In this post, we’ll examine the key questions you should answer in your business case to demonstrate business value and benefit as compared with cost for long-term innovation investments.
A global tire company provides offline access to sensitive pricing information and customer data, empowering remote employees to close business faster.
A large heating supply equipment wholesaler updates legacy inventory management systems for their warehouse to move products through faster, reducing overall cost of sale.
Logging companies solve transportation inefficiencies by pooling data collected from GPS trackers and developing an innovative software solution to craft and visualize that data. This enables them to boost profits, minimize waste, and reduce carbon emissions.
These are all real stories from our clients, and they all share a common factor that played a vital role in their overall success: they had specific, measurable goals that made it possible to quantify outcomes.
When you’re building a business case for software innovation, this ability to articulate and measure outcomes is the fixed point on which the success/failure pendulum swings. If you can’t pinpoint the goals you want to achieve and the benefits the software will provide, it will be difficult if not impossible to make a convincing case for resource investment.
For most companies, it’s pretty easy to justify an initial software innovation endeavor. During that first phase, you’ll be developing and implementing the new software, and you’ll see significant improvements in your key metrics as processes become more efficient and you’re able to boost profit, increase production, or reduce waste (sometimes all three).
But after that initial phase has been completed and you’re moving into your long-term transformation strategy, demonstrating benefit can be a little trickier. The most pressing pain points have been addressed and additional improvements can become harder to quantify. Even here, however, the focus should still be on measurable outcomes. How will your investments help you boost revenue, reduce scrap, increase cycle times, or achieve another desirable goal?
If you have planned your innovation strategy well, you should see benefit realization in excess of what you spend within the first six months (at the most). Once you hit that mark, your investment curve should always remain underneath and behind your benefit realization curve. In other words, you should be achieving benefits faster than you’re spending not only initially, but also over time as each step creates greater value.
For example, here’s what that might look like for an analytics automation initiative:
As you gather data to present to your CFO or other decision-makers, having a firm grasp on this projected curve will give you a good foundation for justifying the cost of long-term investment. But how exactly do you go about making a strong case?
4 Questions To Ask As You Build Your Business Case
As you prepare to present your business case to senior leaders or executives, keep in mind that they are primarily concerned with tangible business benefit. Think about what your company’s executives have identified as their most important enterprise objectives, and demonstrate how long-term technology innovation will support those objectives with quantifiable improvements to processes, sales, or other key functions both immediately and over time. How will this initiative continue to move key metrics through each progressive stage?
Let’s take a look at four questions your business case should answer.
1. What are the measurable outcomes this initiative will achieve?
The goal here is to identify and quantify the opportunities inherent in the investment. Frame these outcomes in terms of your company’s stated objectives. How will the new strategy increase revenue, boost productivity, acquire more customers, reduce waste, improve efficiency, etc.?
Resist the temptation to focus only on software features and technology capabilities. Those aren’t persuasive from a business standpoint. Instead, you will need to show how investing these funds in software innovation will progressively move the needle in key areas for the company. For example, ask questions like these:
- What will the business achieve by spending this money?
- How will this investment benefit us immediately?
- How will this investment benefit us long-term?
- What intangible, qualitative outcomes will we achieve (employee retention, customer retention, improved brand image, etc.)?
2. What are the specific metrics you want to move?
The next step is to drill down into specific metrics. It’s good to show that the initiative will help you increase revenue, but it’s better to pinpoint which metrics will contribute to that outcome. Metrics should be specific and quantifiable, and they should clearly demonstrate whether or not you are moving in the right direction. The particular metrics you highlight will depend on the nature of the innovation, but here are a few examples:
- New products launched
- % Revenue growth
- Improved cycle times
- Higher profit margins
- New customers acquired
3. What are the short-term and long-term benefits?
Your business case should identify not only the quick wins, but also the long-term transformative benefits the initiative will secure. Short-term quick wins will help you unlock immediate business value, and long-term transformation will support future growth and new opportunities beyond what is currently possible. As you build your case, be sure to include both benefit categories.
4. What is the cost of doing nothing?
It’s easy to focus only on projected ROI in the business case, but don’t overlook the fact that choosing not to act carries its own costs. If your technology remains stagnant, you will progressively fall behind your competitors. You may lose customers to other companies who can provide better, faster service. You may close fewer sales because processes remain inefficient. You may fail to differentiate your company in a ruthlessly competitive marketplace. All of these scenarios carry costs that should be included in your business case alongside projected benefits.
The Key to Successful Cost Justification
Once you have done a detailed analysis of projected outcomes, metrics, and both short and long-term transformative benefits, you’ll have the information you need to make a persuasive case for investment. Alongside budget numbers, cost/benefit analysis, and a detailed plan, your assessment of benefit realization and measurable outcomes is crucial in receiving approval.
At Worthwhile, we emphasize measurable outcomes for every initiative and every client because we believe that all innovation should rest on a strong foundation of specific, quantifiable benefit. Our goal is to help you think through these considerations before you find yourself knee-deep in a technology initiative that isn’t getting the results you want.
Looking to bring your ideas to life?
We are committed to guiding you towards the best solution for your business.Schedule a Call With Us