BENEFITS, BENEFITS, BENEFITS

In May/June 2020 we spoke to 20 of New Zealand’s leading CDOs and CIOs. We asked them to tell us about the challenges they were facing with their digital transformation journeys. Unsurprisingly we found some common themes and we summarised them in this infographic 5 Top Challenges for Digital Leaders . Each week we will look at a specific challenge in more detail. 

This week we look at setting and tracking benefits for your transformation programme:

Project benefits have always been the bane of digital leaders’ lives; particularly in recessionary times when investment money is tight and there's high internal competition for project funding. So right now, it’s a very hot topic.
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Broadly we’ve heard two main challenges relating to benefits:

1. I’m not confident in setting and committing to financial and business targets for my transformation project;
2. Other stakeholders aren’t prepared to trust that my project is going to deliver the benefits when and where they’re forecast to be delivered, (especially if there is a Benefits Owner who receives a budget impact from your project but isn’t directly responsible for project outcomes). 

​In these budget-constrained times digital leaders need to operate on a “track me, don’t trust me” basis, meaning that you are developing a track record of good financial discipline and are meeting or (even better) exceeding the benefits commitments you promised when you received funding for your project.

​This can be a scary proposition but remember it’s not personal. Your shareholders expect your company leadership to have rigour around what projects get prioritised and funded.

A word about the definition of “digital transformation” - in our context it can refer to either activities that digitise the front-end customer experience of your organisation, or use automation and digital tools to digitise your internal processes and staff experience.

​So here’s some ideas to get you started on your journey of great financial discipline for your digital transformation programme.

Step One: Sort out the basics.

Ask your finance team to help you develop a simple benefits forecasting model that focuses on the key drivers for your business. Work with your key stakeholders to get a single source of truth for calculating key benefits for a digital or automation initiative. There are three things you’re looking to confirm:

1. The "menu" of cost or revenue drivers that a transformation initiative might reasonably be expected to directly impact. ​Cost benefits might be from reducing manual processing, rework or customer queries; or eliminating third party processing or manual fulfillment costs. Revenue benefits might be associated with average purchase size, repeat purchase volumes, cross-sell or upgrade results. These will obviously be specific to your industry and your programme scope.

2. The base rates for these key revenue or cost drivers (or if that is not yet known an agreed methodology to determine them), and how you will track them going forward. For example: if your business case is based on reduced operational effort – agree how you will set the baseline measure for that effort now and how/when you will re-measure it after the change is implemented.

3. How you will bake the benefits into your business’s operating plan. Will adoption of the digital function be a gradual process or will you turn off the old manual way of doing things? Have you allowed for sufficient support functions for the new digital service? Work with your stakeholders to agree the realistic impacts on your business and build them into your methodology.

Once you’ve agreed your benefits forecasting model with your key stakeholders ask your CFO to sign it off. That way you know your finance colleagues will be supportive of the approach, regardless of the internal business team they happen to work with. Meet regularly to review how the process is going and amend as needed. 

​ A note about indirect benefits
You’ll notice that we haven’t talked about the indirect benefits associated with a project. These can often be problematic. Project teams enthusiastically attach indirect or “soft” benefits to a project, then somehow financial benefits get assigned to them and before you know it there’s a giant expectation of what your project is going to deliver which isn’t realistic. Soft benefits are often used to get a business case approved in the first instance (and that’s a whole other topic for another day). My advice is to steer clear of indirect benefits when agreeing the financial impact of your initiative but do track and report on the key ones once you get to Step Two.

Step Two: Transparent tracking.

​The philosophy here is no surprises. You’ve agreed upfront what the financial impact of the change will be, now it’s up to you to show how you are progressing against key metrics every month.
This is a good time to bring in a balanced scorecard for your change (which may include some of the indirect benefits that you wanted to include in Step One). Your balanced scorecard might look something like:

Publish your results report to your colleagues and teams. One of the key components of building a culture of financial discipline is to show that progress is tracked and results are discussed.
 
It’s pretty common for agile project results to be a million miles away from your original forecast. This can be for a host of reasons – your scope changed, take-up rates were faster or slower than expected, you changed the phasing of your deployment. This is great news! Every time results are different from forecast you have new info to go back and refine your assumptions in Step One for the next project (but not the current project, don’t be that person!)

Step Three: Make results important to your team.

It's not unusual to find that the creative folks in your digital team work for the sheer joy of creating lovely digital experiences for users; they’re not there for the bottom-line impacts that keep the investment dollars coming your way. On the one hand this commitment is very admirable, you absolutely need beautiful experiences to drive customer engagement and usage. On the other hand it can be very frustrating as a leader to be the only one worrying about whether a project is achieving the benefits you promised.
 
If your company is a for-profit one, then you do need to build some commercial thinking into the fabric of what you do. You can do this through a focus on results, where successes are celebrated and failures are recognised as wonderful learning opportunities. Some ideas to consider:

• All new transformation ideas should have a project benefit summary as an input to the discovery phase. This is a one pager describing the initiative, why you want to do it, a t-shirt sizing cost (here’s a good overview about this) and a high-level view of benefits. 
• Have a central repository of project forecasts and results so that new projects can reference previous results when setting their targets.
• Hold a regular benefits review with stakeholders so they know what’s happened so far, what’s changing and how this impacts them. You can also review the performance of your benefits forecasting model at this meeting too.

• Ask team members to talk about recent results at sprint reviews or showcases. Why did those results happen? What change in delivery, performance or customer behaviour was different from what they expected and what have they learned from that?
• Capture results and lessons on company-wide collaboration platforms like Microsoft Teams or Slack so that everyone can access ​
• Appoint a Benefits Owner who is responsible for checking teams are tracking their results and who can collate benefits data centrally.

​Good luck! Being great at forecasting, tracking and delivering on benefits is certainly not the coolest thing in your digital transformation world but it goes a long way towards building credibility and trust for your digital programmes within your organisation.
 
If you have other ideas that have worked for you please leave a comment below. If we can help with any of the ideas or tools mentioned here, please get in touch.