan, you must go through having a presence in the list of His Majesty Google. Much has changed since Google appeared in our lives, but Instead, the new era that the most famous and used to symbolize the search engines, began to make a long, long time, back in 1945, when Bush Vannaver published in The Monthly Atalantic an article that prompted a new way of understanding and sharing knowledge.

What a curious, right? That new things are, in fact, the updated version of things that already existed or who come from far behind.

The search for the perfect business is as old as the very concept of "business". What suecede is that some time ago that the Internet came into our lives and our society as well as in our estrucutura mentally, to make us look with new eyes ideas that are not.

We agree that the Internet is essential in any business, from the most traditional to the more avant-garde. This does not mean that a truly prosperous business can exist only within, to, for and on the Internet. Certainly, the Internet is a channel of communication, a sales channel, a research tool, a wonderful shop window and a tool of great value if branding is to use well-known. But if we take e-commerce as an example, we see the actual data are, say, discreet. It is true that the trend is upward, but not yet live in a 100% digital environment.

There is something, however, that has not changed since the start of business. Something whose importance has not changed decisively industrial revolutions, social or technological. That "something" is the customer. A good business, a real good business is measured by customers. Hence stems everything else, from the Corporate Reputation to the Income Statement, via the Brand Image and Positioning in the Marketplace . Customers, actual or potential consumers, satisfied or dissatisfied, they are the ones who make good or bad business, which close or move away from perfection. Clients. Consumers. Neither more nor less. Because a business fails, does not live on ideas, but from customers.

And then come the times of crisis. And it gives the impression that the fog of the crisis it permeates all and nobody knows what to do, and the basic principles of business are invested, the bonds are upset, it is difficult to distinguish a good from bad news and, most serious However, nobody knows what will happen tomorrow. To understand a little better in this crisis, we recommend a visit to encarecidament blog Leopoldo Abadia, its analysis of the crisis NINJA is bright. But tell me, just in case we ever know what will happen tomorrow? No.

The crisis may increase the uncertainty, but uncertainty remains intact. If before we did not know what was going to happen tomorrow, now the situation is the same. And a few certainties also keeps intact is more, confirms and reinforces. And these are the certainties, if not a perfect business, yes to a viable business:

• It is better to engage in something we do well and find differentiation in how to do that trying to make a fortune on something that no master and whose only advantage is that it is "new".

• The gap between the fortune and the debacle is the measure of risk. A high-risk business is ephemeral and, unfortunately, we do not know when the streak ends good. Excessive risk, failure insured.
  

• A business with certain guarantees of prosperity should keep a balance analog / digital reasonable. You should also keep a balance innovator / known reasonable. It is important that the market understands what is offered and can compare it to something already known.
  

• A great business must be, above all else, great for you. You should feel right at him and with him.Can hardly convincing if not convinced. It is very obvious, it is true, so this is a stone on which so many face.

• If there are customers there are business.

In a previous article said customers no longer exist. Does not exist in its conventional meaning, because in the environment of Internet 2.0, define customer is complex. A customer is not necessarily the one who buys a product or a service uses. A customer can be someone who consults a content, which read a blog, which shares a file, someone who weaves links in social 

networks, updating your profile, leaving comments at a forum. Customer is someone who bids on an item in an auction, which leaves their data in a form ... Client, ultimately, is the person who, with his action and his relationship with respect to our business gives us a value (because it has no be money, although that value must be measurable and be transferred to economic value) that allows us to maintain our business, to grow and generate increased value of assets. That is, what the customer provides (information, links, comments, references, content, time, money ...), this should enable us to generate wealth.

If there are no customers, no wealth is generated (we let everyone give meaning to the term wealth to create more convenient). The search for the perfect business goes through the search for the type of client suitable for generating wealth. Do you have a business?, It is neither good nor bad. You have'got customers?, That's good. Preserve and be sure to strive to achieve more.

First of all, added value in financial terms translates into a (positive) discounted cashflow. Cash is something different than costs (or expenses). For example, the investment of a logistics company in a new truck of € 10.000,-, results in a one-time cash-outflow of the same amount (provided that it is paid for in one-term). The company needs to pay the truck dealer, to put it simple. However, the cost of the truck is not the same, but the amount the company choses to depreciate. If the truck is depreciated to 0 evenly during 5 years, the cost of that truck in the same year is € 2.000,-. Just looking by the numbers, that paints an entire different picture.

Financially, a business case should be based on cashflow. So when making a business case for BI, what results in a net positive cashflow? Analyst's and controller's time that is freed up because their reports are generated by BI instead of having them to make the reports in Excel, does not result in positive cashflow, unless personnel is laid of. Reduced licence fees because of BI-platform consolidation, does result in positive cashflow effects, because it directly affects annual licence payments. When the investment (cash outflow) to migrate old applications to the new platform are less than the savings, you have a positive net effect. Of course, this is a somewhat simplified example but it just serves to illustrate the principle.

So from a financial point-of-view (which is primarily what a business case is), there is no reason not to deploy a BI-initiative that generates positive net cash-flow just by reducing licence-fees. Maybe not sexy, but certainly financially healthy.

Now, let's look at the benefits side. There's often a lot discussion that the benefits of BI cannot be quantified and can only be expressed qualitatively. First of all, one needs to distinghuish between benefits that:

1. By definition cannot be quantified, for example the even distribution of wealth in a society, and
2. Benefits that are hard to quantify - but not impossible, like improved company image - or quantified benefits that still have a lot of uncertainty.

In my opinion we're dealing with the 2nd category, not the 1st. So, don't hide but work harder and digg deeper. One way to do this is, is to make a Benefits Logic. This method establishes the logical links between cash-flow generation, benefit areas, opportunities and components of a solution. In other words, a cause-and-effect relationship between a solution (BI) and ultimately financial results. An example is given in this figure:

When making a benefits logic, you start on the right hand side, not on the left! Then you work your way to the left by asking the 'How' and checking that every step that is added this way makes sense. Each time, you ask the How-question, determining the pre-requisite for a step you just added, until you get to the solution. The benefits logic is the fundamental step in linking BI to true business benefits. Obviously, the quantification of the benefit areas identified is the next step. From here, the quantification follows a common systematic approach to get to the numbers and doesn't require any BI-specific enhancements (or BI-specific arguments why it quantification is not possible for that matter).

