Creating a proposal framework to estimate quantitative financial benefits – the right way.
We had a perfect opportunity.
Due to a reorganization at a client, I was suddenly working directly with a former sponsor who enthusiastically wanted new capabilities implemented to their then-2 year old project management enterprise solution. The group had had two full years to embed the processes and tools within their ’DNA’ and then came to realize there were new challenges that weren’t addressed.
The project involved network transition inventory planning for a global Pharma manufacturing division. Our initial proposals to the client were awash with qualitative benefits (end-to-end visibility, portfolio level reporting, live connections to other systems, and improved UI). However during our presentation, the sponsor flatly asked, “What will this cost and how much will it save me?“. With this in mind, the next thing our sponsor did was the best thing to happen to our business case: they instructed two director-level reports to work with me to quantify the costs and benefits of this proposal.
Over the next few weeks we held workshops to identify cost and benefit levers, and quantify the return on investment. One of the key benefit levers that we considered was around data quality improvements (e.g. 5% error rate at 15 minutes per task equaled 45 seconds of savings). These savings were then measured against the total number of occurrences (e.g. 4 tasks per week per project manager) enabling us to accurately project the overall return on investment. To factor in any externalities that may bring about our envisioned benefits, we were also extremely conservative in our benefit projections, but liberal in the cost to develop. This approach in estimating the return on investment, in partnership with the client, enabled us to earn a high degree of trust from our client sponsors.
By completing this analysis in partnership with the client, we eliminated a major hurdle to any consultant-driven quantities projection: management’s skepticism of the cost/benefit projections. This was not a proposal using historical data from other projects, or estimates by consultants based on industry reports or comparisons against client benefits in similar scenarios. This was a value statement created directly in partnership with the business; individuals who were in the best position to quantify and justify the return on investment (ROI).
When we presented our proposal, supported by the detailed cost analysis, benefit proposal and financially attractive ROI, we secured unequivocal approval from our client sponsors. (This, along with the slick technical solution we proposed – stay tuned for more about that in our next blog post – warranted our consideration for the 2014 Walberg Innovation Award.)
Near the end of the engagement, we revisited the cost benefit analysis from the beginning of the project. Although a number of inputs (e.g. number of project managers) had changed during implementation, our calculated ROI was still significant, validating the initial estimates.
The legacy of this project created a basis and framework for ensuring that future proposals estimate quantitative financial benefits so clients can visualize true ROI.
Read Part 2 of this post here.