Valuing the Benefit: Predictive Lift and Data-driven Management

How much is it worth spending to solve a “large” problem or receive a “large” benefit? $10,000? $100,000? $1MM? $10MM? More? Less?

At many companies, annual plans come from a few buckets like “high/medium/low cost” and “small/medium/large” value. Those broad categories aren’t enough to instill confidence in the value tied to key initiatives.

One of our clients’ most common asks is for help assigning realizable value to a particular initiative, project, or IT investment. If done effectively, quantified value helps prioritize projects and cascades directly into annual budgets, strategies, and investor communications.

Vendors Make Forecasting Sound Easy

Vendors are quick to tell you that over the next 12 months, you could rack up major wins based on prior clients or their “forecasts”:

$20MM/year of savings or more = $30MM software investment + $10MM implementation consulting investment + $2MM training investment

The sales spin promises the sky. But when projects wrap up, CFOs find themselves explaining concepts like “soft dollar value,” “unusual market conditions,” or even “lower-than-expected uptake” to the Board, hoping that the original forecasts have been forgotten.

Forecast Project Value without the “Fingers-Crossed Math”

We find that organizations get lost in a litany of inputs without actionable insights. Systems promise to “reduce mistakes,” but what is the current cost of poor quality? Systems will “improve customer experience,” but what will this mean for attrition or customer satisfaction?

Is this something your customers actually care about? Let’s break it down to the basics. The trick to getting a good dollar estimate of project value is to keep it simple:

Total project value =

(Value of total opportunity) – (Opportunity that this specific project will not address)

At Ramaley Group, we call this the predictive lift of the project. This helps us answer the fundamental question: “How much should we be willing to spend to complete the project with adequate ROI?”

For Example:

Your company identifies a rural bank branch with a single teller. You don’t intend to close this branch or eliminate the teller. Therefore, there may be no value in installing a touchscreen kiosk inside the branch to pre-print transaction slips despite the apparent “efficiency” of a more rapid teller transaction time. The potential for improvement is meaningfully reduced by the fact that you will not address any of the branch’s actual costs.

Timing is Everything: Putting Predictive Lift to Work

Of course, timing the predictive lift is also critical – how rapidly will you realistically achieve that predictive lift?

What does the ramp-up period look like? And how will you measure the results as they are achieved? We have developed various proprietary measurement approaches to help our clients understand the predictive lift, as well as the opportunity and velocity of investment options. These are the cornerstones of a quantitative annual planning process.

Bottom line: If you want to have confidence when asking for a “big” investment, you'd better know more than just that it will have a “big” benefit

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