Please discuss the example benefits logic presented here and the way it can be used for BI-projects. Any comment is appreciated.

NB: the contents of this post is based on the Business Case methodology developed by Capgemini

La búsqueda del negocio perfecto es como la búsqueda del Arca perdida, del Santo Grial o de la Piedra Filosofal. Es posible que existan, es posible que no, pero no por ello dejamos de buscar. Vamos a partir de la premisa de que el negocio perfecto no existe, y nos preguntaremos a cuál de los negocios que conocemos se parecería si existiera.

Como vivimos en una Sociedad Global que identifica negocio con Empresa y Empresa con Marca, ¿el negocio ideal podría ser algo parecido a Coca Cola, a Microsoft, a Sony? ¿O tal vez estaría más en la línea de Google, Amazon o IKEA? Un negocio ideal es un negocio que mueve mucho dinero, ¿sí?, que proporciona beneficios y genera riqueza y más negocio. Entonces, tal vez el negocio ideal esté intrínsecamente relacionado con el dinero, ¿podría ser el HSBC, el Santander, el Chasse Manhattan Bank?, ¿tal vez un Fondo de inversiones, una aseguradora? Bueno, a la luz de recientes sucesos con nombre propio como Lehmann Brothers o Merryl Linch, puede que el camino sea otro ¿Una empresa de subastas online? Puede que algo relacionado con el espectáculo y el entretenimiento, ya que ésta es la sociedad del ocio, ¿Pixar, Time Warner, la Paramount? Algo más cool, admirado y deseado, ¿Apple, la MTV, Nike? ¿Un negocio con el glamour de Armani o la sofiticación de Bentley?

Grandes negocios todos ellos. Empresas de grandes dimensiones que operan a gran escala, lideradas por el gigante entre gigantes: Wall Mart . No todas rentables, desde luego. Ninguna sencilla, aunque globales sin duda. La mayoría de ellas aquejadas de lo que podríamos llamar el síndrome de Babel, que se caracteriza por tratar de abarcarlo todo y tocar el cielo. La mayoría de las Marcas aquí mencionadas figuran en el Ranking 2008 "Best Global Brands" que elabora anualmente Interbrand. Ah!, pero el negocio ideal podría no tener nada que ver con ninguna de ellas. Mies van der Rohe, el genial arquitecto alemán, sentenció en una vez, al ser preguntado sobre el secreto de la perfección que reflejaban las grandes obras:

"la perfección no es una cuestión de medidas, sino de proporciones".

Si existe un negocio perfecto, seguramente será un negocio de proporciones equilibradas. Equilibrio significa armonía. Si existe un negocio perfecto, a buen seguro, tendrá como estandarte una Marca reconocida, valorada, bien posicionada, asociada a valores sólidos y con una conexión emocional con el público. Cuando las grandes consultoras elaboran sus rankings de Empresas más valiosas, siempre tienen en cuenta la importancia de la Marca, los motivos de compra del consumidor y la probabilidad de ingresos provenientes de la Marca en cuestión. Esos parámetros determinan el valor de los Negocios, de las Empresas, de las Marcas. Sirva como ejemplo el Ranking de las 50 marcas más valiosas de América Latina elaborado por Interbrand y AméricaEconomía.

El Internet 2.0 ha cambiado no pocos de los parámetros con los que estábamos acostumbrados a medir y valorar los negocios. Entre otras cosas, ha transformado en negocios (sonadamente lucrativos en casos puntuales) proyectos e inciativas que no pasarían de ser aventuras delirantes y descabelladas poco tiempo atrás (delirantes y descabelladas lo siguen siendo, a pesar de todo, pero hay que quitarse el sombrero ante la habilidad que algunas personas han tenido para hacer de esas locas ideas su modo de vida).

El caso más representativo de este fenómeno son los Blogs. Un fenómeno muy reciente, si tenemos en cuenta que su eclosión mundial la podemos situar en el 2006. Los blogs son hoy un mundo en sí mismos, un territorio nuevo que nos pone ante una realidad diferente, influyente y en constante crecimiento; cada día se crean 120.000 nuevos blogs y 17 nuevos post son publicados cada segundo. EE.UU, Japón, el Reino Unido y Alemania son los líderes de la blogosfera. Los datos estadísticos de la blogosfera son de lo más interesante, y analizándolos podemos entender un poco mejor la magnitud del cambio que estamos viviendo y que va más allá del impacto tecnológico. Es un cambio social, y, desde luego, una transformación de los parámetros económico-empresariales.

Aunque no todo son blogs en el Internet 2.0 por mucho que ahora lo parezca. En cualquier caso, puesto que son las grandes "estrellas" del momento, como lo fueron en su día los websites, el e-comerce, las aplicaciones en flash, las comunidades virtuales, el video streaming o el messenger, vamos a decir 4 cosas sobre los blogs:

• Toda persona puede escribir un blog, pero siempre está bien tener algo interesante que explicar.

• Su blog puede leerlo todo el mundo, y puede, téngalo en cuenta, no gustarle a nadie.

• Con su blog podría usted hacerse rico, pero no crea todo lo que lee sobre el dinero fácil en la Red.

• Tener y mantener un blog es completamente gratis, siempre y cuando usted considere que el tiempo que dedica a su tarea de blogger no tiene absolutamente ningún valor.

Hay vida, y negocios, más allá del blog. Sin embargo, parece que sea cual sea el negocio o la idea de negocio, o el plan de negocio perfecto, debe pasar por tener presencia en el listado de Su Majestad Google. Muchas cosas han cambiado desde que Google apareció en nuestras vidas; pero, en realidad, la nueva era que el más famoso y utilizado de los buscadores simboliza, empezó a gestarse hace mucho, mucho tiempo, allá por 1945, cuando Vannaver Bush publicó en The Atalantic Monthly un artículo que impulsó una nueva manera de entender y compartir el conocimiento.

Qué curiosos, verdad? Que las cosas nuevas sean, en realidad, la versión actualizada de cosas que ya existían o que vienen de muy atrás.

