Reimagining the Business Case for Digital Initiatives
I once attended a talk in which a muddled speaker told us we should FAIL. After some awkward back-peddling, the message was corrected to say - "don't be afraid of failure, but if failing, then fail fast, learn from the mistakes and move on".
Dan Lyons references the fail-fast ethos in his amusing book “Disrupted: My Misadventure in the Start-Up Bubble.” Here, he notes that, one of the many things digital startups do well is having a clear sense of shamelessness - but not in a bad way. Startups often launch things that fade away or quickly move in a different direction. They’re not embarrassed. They are OK with failing, as long as they’re growing.
The fail-fast mentality helps promote risk taking, which is good. A potential downside is experimentation without clear business objectives and end goals. Rather than innovation, the end result can be wasted time, effort and money.
So, what's the right balance?
I started my career working on multimillion dollar enterprise IT system implementations. My first project was implementing the world’s largest global SAP project at the time for Ericsson in Stockholm. The first step in these transformations was always the business case, which included a comprehensive ROI model. A concrete ROI was the trigger that set off a meticulous transformation planning process, including people change management, business process reengineering, functional designs, technical designs and so on. We followed a waterfall approach, meaning each stage was signed off before starting the next. Any mistakes were potentially highly embarrassing. We would spend months analyzing plans, costs and benefit models before lifting a technical finger.
While organized, the old-school approach was far from perfect. Large-scale IT projects often overran on budget and timeline. Benefits were often over-egged and costs underestimated. Many IT projects failed - and they failed big and they failed slowly -- sometimes over years.
Of the hundreds of ROI models I’ve worked on, rarely did an enterprise fully execute a subsequent benefits realization against the original business case. Arguably, the ROI models were shelfware as soon as the project started. Despite this, the business case process remained an essential stage-gate.
Starting a project without a scrutinized and ratified, not to mention fully documented, ROI model and plan would be unthinkable, never mind practically impossible. The ROI was the vehicle to free up budget, get stakeholder commitment and mobilize resources.
The need for this style of business case applies less and less in today’s digital landscape.
Today the detailed business case appears to have fallen out of fashion. We see a faster pace of digital with agile methodology; small, incremental, iterative work cadences with empirical feedback. Agile teams evolve solutions through collaboration, allowing teams to fail small and fast, and quickly move on. We can make progress, while responding to unpredictability.
Few of my customers include an ROI model as a prerequisite to allocating budget for a digital initiative. Creating robust financial models for many customers just doesn’t seem to be that important - certainly not a priority. The ROI is often a curiosity at best. Dan Lyons observed a sense of shamelessness in startups. In my case I see a sense of experimentation in many approaches to digital investments. Things might work, they might not. Where tech teams lead an initiative, the team doesn’t want to set goals for the business. The ROI can be ignored.
So what?
Similar to Dan Lyons (although not quite as old - a joke he'd get), I find myself having to adjust to a new way of working. I’m not arguing for a return to the old waterfall approach. Far from it. But I do think, as Dan articulates, in the race to adopt new ways of working, we’ve perhaps lost some of the good things in the old ways. So, I’ve tried to articulate my thoughts on this trend here:
I suggest an agile approach to writing business cases. This allows for the experimental, agile element to development. Instead of documenting benefits and assumptions in minutiae detail and assuming that a minimum 3-5x ROI is required before proceeding, we can roughly model value.
Value can still be in the form of a hard benefit -- it can include ROI and/or reduced total cost of ownership (TCO)… but often it may be a soft benefit. These include the unquantified, intangible benefits, such as enhancing performance, presence, customer experience, reducing effort indirectly and/or simply keeping up with fast moving trends.
The purpose of the ROI can change. Focus can switch, for example, from:
Pre-transformation: An assessment can help support managerial decisions and secure stakeholder commitment, helping decision makers identify what’s at stake. It can help secure the budget, managing total investment costs, with a clear justification for these.
The assessment can also help during transformation. Many projects fail through lack of governance and control. A good value assessment can maintain overall buy-in and focus on execution.
Post-transformation: The assessment should always act as a benefits realization baseline – this is essential for continual service improvement (CSI). If you’re not measuring something, how do you really know if you’re maximizing the benefit of that thing?
A good ROI, like any a good business case, should help align your digital plans with your business strategy and ensure you have the right operating model for execution. The assessment should help set a goal but also help you realize that goal with sound advice to maximize potential value.
An assessment helps drive digital platform choices, such as, open source, open APIs, cloud, security and governance. You can organize your change program and operations around your value assessment and ensure the people underpinning any digital transformation are all on-board. This will all help drive impact.
With these lessons, I believe value should be built into every digital initiative. Ideally, ROI models would be completed at the start of an initiative and should live with it. But, as above, they can also be completed part-way through and after too. Gartner found that nearly two-thirds of tech buyers would purchase more from existing providers if they saw value from their initial investment being clearly demonstrated.
The value assessment is a tool to help you think about what you’re doing and why -- it is a way of practicing (modeling) before execution. This helps you learn from potential failures before failing. It helps to create a clear robust plan, based on business returns. In the end, it is the value that should drive behaviors.