Taking a discovery driven approach to internal projects

The first step of discovery driven planning lies in specifying what success looks like. For for-profit projects, this usually takes the form of a level of growth or enhanced profitability.  But there are many kinds of projects that don’t have such a clearly defined outcome – this article addresses those.

Technical debt and transformational projects

As I have written about elsewhere, many large scale digital projects are created with the intention of transforming something significant about the business. Their success leads not so much to profits or growth directly, but rather builds new organizational capabilities that may be essential to remaining in business at all.  As with new ventures, many such projects entail a significant amount of uncertainty, meaning that the goal of planning for them involves reducing what I call the assumption : knowledge ratio.  A similar process as discovery driven planning for a new business can be followed.

Of particular interest are projects which are intended to reduce “technical debt.”  This is the cost of having to work on code that may have been built to save time, but which can’t cope with the demands of running at scale; or otherwise code that really needed to be brought up to date but which people have been putting off because the current system sort of works, and they don’t want to incur the cost of making upgrades.

Where to start:  What would success look like?

As with a for-profit project, you want to be clear about what outcome your investment in an internal capability would drive.  Shortening time from customer order to purchase, achieving a higher level of sell-through on your web site, getting greater penetration into your customers’ budget because they can meet more of their needs by working with you are all examples of the desired outcome of your internal project.  As you are doing this, you are implicitly going to be making assumptions about the relationship between what your system does and customer behavior.

For example, you might have a hypothesis about how deficiencies in the current system are negatively affecting the customer experience.  What you want to do is put these assumed relationships in the form of an experimental hypothesis.  A great way to formulate this is by saying “Our hypothesis is that if we can respond to a customer inquiry within 2 hours, we are 20% more likely to make a sale to them than our current 24-48 hour response time.”  This is now a hypothesis with a testable result, which, if you tie numbers to that performance improvement can give you a measurable outcome for your investment.

Start with the external facing problem first, then back into what the systems would need to do to be able to support that.

Next, tests and experiments before full-scale roll out

With your hypothesized measure of success in hand, now consider what the minimum amount of investment would be required to start you on the path to a solution.  At German metals-distributor Kloeckner, for instance, their CEO had a vision that the company could create a full-scale digital platform to make ordering products super-easy for the customer.  They did not, however, move to build that platform overnight. Instead, they looked at what simpler, smaller problems they could solve with relatively low levels of investment.  One was to eliminate orders that came in by fax so that customers didn’t have to go through the bother of filling out a fax form every time they wanted an order. Shifting to a digital form made everybody’s life easier by allowing for easy recall of repetitive items, eliminating the  need for retyping and eventually linking that information to stocking information so that people could pull required elements very easily.

As you are doing this work, you are hopefully learning what the real payback of your investment in better systems can be.  As the small wins begin to accumulate, this creates greater confidence that investment in this area will generate larger wins.

At Accenture, for instance, Frank Modruson, their former CIO, insisted on relentlessly retiring older platforms and upgrading them to more efficient newer ones.  His metric for success?  Hold IT costs constant even as the company grew – allowing IT as a percentage of employment spending fixed, and reducing the cost per person for that support.  While it required investment initially, he was able to demonstrate the benefits, which are cumulative.

Manage the program through key checkpoints

Just as with a discovery driven plan for a for-profit venture, you want to release funding for your internally focused projects on a checkpoint basis.  Develop a hypothesis, test the assumptions, and then move on to the next set of processes.

Here, the discovery driven process is very similar to what has popularly become incorporated as a set of principles for agile working.  As this Wall Street Journal article suggests, breaking a big  project into smaller pieces, reviewing progress more rapidly and openly and being very frank with one another about what is being learned and where the obstacles and blockers are is key.  This fantastic interview with Bob Sutton and Pixar’s Ed Catmull lays out the principles that allow groups to perform at a high level, even when things are uncertain.

Measuring overall impact:  Return on Time Invested

A very broad way of measuring the impact of capability-building investments is through a metric we call “return on time invested.”  To calculate it, take the revenues created by your firm and divide it by the number of people required to generate that revenue.  As your investments in internal capabilities start to pay off, you should see that you are able to generate more revenue per person over time than you were previously able to do.  As I’ve described elsewhere:

“Walmart’s relentless push into digital (which included the purchase of Jet.com and the acquisition of digital legend Marc Lore) shows in its ROTI numbers. As of 2020, Amazon had sales of $386 billion, with 1.3 million people, for a ROTI of $296,923 (note the drop since 2018).  Wal-Mart in contrast had sales of $519.93 billion with 2.3 million workers, for a ROTI of $226,056.  While they haven’t caught Amazon yet, the investments in digital can be clearly seen in the numbers.”

The advantage of ROTI is that it is both simple and unambiguous, and it allows you to clearly state the benefit of your program in terms of productivity gains overall.

Remember the ‘price’ of not taking action

When assessing investments, people often commit what is sometimes called the Parmenides fallacy. It means that they compare what is today with some uncertain future. Unfortunately, the right comparison is what will a future be like when we don’t make essential investments with the future when we do. If competitors stay ahead of you on technology and you don’t invest, eventually that will show up in your becoming uncompetitive.

Meanwhile, at Valize

Our team is just back from visiting the World Agility Forum, when we had the chance to brainstorm (in person!) about our product roadmap for the coming few months.  Look for cool learning modules, new individual tools and lots of other great stuff in the works.