Innovation is critical for organisational survival. Whether it’s a new product innovation, or creating better and slicker processes, organisations need to adapt to stay afloat. They need to find new ways to reach out to their customers, and new ways of meeting (and exceeding) their customers’ needs and expectations.
This creates a dilemma. Knowing which project, product or initiative to progress next is a tricky choice. There’s often no absolute “right” or absolute “wrong” answer, and as a result people often rely on experience to make decisions. A recent HBR article showed that on average, marketers rely on intuition and “gut feel” over data, for 89% of customer-related decisions.
A rich source of data could be available to organisations to help them make decisions. One area where useful data can be found is the examination of benefits realised by previous projects. That is, understanding which new products and projects delivered the business and customer value that was anticipated, and which didn’t. This boils down to understanding which projects were good investments and which were bad.
The discipline of “benefits realisation” is thoroughly ingrained within the project management profession, yet statistics show that organisations rarely define and track these benefits. Figures from 2011 show that in the Insurance industry, measurement of benefits happens in only 25% of organisations. Another way of putting this is that in the insurance industry 75% of organisations have no idea whether their projects have delivered any benefits at all!
This presents an opportunity for smart organisations to take the lead. By ensuring that new initiatives and projects create actionable data after implementation, organisations are able to track the return on their investments. They are also able to embed data and analytical capabilities that help them with future decision making. This doesn’t have to be restricted to large multinational companies—in many ways small and mid-size organisations have more to gain by measuring and embracing project benefits realisation. They may well get an advantage over their larger competitors.
Before starting a project or initiative, organisations should consider what benefits they are expecting and how they will track them.
- Projection: Before starting a project or initiative, make a projection of the expected benefits and costs. This is often as part of a business case or cost benefit analysis.
- Embed KPIs: As part of the project implementation, make sure that data will be collected to help inform you whether the projection was accurate. Define “key performance indicators” to track the success of the project.
- Track: After implementation, keep tracking against the metrics you have defined. Have analytic systems in place to help you track the significance of this data—this might just give you the edge and help you make your next project decision!
When organisations embed the right KPIs and embed the right analytical capabilities to track them, they can move beyond traditional ‘project benefits measurement’. This helps them move towards a future where they are able to make informed decisions based on actionable data, rather than ‘gut feel’ alone.
This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet.