Do You Know the Value of the Projects You're Working On?
We often dive into digital transformation projects because they tie into a strategic initiative or appear on a stakeholder's wishlist, although the value of a single project is often murky. Let's explore why that happens and walkthrough an example to see why it matters.
Why are organizations not able to estimate the expected value of a project?
The top three reasons that I see are:
Resources are too constrained to perform an analysis of expected value
It's too hard to quantify how a single business process works because of some combination of high variability, poor documentation, etc
Organizations don't make data-informed or data-driven decisions and rely instead on the intuition of leadership and imitating competitors
However, none of those justifies skipping value estimation for your projects.
Consider this example: a project is proposed to change how data is organized and displayed to stakeholders who want to better understand and manage customer preferences.
Seems innocuous, right?
Well, there are many different ways to solve that problem (assuming we've spent time framing the problem to know it's the right problem to solve in the first place).
A common and straightforward approach involves integrating two systems together, which comes with a five to six figures per year increase to expenses.
If we're using a vendor to build this integration, there is another expense in the five to six figures range that will hit in the first year.
We might also explore whether automating or outsourcing is better for this project.
Regardless, the expected value of the project is a constraint that drives which solution is built.
If the current state is one person spending half a day per week on this work, is it worth incurring an additional $75,000 of expenses annually for technology licensing and usage to replace that person's time?
Probably not, unless that person is a member of the executive team.
By understanding the expected value of your project, you can ensure the solution is value additive to your organization.
TLDR: Estimate the value of each project in terms of dollars. Revisit the estimate during the project to avoid any solutions diluting the expected value.