La búsqueda del negocio perfecto es tan vieja como el propio concepto de "negocio". Lo que suecede es que hace ya un tiempo que Internet entró en nuestras vidas y en nuestra sociedad, así como en nuestra estrucutura mental, para hacernos mirar con ojos nuevos ideas que no lo son.

Estamos de acuerdo en que Internet es fundamental en cualquier negocio, desde el más tradicional hasta el más vanguardista. Lo cual no quiere decir que un negocio verdaderamente próspero sólo pueda existir dentro, para, por y en Internet. Ciertamente, Internet es un canal de comunicación, un canal de venta, una herramienta de investigación, un estupendo escaparate y una herramienta de branding de grandísimo valor si se sabe utilizar bien. Pero, si tomamos el comercio electrónico como ejemplo, vemos que los datos reales son, digamos, discretos. En el caso de España, tan solo el 7% de las empresas utilizan el comercio electrónico. Es cierto que la tendencia es al alza, pero todavía no vivimos en un entorno 100% digital.

Hay algo, sin embargo, que no ha variado desde el inicio de los negocios. Algo cuya decisiva importancia no han cambiado revoluciones industriales, sociales o tecnológicas. Ese "algo" es el cliente. Un buen negocio, un verdadero buen negocio se mide en clientes. De ahí deriva todo lo demás, desde la Reputación Corporativa hasta la Cuenta de Resultados, pasando por la Imagen de Marca y el Posicionamiento en el Mercado. Clientes, reales o potenciales, Consumidores, satisfechos o insatisfechos, son los que hacen buenos o malos los negocios, los que los acercan o los alejan de la perfección. Clientes. Consumidores. Ni más ni menos. Porque un negocio no prospera, no vive de las ideas, sino de los clientes.

Y, entonces, llegan los tiempos de crisis. Como ahora. Y da la impresión de que la niebla de la crisis lo impregna todos y nadie sabe qué hacer, y los principios básicos de los negocios se invierten, los valores se trastocan, es díficil distinguir una noticia buena de una mala y, lo más grave de todo, nadie sabe qué pasará mañana. Para entender un poco mejor esto de la crisis, recomendamos encarecidament una visita al blog de Leopoldo Abadia, su análisis de la crisis NINJA es brillante. Pero, díganme, acaso hemos sabido alguna vez lo que pasará mañana? No.

La crisis puede aumentar la inseguridad, pero mantiene intacta la incertidumbre. Si antes no sabíamos lo que iba a pasar mañana, ahora tampoco. Y algunas certidumbres también las mantiene intactas, es más, las confirma y las refuerza. Y esas certidumbres son las bases, si no para un negocio perfecto, sí para un negocio viable:

• Es mejor dedicarse a algo que sabemos hacer bien y buscar la diferenciación en cómo hacerlo que tratar de hacer fortuna en algo que no dominamos y cuya única ventaja es que es "nuevo".

• Rico viene de riesgo, cierto. Y la diferencia entre la riqueza y la debacle es la medida del riesgo. Un negocio de alto riesgo es efímero y, desgraciadamente, no sabemos cuándo acaba la racha buena. Riesgo excesivo, fracaso asegurado.
  

• Un negocio con ciertas garantías de prosperidad debería guardar un equilibrio analógico/digital razonable. También debería guardar un equilibrio innovador/conocido razonable. Es importante que el Mercado entienda lo que se le ofrece y pueda compararlo con algo que ya conoce.
  

• Un negocio estupendo debe ser, por encima de cualquier otra consideración, estupendo para usted. Debe sentirse como en él y con él. Dificilmente podrá convencer si no está convencido. Resulta muy obvio, es cierto, por eso esta es una piedra en la que tantos tropiezan.

• Si hay clientes hay negocio.

En un artículo anterior decíamos que los clientes ya no existen. No existen en su significado clásico porque, en el entorno del Internet 2.0, definir cliente es complejo. Un cliente no es necesariamente aquel que compra un producto o utiliza un servicio. Un cliente puede ser alguien que consulta un contenido, que lee un blog, que comparte un archivo, alguien que teje enlaces en redes sociales, que actualiza su perfil, que deja comentarios en un foro. Cliente es alguien que puja por un artículo en una subasta, que deja sus datos en un formulario... Cliente, en definitiva, es aquella persona que, con su acción y su relación con respecto a nuestro negocio nos proporciona un valor (que no tiene porque ser dinero, aunque dicho valor debe poder medirse y ser trasladable a valor económico) que nos permite mantener nuestra actividad, crecer y generar activos de mayor valor. Es decir, que nos proporcione el cliente lo que sea que nos proporcione (sus datos, links, comentarios, referencias, contenidos, tiempo...), eso debe permitirnos generar riqueza.

Si no hay clientes, no se genera riqueza (dejamos que cada cual otorgue al término riqueza el significado que crea más conveniente). Si no se genera riqueza no hay negocio. La búsqueda del negocio perfecto pasa por la búsqueda del tipo de cliente adecuado para generar riqueza. Tiene usted un negocio?, eso no es ni bueno ni malo. Tiene usted clientes?, eso es bueno. Consérvelos y no deje de esforzarse en conseguir más.

The basic approach that people generally use to prioritize development tasks:

• Write down all the pending development items, as and when you think of them at a common place.
• Assign them a priority of high, medium or low [or something fancier] and pick up the high priority items first.
• Keep compiling the list of most high priority items as you go. There are many problems in this kind of prioritization.

The major problem is that any decent sized project/ product would have a lot of development items as open. And most of these items are always high priority or medium priority but not low priority. Hence, you have to do a nested priority tango [where you prioritize between high priority items further with something like Very High Priority, Super High Priority etc], till you are left with the items you can pick up for the next release.

Although very simple to look at, as the data grows, this method becomes a complete mess for you to manage your priorities and also takes a lot of time for managing the priorities. In addition, this gives some items with low priority a wrong interpretation - these are not important, and even worse, confuses the high priority items as the most important. Another major problem that development teams face is classifying the items as bugs, defects, new features, revision of old features etc and sort of prioritizing within this.

