Every company is faced with decisions on where to allocate resources and capital. Here at Merlion Solutions, LLC we use “Value Based Decision Making.” Today’s software development industry is in a constant state of evolution, and change is the norm. With change decisions must be made about how to adapt and adjust and projects/tasks need to be assigned. We use value based decision making to come to a decision quickly and efficiently, allowing us to compete in the fast paced world of software development. The decision points within value based decision making are;
- What is the value of the investment?
- What is the cost and timeline?
- Are the results tangible or intangible?
- Is this required to compete?
What is the value of the investment?
Parents teach children at a young age to determine the difference between a want and a need. A want is something you would like to have but is not required to allow you to survive. A need is something required to live and succeed. In business you have to make the same decisions, we want the class A office space but don’t need it, we need a sales force. Do you lease the high-end office space or hire a salesperson? Is this a want or need, what is the value of this investment? A want provides little if any value, a need provides value either in tangible or intangible form. Value is not always measured by dollars.
What is the cost and timeline?
Since the world is in constant flux, investment opportunities in software development often do not have time to provide returns before they become obsolete. Projects with long lead times allow competitors to get the coveted first-to-market advantage by releasing a new product/service/pricing before you. Also, long lead times in software development can result in product obsolescence even before you release to the market. To avoid this, projects need to be broken down into individual milestones with deliverables at each step. By breaking down the projects and understanding the cost associated with it, the decisions become easier and waste can be subverted. Cost and time are now evaluated to value or what can also be called Return on Investment. We use the word “value” as not all investments provide a tangible return.
Are the results tangible or intangible?
Projects provide either a tangible or intangible benefit. Neither should be placed above the other as intangible benefits can have a bigger impact on the company then tangible benefits. Reducing the number of hours it takes to complete a task has tangible benefits as it reduces costs to the company. Increasing website views has intangible benefits as it increases market recognition but can’t be directly measured to the increase in revenue. Both types of projects are critical for companies to provide the best product/service at a value price point for your customers and to remain competitive in today’s world. Understand the underlying object of each proposed project and the benefits they provide when making a decision on which project to proceed with. Employees, consultants, advisors, and mentors can help you in the evaluation phase by providing experience, insights, and asking questions you did not think of.
Is this required to compete?
Some projects are required because they are mandated by industry standards, government policies, etc. These are table stakes, these are projects that allow you to stay in the game. Table stakes includes offerings the customer base considers to be a part of your competitor’s service or product. For example, in the restaurant business you can’t just have a physical store front. You need a web presence to draw in patrons who use search tools and read reviews. Without it you are at a disadvantage compared to your counter parts. If you and your competitors are playing cards at a table, you must be ready to “ante up” and match your competitors. If you decide that a project is a table stake then it goes to the top of the decision tree.
When faced with multiple projects to invest in take the time to place a value on each investment opportunity. Projects are not just carried out by internal personnel but also by professional organizations that provide specialized services. If you choose to outsource, look for a partner that adds value and fits in culturally with your organization.
Make an informed decision. Once a decision is made follow it through. Failure is not achieving what you set out to do.