Lockheed Martin has implemented some award-winning innovations to shape the future of IT financial management for direct business value. I recently interviewed Lance Freedman, IT Strategy and Transformation, Strategy Lead at Lockheed Martin, about their strategies for educating business units to take ownership of their costs, and how they prioritize the critical demands on their budget.

Amber Scorah: What strategies do you find effective in educating the business units to take ownership for their IT costs?

Lance Freedman: One critical success factor is centered around perception of the change. If professionals in the business do not recognize a problem, they will resist taking ownership of their IT costs. To see the problem this solves, it is helpful to assemble in one document or presentation all of the incidents that when viewed together induce the “a-ha” moment of problem recognition. Once stakeholders see why it is unwise to continue as is, it becomes imperative to collaborate with them on possible paths forward.

There are many options. Only by addressing each discrete choice with the stakeholders can everyone achieve first-person confidence there is no unexplored, better avenue. It is during this phase that stakeholders come to see for the first time added costs and squandered labor hours implicit in certain models.

Next, a leader must step up to own the decision to act. Inevitably, consumers of IT will gain significantly improved insight into the breadth and magnitude of their consumption. In cases where this is greater than their prior presumptions, some parties will resist integration and seek to revisit option selection. A clear decision owner serves the organization by refreshing stakeholders on why alternate options were not selected. They also serve as a safety brake blocking backward steps.

Transparency during implementation fosters trust in the fairness of charging. Once the new model is in place, highly visible recognition for the implementation team serves not only to reward high performers but also to affirm to all that this completed change is “the new reality.”

Amber Scorah: How do you incorporate the cost of IT capital into your overall department investments? What is the reasoning behind this?

Lance Freedman: All IT investments deserve the same level of scrutiny. Capital or expense, investments need to be evaluated and prioritized for resourcing based on a clear cost-benefit analysis.

Amber Scorah: How do you prioritize the critical demands on your budget and identify what to remove?

Lance Freedman: Every year, company lines of business make tough decisions on how they will put the same numbers on the board in the upcoming year as they achieved in the preceding year. These business decisions effect change to the capabilities at which the business must excel.

Wise IT leaders pay close attention to these changes and ask direct questions to clearly understand which business capabilities face performance deltas. The exact nature of each capability change should be well defined.

For each capability within the business, it is important to determine precisely what improvements constitute success. A business process performed faster? Cheaper? At a higher degree of quality? Once needed business changes are ascertained, IT professionals can ask whether information technology can be leveraged to achieve that progress.

In some cases, the answer will be no. In other cases, IT will be able to contribute. IT is important to distinguish the few, “big leaps” IT can help the business achieve. These determine the highest priorities for IT.

Mr. Freedman is a speaker at the IQPC IT Financial Management Week, July 23 to 25, 2012. For more information, visit www.itfmweek.com.

Amber Scorah, Online Content Editor, Finance IQ, email: Amber.Scorah@iqpc.com; web: http://www.linkedin.com/pub/amber-scorah/9/875/456