After identifying the main benefit buckets for the value model, we need to focus on the costs (and risks) that will be incurred in implementing Project Nova.

Typically, stakeholders look at costs and risks only from the perspective of their domain. Having a designed thinking session with all of the key stakeholders as participants enables everyone to have a holistic appreciation on what it takes to implement Nova.

The figure shows the design thinking exercise used to identify costs and risks. The costs were identified in blue and the risks in pink. The people, process and technology costs are almost ubiquitous in every project and so also in Nova. The other three cost areas: marketing, sales and customer are particularly relevant to Nova. I would suggest that you use the most relevant cost buckets for your project and if none are immediately known, going with people, process and technology costs for starters is not a bad idea.

If you peruse through the cost entries in the exercise, you will notice that most of the costs are easy to quantify. This is unlike the quantification of benefits which are usually harder to agree to.

Now, risks are also treated as costs in the value equation. As an example, let’s take the risk of employee attrition due to Nova. How can you convert this risk into a cost? Here’s how. Valuso has a workforce of 1000 employees. Let’s assume that the probability of a 2% attrition in the workforce due to Nova is 10%. If it costs $10K to hire a replacement employee and $1K to exit an employee (exit interview, removing access, knowledge transfer, etc.), then the risk of 2% employee attrition can be converted into the following cost:

One Time Financial Impact of Attrition = Probability of Occurrence * Cost to Replace Employee

= 0.10 * (10000 + 1000) * .02 * 1000 = $22000

In my next blog post, we will talk about KPI identification.