Which model of benefits measure is appropriate for a new projects

Question

I would like to know a good method to measure which idea choose to get the maximal benefits. The live is more easier when we have a customer which suggests some price and we can balance the cost to full fit the requirements.

But please imaging the situation that we are the product owners and we would like to know what is attractive for the market. The question is what we can do in the situation that we have a few ideas what to do but we don't know what we should choose at first to do. My first way to make prioritization is to estimate the future benefits.

I would like to know any model how to measure the benefits for new project.

Answer 1

I hope I've understood what you're asking OK...

People often struggle to articulate all the expected benefits of delivering a piece of work, it can help to think of benefits falling into categories. I use:

Increase revenue Sales or marketing people will usually be able to help you get an idea of what additional revenue you can expect to gain.

Reduce cost Will the idea mean you can avoid spending money you currently do e.g. maintaining an old system, reducing headcount etc.

Avoid cost Work that means you don't need to expand to cope with future demand or pay fines due to non-compliance would fit here

Reduce Risk An opportunity to reduce the chance or impact (or both) of a future risk occurring. For example, hardening network security reduces the likelihood that someone will gain access.

Using these categories helps to add some structure to conversations about expected benefits and gets your stakeholder thinking about things other than just their key objective.

To prioritise, a simple method is to take your total benefits figure and divide by expected cost. This ratio of benefit to cost can then govern which ideas you do.

For some other ideas about project prioritisation, I highly recommend reading Developing products in half the time which explores using cost of delay as a factor in choosing when to take a product to market.

Answer 2

There are two pieces of analysis and I am not sure which type you are seeking. Choosing a project over another from an initial standpoint is typically done by developing a case that assesses your return, using methods such as ROI, IRR, NPV, and Payback. However, the second piece, and I think this is to what you are referring, is assuming you have a case for each approved project and you are simply prioritizing, but eventually all projects will likely be completed.

The criteria I use to prioritize are Value, Cost, and Risk. I break value into two: benefit and penalty. Benefit is measurable, tangible, and objective and can be increased revenue, decreased cost, decreased risk, or a combination of these. Penalty is intangible and subjective. There are simply those things that are valuable to an organization or stakeholder group that provides no real benefit that you can count. You cannot discount that simply because you cannot measure it.

Cost refers to the cost to undertake the project and risk is those threats--organic and discrete--caused by the project that threatens success.

By taking the ratio of value over cost + risk, you can easily score each project resulting in a racked and stacked list.

Hope this helps.