ROI vs. Outcomes: Prioritizing IT Projects for the Greater Good

How do you prioritize your IT project portfolio? If ROI is the driving force behind what gets funded and what doesn’t, you’re not alone.

When an organization views the IT department as a cost center, technology projects are typically justified based on ROI. These ROI calculations are made based on direct cost savings alone, not on the most effective use of time and resources.

“Cost savings” is a suboptimal reason for doing things.

In Russia, I was told a parable that highlights this concept: A man decides to train his horse to eat very little food in order to save money. He systematically cuts the animal’s portions back everyday. When he finally reaches his goal of having a horse that demands basically no food, the horse drops dead.

noun_87380_cc

The moral is: Don’t starve your horse to save money on food.

tweet-graphic-transTweet: “Don’t starve your horse to save
money on food.” #ROI http://ctt.ec/r9dy6+

Likewise, don’t fixate on ROI to the detriment of your business outcomes.

While ROI is a perfectly valid factor to consider, there is a wider range of outcomes that are even more important. Namely, revenue opportunity, customer service improvements, and alignment with the organization’s strategic objectives.

Plus, ROI doesn’t help much in narrowing down the list of potential projects. There are countless projects that promise to deliver a positive ROI. But when it comes to an IT project portfolio, less is more. Stricter criteria is in order.

5 Tips for Prioritizing IT Projects by Outcomes, not ROI

As an alternative to evaluating projects based on ROI alone, try a more comprehensive prioritization methodology to get more valuable outcomes from your IT investments.

tweet-graphic-transTweet: 5 Tips for Prioritizing #ITProjects by Outcomes
not #ROI | @mpapov http://ctt.ec/04c_Y+

1. Align IT strategy to overall business strategy.

A well-articulated IT strategy, aligned with the overall business strategy, provides a rich opportunity for outcome alignment for IT initiatives. Understanding how a project supports strategic objectives (beyond direct financial return) allows for more complete benefit analysis.

2. Change who prioritizes the IT workload.

Many IT departments prioritize their own work, even if they function as a service to the business. This scenario puts IT at risk of taking on projects they select (based on the best information they have on hand), plus any projects the business demands afterward. To avoid overcommitment, request that the business rank the project portfolio.

3. Use a business case for every project.

It is still puzzling to me that so few IT projects have business cases. In my experience, too many major IT investments are approved based purely on executives’ gut feelings about their strategic nature. If they are indeed strategic, documenting the relationship between scope and expected result will establish a timeframe to see tangible outcomes.

4. Don’t be shy; sideline or cancel initiatives when necessary.

Sometimes the best course of action is to trade an active IT project for another that is more critical. Unfortunately, this course is often considered a “failure” and managers fear taking the fall. But the fact is, priorities change. There’s no shame in making bold, corrective decisions to free up money and resources. Communicate it clearly, pull the project, and channel your energy to a more deserving effort.

5. Team up.

When IT leaders take on the responsibility of justifying their department’s projects, they tend to look internally for benefits. ROI ends up being the most familiar weapon of choice. Instead, collaborate with other executives and explore their priorities and objectives. This may seem at first like a regression to the old “IT as order taker” mentality. In reality, it is a way to elevate IT to the highest levels in the organization, where it belongs.

tweet-graphic-transTweet: ROI vs. Outcomes: Prioritizing #ITProjects
for the Greater Good | @mpapov http://ctt.ec/O7k7n+


RelatedIT Portfolio Management and the Squeaky Wheel EffectIT Portfolio Management and the Squeaky Wheel Effect

One Comment

Leave a Reply

Your email address will not be published. Required fields are marked *