Hence, the main problems in the main approach is:

• As the data grows, managing the priorities becomes an issue
• Making an item/ task as not important, low priority, can wait, not urgent, good to have - makes people take those tasks/ items lightly
• Prioritizing within the items/ tasks - bugs, defects, new features, revision of old features

A quick review of Internet threw up some variations of this approach:

• OrganizeIt.com suggests that you should prioritize the stuff between must do, should do and would like to do. The only problem with this approach is that different arguments can convert a would like to do into a must do.
• OpenBravo has a delicious looking approach to development process management and takes a linear time bound approach for each task. I have not used OpenBravo as yet but probably this would probably work well in some circumstances as long as you make sure you enter the right data.
• A common approach in Scrum Projects is to have teams gather around for a Sprint Planning Meeting and arrive at a consensus on what they would need to develop in the next sprint. Everything else waits. This is a good approach. However, the work involved in estimation of the items/ tasks and discussions can sometimes extend. This is not a problem with the approach but signifies something else [communication gap between the teams and product owner]. Unfortunately, not many people would see it like that [I will cover this topic in more detail later].
• Another very effective approach [again borrowed from Scrum/ Mike Cohn's work] is to first draft coarse grained requirements and refine the ones that are immediate priority. This takes care of not having too many requirements/ items while still having enough detail for meaningful priority for the tasks / items at hand.

Now that, we have discussed in brief what we probably already know, I will try and analyze why these problems appear.

• No single product owner
• Too long a time before priorities can be changed
• Wasted effort on not so hear horizon tasks [which might never get done, or are changed when those are picked up]

However, the biggest issue is that prioritizing the above way gives you a false sense of security that you understand how the future would unfold. You lock yourself up in decisions [based on a prediction of future, and a growth path/ evolution of product or features]. This is the exact mindset and belief which Agile [or "a"gile ???] seems to correct. The product management teams and development teams, both need to be open to all possibilities. Unless the mindset which develops the products is open, we fight keeping the natural progress of the product [based on customer requests and inputs] at bay.

Now that we have seen the issues in prioritizing using conventional techniques, lets try and see an alternative approach to prioritization.

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Of course, this principle helps detectives to not only catch criminals, it helps to get the criminals punished.  Similarly, in the IT world, I've used the principle to both understand what is leading to dysfunctional IT behavior, and to help correct that behavior by fixing the money-related drivers.  Let me provide an example and the application of this principle.  The example is, of course, fictitious, though based on real life situations I have worked over many years of management consulting and research.

First, a caveat.  Clearly, not all human or organizational behavior is motivated by money.  However, I have found that collective organizational behavior is significantly shaped by money - by the sources of funds, valuation of returns, and measurement inherent in financial reporting.

Scenario

Higgins-Smithbottom is a global fashion designer and retailer.  The company culture values the creative geniuses who come up with the hallmark designs, and places great freedom and authority on the heads of business units.  In common with the industry, success is seen to be all about great design, brilliant merchandising and effective management of the brand - three disciplines that seem to have little to do with IT.  As such, IT is an "expense to be minimized," a "necessary evil," and something that the IT organization is expected to "take care of with minimal disruption to the business" so that business leaders are "free to design, merchandise and manage the fickle fashion business unencumbered by IT."

The executives at Higgins-Smithbottom are vaguely aware of contemporary success stories such as Zara and Li & Fung, but don't recognize the role that information and IT have in these companies success stories.

Financial Forensic Clues

1. All IT capital and expense is managed out of an IT budget - the IT resource is essentially "free" to the business unit leaders.
2. There is no enterprise-wide IT prioritization and allocation process.  Resources are essentially allocated on a first-come, first-served basis, with the regulator on business demand being total supply - when all available supply is tied up, no other demand is accepted.
3. Because IT is "free" there are no attempts to measure and track the return on IT investments.

Dysfunctional Behavior

The perspective on IT is that it costs too much and delivers too little.  Even though business heads do not "pay" for IT, they know that the bottom line is impacted by it - IT saps profits and eats into the executive bonuses.  As a result, business leaders try to minimize their involvement in IT, invest no time or energy trying to understand it, or figure out how it can improve the business.  Consequently, IT contributes relatively little to the business.  It responds as an "order taker" acting on low value requests from business silos, without an overall IT strategy or architecture.  Each response to a business order adds more complexity to the patchwork of IT systems.  More time and money is spent on inter-system interfaces than on business enablement.

When a meaningful business request surfaces for management information or business analytics, IT finds it virtually impossible to respond, due to the complex patchwork of systems and lack of data standardization.  Lack of adequate IT resourcing and responsiveness leads business units to hire their own IT resources - sometimes as consultants and contractors, other times as permanent staff.  These "shadow IT" groups exacerbate the complexity of the systems environment, and mask true IT spending levels.

IT eventually finds itself in a vicious cycle - low business demand maturity begets low IT supply maturity.  When IT does get engaged by the business for a new system, it fails to "push back" on the business demand to "automate the manual process as is - don't make us change the process!"  IT does what it's told, even if that means customizing the heck out of an off-the-shelf package.  The customization triples the implementation costs, and sends subsequent maintenance costs through the roof.

Lessons Learned

1. When IT is "free," it is not valued.  When someone else is footing the bill, there's no sense of accountability from those who should be turning the investment into a valued return.
2. Without enterprise-wide prioritization and allocation, IT optimization takes place at the business unit level, leading to sub-optimization at the enterprise level.
3. Lack of enterprise-wide prioritization and allocation is typically accompanied by a lack of an overall IT strategy and road map.  This leads to islands of automation, and over time, the number of interfaces (and costs associated with building and maintaining those interfaces) increase exponentially.  After a few years, the vast majority of IT spend is related to interfaces - i.e., it's all cost-added, without any value-added.
4. When IT is sub-optimized for the enterprise, IT "vacuums" get created throughout the business, and nature's abhorrence of vacuums leads them to be filled by "shadow IT" groups.  This adds to actual IT spend, even though the shadow spend is not visible in the IT budget - i.e., IT is costing you more than you think it is.
5. Being "cheap" with IT usually ends up being very expensive!

The game also has players assume the role of salespeople who have to prioritize the backlog that developers will have to implement.  This approach is great for both roles:

• If you have salespeople play the game, they start to get a better feel for the real consequences of having made unfulfillable promises at deal time. 
• As developers play the game, they should develop more empathy for the pressure that sales teams feel as they try to satisfy the customer and close deals.

