Estimating Business Impact…Simply

by Bill Bliss on March 13, 2011

in Aligning All Investments

In Why Are We Doing This Project, Anyway? I discussed why it’s important to assign every project to a business objective.  And in The Un-Innovation Trap, I discussed what can happen when your business objectives are narrowly focused on “short term revenue.”

That’s not to say that it isn’t useful to calculate ROI for software projects; it definitely can be.  But it does take time and effort, so many people don’t bother.  Instead, most people I’ve talked to use “Priority” as the way to stack rank projects relative to each other.  The problem with “Priority” is that no one ever agrees on it, which makes sense: it’s inherently subjective.

The Roadmap Integrity Process uses a different approach.  We consider every business objective, conceptually, as the “finish line” of a race.  Presumably, every project, whether it’s an entirely new product, a new feature, or an enhancement of an existing feature, gets you closer to the “finish line” to some degree.

Very simply, we ask this question for every project: “If the project is successful, how much closer to the ‘finish line’ will we be?”  There are only four possible answers:

  • Minor. Closer to the finish line, but few customers or stakeholders will notice.
  • Noticed. Customers or stakeholders will definitely notice the functionality and/or progress towards the objective.
  • Significant. The project will make significant progress towards reaching the objective.
  • Game Changing. Relative to our current state or competitors, this could change the rules of the game.

There’s a subtle point in the above list: you must understand who your customers and stakeholders are. Broadly speaking, it’s anyone for whom your development team does project work on behalf of. “Who are your customers?” is probably worth an article in itself, but for now, it’s sufficient to know that you must have an answer.

Business Impact is determined by, and must be justified by, the person who puts the project on the list.  That person’s name is also recorded. Asking someone to estimate, on the record, “how many people will notice?” is subtly powerful. It’s hard to hide a pet project that way: either you can make a persuasive case that a lot of people will notice, or you can’t. There are no numbers to fudge, and since the spread between values is intentionally large, in practice, people don’t disagree very often, or for very long. And since business impact alone isn’t the sole determinant of whether a project is approved, there’s not as much incentive to “game the system” as when ROI is the sole factor.

Last but not least, while these are obviously qualitative assessments of business impact, if you do have the resources and expertise to calculate ROI, it’s easy enough to define quantitative definitions for business objectives that lend themselves to it.

The takeaway? The Roadmap Integrity Process uses a simple but powerful approach for estimating business impact: require the person asking for the project to estimate how many people will notice if the project is successful.

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