Business Outcomes and Benefits
How do you quantify and monetize the value of an opportunity, a new project or an investment? What is the business value of this outcome or that benefit?
We need clear and explicit definitions of Outcomes and Benefits to answer such questions.
Outcome: The result of the change derived from implementing the project. Example: Shorten the average sales cycle time by 30%.
Benefit: The measurable benefit resulting from an outcome. Example: Increase sales revenues by 10%.
These definitions are the business case metrics and provide the practical basis for measuring, valuing, monetizing and comparing all outcomes and benefits, financial and non-financial.
Monetizing the Outcomes & Benefits
Quantifying and monetizing the business outcomes and benefits is central to strategic planning, cost-benefit analysis, and business case analysis. Therefore, it is critical to gain a solid understanding of the main drivers of the business case.
To develop a robust business case, you must model the business case drivers that drive the strategic and operational outcomes and monetize the financial outcomes and benefits.
The business case drivers are:
The key inputs and activities drive the business case's strategic, operational and financial outcomes.
They have a significant impact on outcomes & benefits.
They are controllable by the business case.
Before building the financial model, you will need to create a revenue or operational model for the business case drivers to evaluate the relative strengths and weaknesses to make the best choices about the business case in monetizing the outcomes and benefits.
Financial terms are easily confusing and often used interchangeably, so be careful! However, phrases like "financial forecast" and "financial projection" that sound similar are pretty distinct.
Financial forecasts are estimates of future financial outcomes for companies. It predicts what will happen in your company’s future based on things that have occurred in the past.
Projections explore different scenarios to reveal a wide range of possible business outcomes, whether the assumed circumstances become true if they come to pass or what your company hopes will occur in the future.
In summary, a projection outlines financial outcomes based on what could possibly happen. In contrast, a forecast describes financial outcomes based on what we expect will actually occur under current conditions, plans, or intentions.
Forecasts and projections can be combined in the business case to create a complete picture of how things might play out over time.