Very promising stuff...  Now, when can I get the time to check it out?!

I always talk about how important tracking is, well another aspect of project management and analysis is understanding how a solution benefits the organization and what business objectives does it help meet. Stating that a solution solves a problem isn't enough, you have to understand what solving that problem means to the business, this is the only way you can properly identify priority on whether to do solution 1, or solution 2 first (unless you have limitless resources and money, and if so please give me a call).

In the table below we can see ▓ as a direct relationship, and ▒ as an indirect relationship. With a glance we can see exactly how Solution 1 maps to the business objectives and if we are really interested in objective 2 and 3, we would implement solution 3 first (probably).

Where do business objectives come from? Typically to get business objectives you identify the vision statement for what the organization is striving towards, take that vision and break down what it really means into several major business objectives. Often many people in the business will be able to identify what the business objectives are for you, or it should be easy to come up with some of your own that ring true for the business as a whole.

An example of one of these business objective matrices can be found below.

Lets give an example: I am an organization that sells cars and fixes cars.

Vision Statement:

To provide our customers with the most affordable, best valued cars while providing them with a complete car maintenance solution and unrivaled customer service.

Business Objectives:

• Improve Customer Service
• Improve Sale of Cars
• Improve Sale of Maintenance Services

Those are some very generalized objectives. Well now Johnny in the Technology Department comes up with a couple wonderful solutions for our Car company.

Johnny's solutions are:

• Implement a File Sharing Solution that will enable sales people, customer service people, and maintenance people to share information.
• Implement a Mobile Workforce Solution that will enable employees to communicate via wireless devices anywhere in the company building.
• Implement a Sales Tracking Solution that will help track all sales.
• Implement a Maintenance Inventory System that will help track tools and maintenance supplies.

That is fantastic Johnny, and now how do these solutions MAP to the objectives of the business? Well that's easy, Johnny uses the business objective matrix I mentioned above to show his bosses and they can see easily and graphically exactly how these solutions benefit the organization. This will allow them to easily prioritize the solutions by what their immediate business needs are.

Hope this helps you win more success,
Richard

Many people are familiar with this approach to value since it is commonly used for more homogeneous assets like real estate.  However, the approach doesn't work nearly as well for more unique assets and businesses that have greater variability and more moving parts.  Some of the things that make a market comparable approach problematic for determining value include:

• Is the business really an average business that has very similar characteristics to the businesses that have sold?
• How much data was collected to establish the multipliers, and is it complete enough and representative enough of businesses similar to the business being valued to make a valid comparison?
• Is your business model truly the same as those used by other businesses in your industry?  For example, if the majority of businesses in your industry sell their products wholesale to retailers, but you sell the majority of yours retail, direct to the public via a web site, then you may not have a similar business.
• Are the rates of growth similar?  If Company A and Company B both have $500,000 in Seller Cash Flow in 2007 and a market comparable multiplier of 2 would indicate a value of $1 million you may have overpaid for one business and underpaid for the other.  For example, let's say that Company A had an average and projected growth rate of 5%, while Company B had an average and projected growth rate of 15%.  If someone paid $1 million for each business in 2008, then two years later Company A would likely have $551,250 in seller cash flow, while Company B would likely have $661,250.  Yet, the industry comparable businesses may have had an average growth rate of 10%, so the average business in the industry would likely have $605,000 for the same time period.  Different growth rates warrant different prices.
• Are there different risk factors?  An example of this would be if Company A had one client that provided 40% of its revenue, whereas the average business in the industry had diverse clients with the largest average client providing only 5% of a typical comparable business' revenue.  If Company A lost their top client it would be devastating to the business.  This level of comparative risk should result in a price that reflects that risk.
• Did the comparable businesses sell during the same type of economic cycle?  A dot com business that sold in the giddy late 1990s would likely sell for a much different price than a similar business that sold in 2002.
• Are the sold businesses of a similar size?  If, for example, the average comparable business had seller cash flow of $80,000 and your business has $200,000 in cash flow than your business should command a higher multiple.  The reason is that if you were to hire someone to run the business you may be able to do so for around $80,000.  If you had to pay a replacement $80,000 and the business only had $80,000 in seller cash flow than if you were to treat the business as a passive investment you would only break even, but if you started with $200,000 in cash flow you would still be left with $120,000 after paying a manager.
• Does the business have initiatives underway that will likely lead to significant future increases in business?  A market comparable approach is a backward, rather than a forward looking approach to value, so it will not take into consideration strong unproven increased future earnings potential. 
• Does the business have un-utilized or under-utilized assets?  For example, if a business acquired a $200,000 piece of equipment but then decided not to utilize it but had it sitting in the warehouse, a market comparable approach to value will not recognize the additional value of that non-income producing asset.  
• Were comparable business' financials reported accurately?  When a business is sold, usually the financial statements have been re-cast to reflect adjustments for non-recurring or personal expenses.  However, those aren't always accurate adjustments.  For example, a business owner may have failed to accurately adjust the financials to reflect the under-payment or over-payment of compensation to him or herself.  A business owner who only pays himself a $40,000 annual salary, when the market replacement cost for his position would be $90,000 who fails to make this adjustment on the financials would show EBITDA that is $50,000 more than it should have been if an owner were being paid a market rate of compensation.  If an EBITDA multiplier were utilized this may produce an inaccurate estimate of value.

These are just some of the types of issues that make the use of a simplistic market comparable multiplier not an appropriate method of establishing a price for a business.  A business seller who wants to price their business in such a way that it is marketable but also doesn't leave money on the table should look beyond a market comparable approach to establish a price.  A knowledgeable business appraiser, business broker or investment banker can help you explore other approaches to value and examine issues that may impact valuation and marketability.

If you would like to learn about more rigorous valuation methodology, as a starting point, I would recommend the book Valuing a Business : The Analysis and Appraisal of Closely Held Companies (3rd Edition)

Codiligent Business Brokers - Portland, Oregon based business brokers representing sellers of businesses with $500k - $20 million in annual revenue. To schedule a free consultation to discuss the possible sale of your business you may contact Eric Williams at 503-535-8817 or E@codiligent.com

With scrum, we try to deliver business value every sprint. That's easier to do with some projects than others. If you have a mountain of technical debt facing you, delivering business value every three or four sprints can be a huge achievement. You might get lucky and find the occasional creative way of delivering business value quickly and easily, but most of the time you simply aren't going to be able to manage it. Forget about it.

