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 Chuck SchaefferA Better Way to Forecast IT Projects

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Too many IT projects begin without a solid business case or clear return on investment (ROI). A business case is needed to demonstrate alignment with the company’s top priorities, forecast accurate payback and prioritize the project among competing alternatives.

Without alignment to the company’s priorities, the IT project is at risk of being viewed as a departmental or siloed effort. Such a project may have value, but will fail to deliver a material impact to the business, and is thereby at risk of early cancellation when budgets get squeezed, competing interests emerge, or there is a change in company priorities.

Without a calculated payback, an IT project is little more than wishful thinking, has little basis to survive scrutiny and even when completed, is at much higher risk of failed user adoption because the perceived business disruption is greater than the uncertain benefit. Further, without a forecasted payback, it’s impossible to calculate an ROI and justify the investment relative to alternatives.

There are two common methods to demonstrate the value of IT projects.

A business case generally includes a project charter, business purpose, project objectives, the business problem to be solved, a broad approach, a high-level scope, stakeholders, assumptions, dependencies and risks. The business case method highlights some helpful information, but by itself doesn't offer predictable payback.

A Business Value Assessment (BVA) takes a different track. It still includes much of the business case content, but that's largely just background and positioning information. What makes the BVA different is its objective and measurable financial impact derived from specific performance improvements.

A Better Way – Business Value Assessment

The BVA takes a more measured approach, by comparing your company's business performance metrics to your industry peers, identifying areas ripe for improvement, and demonstrating how improving performance measures to median or best-in-class levels will impact revenues and profits.

Benchmark

The Business Value Assessment methodology uses a 3-step process:

  1. First, compare your production, marketing, sales, service or any other business performance measures to your industry peers using a benchmark database. The database I normally use is the AQPC benchmark database, which adheres to the open standards Process Classification Framework (PCF) and sources benchmark data from thousands of companies;

  2. Second, use the metrics comparisons to identify low performing areas, and areas that offer the biggest upside gains to revenues, margins or profits;

  3. Third, forecast how improving weak performance or high impact measures to median (50% percentile) or Best-In-Class (top 20% quartile) levels will add to revenues and profits, or reduce cost of sales or SG&A.

With this data, and an objective pro forma business model that is based on the actual performance results of your industry peers, you can then propose the strategies, methods and technologies to achieve those revenue additions or cost take-outs and calculate the ROI.

I recently finished a project for a client, and with the BVA methodology, was able to show how using Adobe Marketing Cloud capabilities to increase lead to customer conversions, and use CRM software to increase customer retention, from below median levels to the median, or 50% level, would grow the client's top line revenue by just over $8M dollars annually. The client recognized their lead to customer conversions were not great, and their customer retention had some issues, but didn't have concrete visibility to see how a change would specifically impact company revenues. With the visibility, kicking off the project was a no-brainer, and the company is well on its way to not just achieving the median level, which was their goal, but advancing to a best-in-class benchmark.

Benchmarks

The Point is This

The BVA methodology demonstrates greater business credibility by showing how technology delivers business results, comparing the company's performance to industry benchmarks, and forecasting measurable revenue impact or cost take-out from specific process changes. It can also quantify the cost of delay, providing hard evidence to act rather than defer. End

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Without a calculated payback, an IT project is little more than wishful thinking, has little basis to survive scrutiny and even when completed, is at much higher risk of failed user adoption because the perceived business disruption is greater than the uncertain benefit.

 

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