How to Re-Allocate Trapped Value in Your Organization
By Jay Keating, SVP of Service Delivery
A major aspect and anticipated benefit of the digital transformation process for most companies is achieving savings—both in terms of costs and efficiencies. In fact, identifying efficiencies and savings is often an essential early step in order to provide necessary funding and focus to fuel transformation initiatives. One significant, albeit often overlooked, way to create efficiencies and savings is to identify areas in the company where you have “trapped” value and to reallocate that value by aligning your IT budget with business priorities.
Business Challenges Contributing to Trapped Value
There are several potential reasons your organization may have trapped value. Together, these reasons represent an enormous level of risk—and opportunity—for your business.
In many companies, the IT department spends a significant amount of time being reactive and fighting to maintain the status quo; there is little opportunity to act proactively to align IT resources with business priorities, and the status quo may not even be acceptable in terms of current-state outcomes.
Another challenge is that the aging IT infrastructures in most companies are becoming increasingly complex and widely distributed, thereby making governance and maintenance activities less and less efficient to perform.
Even in organizations that recognize the need to innovate, reallocating trapped value is a challenge. Under increasing pressure to deliver new capabilities and develop new services, many IT teams struggle to adequately invest the appropriate focus and allocate funding needed to modernize and manage what they already have. The idea of adding new operational responsibilities to an already inefficient process may be daunting and could thwart innovation efforts through unintended resistance.
Potential Sources of Trapped Value
When you recognize that you may have an opportunity to reallocate trapped value, your first step should be to identify where that value may be lurking. Finding trapped value isn’t always easy. It’s also important to understand that trapped value includes “hard dollars” as well as value lost by shifting employee focus from productivity to non-operations activities.
The answer is to evaluate your business structure and consider whether you could have trapped value in one or more of the following areas:
- Value Creation. This stage includes value trapped because of inefficient markets, unmet demand, or inelastic overhead.
- Business Operations. Your organization may be relying too heavily on antiquated processes, making decisions based on uninformed interactions, or losing competitive advantage because of extended decision cycles.
- IT Operations. Trapped value can also be lurking in your IT operations. Organizations that rely on in-house data centers and / or legacy paradigms often struggle with trapped value, as do companies whose infrastructure gives rise to network bottlenecks. Your software release model could also be a contributing factor to trapped value, particularly if heavily reliant upon manual effort.
Identifying and Reallocating Trapped Value
If you are successful in identifying trapped value in your budget and workload, you can reallocate it to other, more strategic focus areas such as infrastructure modernization, cloud enablement and operations, digital transformation, and security.
To identify trapped value inside your organization, you will need to perform a series of initiatives that, together, will give you a good sense of where your trapped value is. When done well, this exercise should also help you identify the best areas to reallocate and invest those funds. Key steps include the following:
- IT Strategy & Planning. Take a deep look at your organization’s IT strategy and planning process. If the department isn’t taking a proactive approach or engaging in big-picture planning, it could actually be adding to the company’s trapped value problem.
- Financial Analysis. Look at your organization’s current state budget and draft target state budget, and conduct a thorough ROI analysis.
- Operations Maturity Assessment. Assessing how mature your business and IT operations are is an important step in improving organizational awareness and accountability.
- Current State Assessment & Gap Analysis. To be effective, you also need to conduct an honest assessment of the current state of your IT infrastructure, including a thorough risk and threat assessment and a gap analysis. How prepared are you to handle the IT challenges of tomorrow, next week, next year, and so on?
- Target State Mapping. Finally, picture your target state. What does your infrastructure look like? How are resources deployed? Create a prioritized roadmap for improvements and essential investments.
Business Outcomes of Reallocating Trapped Value
When you are able to identify multiple ways to reduce and recover the business costs of maintaining legacy systems through consolidating, replacing, simplifying, outsourcing, or retiring them, your organization will be positioned to realize several benefits.
You’ll be able to recover and redirect essential cycles and budget to enable forward investment in strategic imperatives, improve organizational awareness and accountability, and ultimately implement a prioritized roadmap for improvements and essential investments, such as new products and services to generate top line revenue and/or tighter client engagement and relationships.
Commit to Realizing Full Value as You Embark on Digital Transformation
One of the challenges with digital transformation and releasing trapped value is that most organizations are satisfied once they achieve cost savings; they don’t reinvest those savings. Be bold in your thinking, and don’t merely stop and declare victory once you begin realizing cost efficiencies. Instead, use that savings to create sustainable growth and gain a competitive business advantage.
Of course, if you are already struggling with IT bandwidth and resources, the idea of engaging in this exercise may seem like an insurmountable task. If you don’t have the capacity in house to perform a trapped value assessment, there are companies who can perform it for you, such as GreenPages. One major benefit of this approach is that you will also receive a deliverable plan that includes timing and dependencies, as well as recommendations for delivery support. This added value can help you put your plan into motion.
To learn more, contact GreenPages today. Our Trapped Value engagements help organizations successfully identify, recover, and redeploy key assets to fuel innovation and growth initiatives.