There are a lot different factors that make up a technically mature team, and they often take a long time to put together. Until you overcome those lower level issues, you won't be able to properly address the higher level issues related to delivering business value quickly. Here is a graphic that I use to help make my point:

There are different levels of technical competence that need to be in place in order to support the rapid delivery of business value. If any one of these levels is missing, it is very unlikely that a team will be equiped to manage their work efficiently enough to deliver business value on a rapid and consistent basis. Teams need to be using source control tools and practices. Until they have source control, a team will not have the technical foundation in place to begin to put continuous integration in place. Once you have continuous integration working, you really aren't getting the full benefit unless you can provide automated tests with every build. So on the technical side, a team has to have a lot of infrastructure in place in order to even think about delivering business value quickly.

There is another side to this issue that is very much tightly releated - how large are the releases that we make? Here is another diagram:

Here, instead of talking about technical maturity, we are looking at deliverables. At a relatively low level of process maturity, a team is really only capable of delivering files and resources with any real frequency. As the team becomes more technically adept, they are able to deliver components more frequently. As you can see, as the team becomes more and more efficient, they are able to deliver features and ultimately meaningful business value on a rapid schedule. These two hierarchies, the technical maturity and the deliverables maturity are linked tightly together.

So what's the point? Well, if you are working on a team that is just adopting agile, don't let anybody tell you that you are going to be delivering significant business value frequently - especially if you are like most teams and have a fair amount of technical debt accrued. It's not that you can't get there - you can, but it's probably going to take a lot of work before you are able to deliver on that promise. People tend to expect immediate results when they switch to agile, and I'm here to tell you that often it just doesn't work that way. If your teams are anything like the ones that I have worked on, you have a significant number of technical, personal, and other issues to overcome before you are going to be able to deliver the promised frequent delivery of business value. It's definitely the way to go - I'm not saying it isn't worthwhile, I just think expectations should be reasonable.

In the meantime, instead of trying to deliver business value every 5 mintues, why not focus on Frequent Small Releases (FSR) instead? Yeah, you heard me right. Learn how to deliver something - anything - frequently first. It's all part of building a mindset of frequent releases that will ultimately (once the team is ready) culminate in the hallowed goal: the frequent release of business value.

Amen.

It is always a good exercise to assess your options.   Goodwill is connected to the earning capacity of a business.  If you have a respectable track record, then you can expect to get some future multiple of earnings should you decide to sell.  If you wait for the cycle to hit its valley, it may be years before your Company is worth what it is now!  If you have nothing else to do with your time, no problem. Most people would choose not to work for free given a choice. 

Christopher P. Mok has 25 combined years as a financial and transactional expert.  He worked with publicly held companies at Coopers & Lybrand (now Pricewaterhouse Coopers) and the investment banking firm AGS Financial Corp. before founding Business Search Group in 1993.  Valuations, building business value, exit planning consulting and middle market business sales are within the sweet zone of his practice. He has a wealth of experience that helps his clients increase their wealth when it comes to buying or selling businesses.  By hiring Business Search and Consulting business professionals, you can be sure that you are on the way towards maximizing your Company’s value.

Stock investing is not just about financial analysis only. Although in my CFA programme, the major parts focus on financial analysis and accounting, I am always reminded to conduct further qualitative research. Malaysia is a beautiful country. Unfortunately, we have weak policy makers which focus on short term achievements without considering the long term effect. For policy makers, they are always confused between protecting their office and serving the country sincerely. That’s why we see malpractice and maladministration in the government and private sectors as well.  

White-collar crime has been on the rise in Malaysia, whether it is reported or kept under the carpet. Subconsciously, Malaysians are used to see professionals criminals get away because of (you guess it) lack of evidence . More cases are expected to be revealed but we know the enforcement will always able to apprehend small fishes and let the big fish swimming away freely .Read this!

I do not want to elaborate more on this but I hope you will understand me. My point is, be a contrarian when investing. It is good to be critical and dig more about a company. Use whatever way to get information about a business. With vital information in our hand, we can increase the safety margin of our investment and increases the chances of winning (decreases the chances of losing). Remember Rule No. 1: Don’t lose money. And Rule No. 2: Don’t forget Rule No.1.

With that in mind, let’s discuss the initial part of valuing a business.

Everyone buys stocks for profit. According to ‘The Greater Fool Theory’, a fool buys stock at any price and sells it to a bigger fool for a profit. During a bull market, this theory does work. But, when reality sets in, all stocks will come crashing down at some point. And that is when great fools lose tons of money and value investors come in to clean up the mess for a huge FEE.

Is there a shortage of fools in KLSE? The answer is definitely ‘No and never will’. Stock broking companies and business newspapers will always try to promote companies to increase the volume of trade. When the volume increases, all middle person become rich. Stock brokers earn more brokerage fee, analysts get bonuses, government get more stamp duties and rich tycoons get an increase of wealth due to sharp rise of market capitalisation. If every investor is prudent and wise, then the market will be efficient and there will be no discrepancies in prices. As Warren Buffet will put it, if the market is efficient, I will be a bum with a tin can on the street.

Fools, in their ongoing quest for short-term profits, with disregard for value, drive prices up and down wildly. And they will lose their money to smart investors in long term. In addition, since they trade heavily, they will lose their money ....continue here 

Move early

Build unique, protected IP

Differentiate and support it with continual innovation

Capture market share quickly

Keep your costs low - the low cost producer can survive in down markets

Invest in R&D to stay ahead of the curve

Stay very close to your customers and their needs!

Cheers

Tom

For some pretty big name companies, more than 50% of their assets are intangible (goodwill, trademarks, mastheads, etc.). 

With the international accounting standands, some companies may be at risk of large write downs of these assets if the economic problems in the US and elsewhere start to impact their profits.  While intangibles are given an indefinite life, companies need to review the carrying value of intangibles periodically. That's where the risk lies.

Danone had 62% of its assets in intangibles. Cadbury Schwepes 56% and Vodafone 55%.

