Let's do away with the "shared lie" of absolute certainty on ROI, in business cases for genuinely innovative ideas.
Pick any number...just make sure it's the right one
You know the scenario: the project team (and often their loyal consultants) take their meticulously crafted business case about an exciting and expansive opportunity, to the portfolio meeting for "the decision".
There are pleasantries and perhaps even some genuine interest...but really, the assembled committee are waiting to see if this new whizz bang proposition hits...the magic number! *sound of angels harmonising here*
Despite the cross functional team composition, glistening PPT deck and well-rehearsed key talking points...the well-considered number for ROI, is not the number. Silence. Shuffling in chairs. Awkward glances around the room...
Then, the real decision maker with the financial power speaks: "Hey Team...look, you've done some really great work here...but that number isn't going to work. However...if we could make it closer to (insert magic here), I reckon it could be possible...thoughts?"
Relieved smiles and knowing glances; the project team had been given the not-so-subtle inside word on what the ROI needs to be. Accordingly, they have the updated slide ready to be inserted in the post meeting pack. The potential vendors knew this too and have already factored it into their offering, even if it meant some compromises.
Even the person with financial authority knew...that the team was aware of this expectation. That's why the meeting was scheduled just before lunch.
"Sure, I think we can make that work!" the team replies, even though the desired number contradicts ALL the scenario forecasts prepared by the business analysts. The SME's in the room (aka: those who have to do the work) are giving resigned shakes of the head. But as for the business case itself: well suddenly, it looks optimal... just like magic.
Embracing the range of uncertainty
You want to know what's really magical? Allowing intrapreneurs and portfolio managers to express uncertainty when presenting novel ideas or concepts. Providing ranges in ROI estimates, fosters better decision-making and builds stronger trust within the organisation.
I recently came across an insightful point from Tristan Kromer of Kromatic - Innovation Experts (edited, from a podcast discussion):
"It’s not unreasonable to ask the questions: how does this idea work? How could you eventually make money? And how are you going to grow? But...the precision is totally unreasonable because what we need, what is not represented in that typical basic business case...is uncertainty."
"They (Executive decision makers) ask for very specific numbers and they have the specific output...but that does not represent the most important thing for innovation, which is what is the level of uncertainty that you have about that number."
When Executives allow teams to provide a range of potential outcomes, Tristan further makes the point that we increase psychological safety. This is critical, because we are fostering an environment where honest conversations can thrive about how to reduce that uncertainty! And honest conversations help avoid the biggest mistakes I see in organisations.
Innovation Metrics to be sure of
When intrapreneurs and portfolio managers feel safe to share the full scope of realistic projections - and NOT just 'splitting the difference' on best-case and worst-case scenarios - we build stronger trust amongst all the stakeholders and make better-informed decisions. Instead of magic number performance art, our efforts are honed to constructive conversations about how to reduce uncertainty on the desirability, feasibility, viability and sustainability of the idea.
Evaporate the shared lie of the magical number and embrace exploring ranges of uncertainty. One thing I am certain of: Giving a huge thank you to Elijah Eilert for all the tutelage he's given me in this space - Innovation Metrics Podcast is well worth a listen!