If business value calculation and modeling was indeed easier, why then the hesitation? In my travails as a business value advocate, I have seen leaders prevaricate on the notion of quantifying value. One of the main reasons is that they do not want to commit themselves to a number and get into trouble with their stakeholders, either internally or externally.
An approach to overcoming this quibble is to look at value development at progressive levels. The following diagram helps to illustrate my point.
- Notional Value: When you first begin to envisage the initiative, you may have an experiential instinct that there are certainly benefits but you don’t quite know the extent. So based on your (or the team’s) experience, you might conjecture that it is worth exploring further. You might make some “back of the napkin” calculations and take swags at estimating benefits.
- Directional Value: This is the next level of quantifying the value of your idea. At this point, you may have begun discussions with other who are specialized in this field. You may also extrapolate from benefits drawn in similar industries. Industry knowledge helps to identify the right benchmark metrics and the benefit buckets. Some benchmarks may be available but not all of them. This is a good model to do some limited socialization with some passionate stakeholders.
- Detailed Value: At this stage, it will be specific to the organization. It will also be specific to the initiative and the benchmarks should necessarily reflect that. In innovative projects especially, no previous benchmarks may exist. If so, then it is a good opportunity to instrument the project with the appropriate telemetry.
- Auditable Value: This is the most detailed version of the value model. The bean counters will get to work at this stage and make it ready for both external and internal consumption. Auditors may likely attest to some of the information and the leaders are now comfortable touting the value of the initiative.