For Danone, most of the goodwill was added during 2007 due to M&A transactions.

There are also a number of European companies with intangibles larger than their market cap! Telecom Italia, RBS Group & Deutsche Telekom are examples.

Vodafone's intangibles are 83% of its market cap.

Its widely recognized that intangible assets / factors are extremely important to the competitive advantage of a business.  Goodwill forms a very large % of the intangible assets of these firms.

I have not looked at intangibles as a % of listed companies in other countries but I suspect there will be similar household names with similar %'s.

This isn't a bad thing but with accounting standards today there might be some big write down's of intangible assets. 

This post is just an observation.  I knew intangibles are now a huge part of many balance sheets but its worth watching your investments in companies with substantial intangibles in the balance sheet.  They will need to keep delivering cash flow and profit growth to avoid the risk of potential write downs of their goodwill and other intangibles.

Cheers

Tom

Build unique, protected IP

Differentiate and support it with continual innovation

Capture market share quickly

Keep your costs low - the low cost producer can survive in down markets

Invest in R&D to stay ahead of the curve

Stay very close to your customers and their needs

So you're thinking about buying or selling an operating business. Well, don't do another thing before you read this article! Don't make the same mistakes that many others have made when buying a business and turn your dream into a financial and emotional nightmare!

DEALING WITH UNREPORTED CASH SALES

One of the biggest problems in the valuing of small businesses for sale is the frequent claim by; the sellers that they are taking large sums of unreported cash out of the business and therefore, the "profits" won't support the asking price of the business. But "trust them" they say, the cash will be there for you. My advice is to ignore all claims of unreported cash income! How do you know the seller is telling you the truth? If the seller will cheat the IRS, why won't he cheat you? And do you really think the seller will admit to you, a stranger, that he is committing a felony if he thought that it could be proven? If the business's unreported sales and profits don't support a reasonable asking price for the business, walk away. Find another business to buy that is run on the up and up. It's your money and time you are about to risk -- don't be foolish.

VALUING THE BUSINESS

Valuing the business is not as hard as you think, but you should never completely rely on a broker's or seller's estimate as to what a business is worth. Remember that buying a business is fundamentally an investment and consequently the business is worth only as much as its ability to generate profits for you based on how much money you must put into it. If you are going to work in the business as most people do, then the business should also pay you a fair wage in addition to the profits. The best way to determine a business's value is to work backwards from the available profits that a seller can prove.

For example, let's say that a business has a total of $100,000 pre-tax profits (proven by IRS tax returns for the latest full year of operation), before allowing for an owner/manager's wage. You plan to work full time in the business (and believe me, you probably will!), and a fair wage for the work if you were to hire someone to do it is $40,000. That leaves $60,000 of available profit to work with but don't forget to deduct the income taxes that you'll have to pay on this, probably about $18,000 depending on the state and city the business is in, plus other personal factors (figure at least 30%). That gets you down to about $42,000 of profits left to be able to either pay off the debt you incur to buy the business or to provide you with a reasonable return on your cash investment (if you're lucky enough to have this much cash).

There are many ways to work with this $42,000, but most lenders of money to buy a business, whether they are the sellers themselves or others, want to see a relatively short payoff term (let's say 5 years) and a fair interest rate on the money (let's say 10%). When you do the math to determine the values of $42,000 yearly payments for 5 years at 10% interest, the amount turns out to be about $165,000. This is the approximate total value of the business and a good starting point for negotiations.

When I say total, I mean total. The total value and therefore the business's selling price must include all closing costs, assets, transfer and franchise fees, etc. Remember; a business is worth only as much as its ability to produce profits for you. Of course, if you change the time period for payoff of the purchase price, the interest rate, the anticipated taxes, and other factors, the price you can afford to pay for the business can go up or down.

SKELETONS IN THE CLOSET

Other things that you must watch out for are the "skeletons in the closet." These are hidden problems that many businesses have and which may be motivating the seller to unload. You'll have to be sort of a detective to find these, but I'll list a few here so you get the idea of what to look for:

* personal affairs of the seller that may affect the ability to sell the business (e.g., divorce)
* credit problems with banks and/or suppliers
* historic downward business trends in the seller's particular industry
* downward business trends for this business in particular
* recent bad publicity, bad reports at the Better Business Bureau, etc.
* expiring patents or licenses
* the potential non-renewal of a major sales account
* significant increases in rent to be expected (if the business space is leased)
* changing franchise terms that will increase operating expenses for the business
* an impending or actual zoning change that will make business expansion difficult or impossible
* major new competition (such as a new shopping center or a new mega store in the area) being planned
* increasing difficulty or expense in getting raw materials, products, or services
* unapproved existing variances in violation of zoning regulations
* leases that are non-assignable or non-renewable
* legal claims, encumbrances, and liens against the business
* unpaid taxes (income, sales, FICA)
* product obsolescence
* pending litigation against the business
* state and/or federal law violations that will require a major expense to correct
* poor management of capital assets
* obsolete machinery, overvalued inventory
* partner and/or shareholder who may not concur with the seller's desire to sell
* potential major increase in product liability insurance
* potential labor union or other employee related problems
* inability of a buyer to replace a "superman" seller who has a unique capability for running the busines
* non-compliance with environmental and/or safety requirements
* recent suspension of a liquor license for regulation violations
* need to hire a policeman to handle rowdy customers at certain times

SO WHAT SHOULD YOU DO?

Although buying an operating business is filled with many potential pitfalls, it is still one of the best ways for a beginner to get into business. There is a proven track record, an existing customer base, a well known name, location, marketing and sales strategy, etc., etc. If you buy the business properly, without overpaying and not taking on any fatal skeletons in the closet, you will have your instant piece of the American dream to be your own boss and to control your own financial destiny. Get all of the information you can to educate yourself about what to look for and what to look out for. Study the particular business that you are interested in and don't let anyone push you into buying. Tens of thousands of successful business sales take place every year and the key to a successful transaction is information and knowledge on the part of the buyer.

Examples:

1. Here in Oz, a survey of businesses in the state of Victoria found only 6% expected business conditions to improve over the next 12 months.  That indicates quite a bit of pessimism.

2. In the US, a report indicated house prices in California fell 26% in March 2008, driven by foreclosures

3. Crude oil prices reached an all time high to US$119.90 a barrell.

That's just a small sample of the bad news in the media. 

But is it all really bad?  Some good news:

Down markets and hard times are also great opportunities for buying.  It takes some courage and some work to find the gems but there are likely to be very good buying opportunities in stocks and property, in Australia, the US and elsewhere. 

Adversity, like necessessity, can also be the mother of invention.   It forces us to get creative.  If we always do what we always did, we will always get what we always got.  So in hard times, we have to try different things.

I read that one time a car dealership was struggling with slow sales during a down turn.  Then they tried something different.  They took a few of their up market models and drove them to a few country clubs and other places that wealtier people hang around.  And they offered free test drives at those locations.  Apparently it really did boost their sales. 

In hard times, we have to try different things.  Differentiation & alternative ideas will win in the down market. 

It would be great to hear about some new things any readers have tried with success (or not) or have heard about. 

We need to support each other in these harder economic times.

Cheers

Tom

• your net cashflow growth rate, and
• your business risk levels (things that can make your growth rate unsteady or occassionally negative)

You want fast growth with all your key risks well managed.   There is a little trade off there but its essential to manage both!

Stay on top of those two factors and you will be working on the two most important drivers of any valuation multiple (like a price-earnings ratio).

Today's conference call, "I Hate My CMS: The Perils And Promise Of Content Management Systems," jointly-sponsored by the Society for Information Management and the Internet Strategy Forum, scored a home run. The 90‑minute panel discussion drew participants from across the country, including some on the West coast, awake at 5:30 AM for the chance to participate.

Bottom line

Very few of yesterday's implementation issues have changed since I got involved with CM in 2000: the platforms are still big and complex; the choices, confusing; the question "Build or buy?", still haunts, and is still misunderstood; and the main vendors are still Interwoven and Vignette. But‑most tellingly‑the advice from hard-learned lessons is still the same:

• Get buy‑in and mandate from the top, and work down.
• Start small, and don’t bite off more than you can chew.
• Respect and understand the complexities of building your business' web presence.
• Last, and not at all least, training and documentation for developers and is a critical success factor.

The webinar should prove to be a great introduction to the benefits of the technology, both from an administrator's and IT management perspectives.

Registration is free, and the webinar is an hour long. I'll be there - and hopefully, I'll be able to meet a few of you "in person."

Details:

Desktop Management - The Business Value of Application Virtualization

March 18, 2008 11:30 AM - 12:30 PM EST

This is a FREE event. Registration link is below.

Attendees will understand how organizations around the world have leveraged application virtualization, to realize measurable business value. Both Gartner and Forrester have called application virtualization the technology to watch in 2008. Learn how businesses combined the newest technology, desktop management best practices and support changes to achieve significant savings.

Planned 45-minute agenda follows:

• Introductions
• Business Drivers
• Application Virtualization and Desktop Management Overview
• Business Value
• Demo
• Questions and Discussion

For more information please contact: IOConsulting@getronics.com

Registration page at:
http://www.getronics.com/us/en-us/getronics/events_data/desktop_management_form.htm

Beware the perception of PM as paper-pusher. Schedules, status, coordination, all matter. But if this is what people think our job is, forget about being highly valued. Paper is a tool for, and can help with, analyzing, summarizing, communicating, and identifying goals, work, problems, etc. But the paper part of our jobs can't get us all the way to solutions for complex problems-and focusing too much on that aspect can turn people off. If that happens, they may never see the highest value we do have to offer.

Its a good point but this weakness in the profession is reinforced by the language and concerns of too many PMs - the talk is of compliance, scope creep, reporting and change control ... rather than the language of business value, learning, opportunities that gives the profession a bit of a negative image and a perception that project management is from another era (not two point zero enough!).

My post Project vs. Program vs. Portfolio back on October 15, 2007, continues to be the most popular post on my blog, day after day.  Given that, I feel compelled to drill down further into this topic.  Today, I will address IT Portfolio Management, which is at the heart and soulof leveraging IT for business value.  And yet most IT organizations do a poor job of managing IT investments as a portfolio.  At its best, IT Portfolio Management (PfM) is a way to:

1. Define your investment strategy for IT - including needs for risk/return, innovation, common enterprise-wide capability.
2. Make that strategy visible and understandable to business executives to allow dialog and debate to reach agreement with key business stakeholders.
3. Monitor performance of the IT portfolio.
4. Adjust the portfolio based upon actual performance of IT investments.
5. Adjust the portfolio based upon changing business conditions.

At its worst, PfM is simply a laundry list of projects, or, even worse, a collection of laundry lists, one or more for each business unit and corporate function.  What are the common mistakes being made here?

1. There really is no tangible IT investment strategy - just a bucket of money and funding sources.  Projects get picked off until the bucket and funding is consumed - everything else sits in a backlog.  In so far as prioritization is concerned, at best it is within business silos, at worst it's based on squeaky wheels and politics - not potential business value.
2. Business executives have a hard time understanding and engaging in portfolio investment decisions based upon laundry lists of projects - in fact, it can't be done!
3. You can't monitor portfolio performance based on a laundry list of projects.  Yes, you can monitor project performance (though from my experience, if you don't have the financial and management discipline to use PfM properly, you probably aren't monitoring project performance except from a time/budget perspective, which tells you nothing about business value).  If you can't monitor portfolio performance, you can't make adjustments based on data - at best you adjust based on politics and knee jerks, at worst, you don't adjust.
4. You aren't really thinking about risk/return profiles in a meaningful way - this tends to emphasize low risk, low return initiatives and starves the enterprise of the more innovative and potentially "game changing" IT plays.
5. Often the portfolio only addresses new, major project initiatives - IT services and smaller projects are not under the umbrella of PfM - and yet these "non-big" activities typically consume 60%-70% of the IT budget - the lions share is untouched by PfM disciplines.

This gets to my title point about sustainability - if PfM is not firing on all cylinders, the business won't see the value, the costs of IT and business value delivered through IT will not be impacted over more than the very short term, and PfM won't achieve a critical mass of benefit to overcome the organizational inertia, and will fail.  I will come back to this point in subsequent posts.