Mark Twain famously said, “buy land, they’re not making it anymore.” The same could be said of time, and although it’s not for sale, time does need to be treated as a precious commodity both in our personal lives as well as in business.
When translated to a business context, time ranks up there with information or data as one of the most valuable non-tangible assets. Therefore, choosing what to do, and having reasonable certainty that it is the right thing to do, is increasingly important.
This is not for a lack of things to do, however. I would venture to say that no successful organization has the challenge of not having enough to do. Instead, there are likely many competing priorities that all have good reasons (depending on who you ask) for being moved to the top of the queue. One incredibly useful tool in order to help take a long list of potential initiatives or projects that all seem of prime importance and sort into an order of importance is a prioritization model. This is essentially a ranked list of items from most important to least.
The Case for the Prioritization Model
I have developed a few prioritization models over the years, and some can get quite complex, though in most cases a simple approach is often enough. Here is a simple formula we can use as an example, with each item being ranked on a scale:
Priority = a (Benefit to the Business) + b (Benefit to the Customer) + c (Customer Reach) - d (Cost to Implement & Measure)
or, Priority = a + b + c - d
For reference, values ranging from 1 to 5 works well for a relatively short list of items, and 1 to 10 works better for longer lists.
Again, this is a simple formula, but some of that is by design. You can certainly make this more complex by weighting different components, separating cost to implement and cost to measure, or many other things, and I’ve done as much with some of my consulting clients depending on the need. Remember, however, that a consistent approach to ranking and prioritizing is as valuable (or more valuable in many cases) to spending an inordinate amount of time trying to get the formula just right.
Now that we’ve looked at the formula you can use as you rank and prioritize your queue of potential projects and initiatives, let’s explore what we mean by each of these elements in the formula I provided above.
Elements of the Prioritization Model
Benefit to the Business
There are many ways to calculate benefit to the business, and I’ve seen a wide range of thought processes on how to calculate this, but the most effective ones have been relatively straightforward and along three lines:
- Revenue or profits generated.
- Strategic alignment.
- Cost savings or efficiency gains.
Depending on your ability to predict these items, this can range from being a rather scientific exercise, to one more based on intuition. I recommend trying to make it more of the former than the latter, but some of the benefit of this prioritization exercise is in the relative measurements, so as long as you stay consistent in your assumptions there is still a lot of value to be gained.
Benefit to the Customer
Similar to the previous item, benefit to the customer may be able to utilize some of your existing measurements as a basis. Here are a few ways to think about this:
- Increasing customer satisfaction.
- Decreasing customer effort.
- Increasing customer retention.
For instance, if you are already using Net Promoter Score (NPS) to calculate customer satisfaction, you could think of this in terms of an estimate of how much you might be able to increase NPS at a certain stage, or across the customer lifetime.
Another way of looking at prioritization and assessing the importance of an initiative is to determine the universe of your customer audience that it will impact. If, for instance, an initiative is incredibly important and will have a big impact on a segment of your audience, but that segment only makes up 10% of your audience, you should take that into consideration when prioritizing it.
One nuance here that you may need to adjust for is the value of a particular portion of your audience. If you have different audience segments with vast differences in value (e.g. freemium uses of a SaaS platform versus enterprise users that spend millions of dollars per year), you can’t use quite as simple a number here.
Related Article: The Long Tail Effect and What It Means for Customer Experience
Cost to Implement and Measure
Last but not least (certainly not to your CFO), we need to calculate what implementing the project or initiative will cost. This could be a combination of budget as well as internal resources. This is the only item in our prioritization formula that is subtracted versus added. Thus, larger values for cost mean more dollars and resources allocated.
For those organizations where budget is a primary consideration above others, you may need to weight this a little heavier, though you can easily do that in your formula by changing it to something like:
Priority = a + b + c - (d * 2)
This would give d, or our cost variable twice the weight of the other items.
Additionally, I have often split this category into two distinct measurements: cost to implement and cost to measure, because often the two can vary in complexity. You can make this determination based on your own organization, as well as how complex you’d like to make your prioritization model.
Using the Prioritization Model
The most effective way to use the prioritization model I described earlier is to add your potential list of projects or initiatives to complete to a spreadsheet, and in each row go through the exercise of scoring each item. Pretty soon, you will start to see some patterns, as well as where you should focus some of your effort. As I mentioned earlier, one of the biggest benefits of using a prioritization model is to see your potential projects and initiatives in relation to one another. This perspective when everything is lined up as such is valuable to both you, your team, as well as other stakeholders.
Speaking of them, I should also emphasize that stakeholders and leadership consistently ask for justification of budget and resource allocation and expenditures. Using a prioritization model such as this one can “back up” your rationale for some of your decisions. It can also allow you to compare and contrast the different choices that can be made, with some clear reasons why you are making the choices with which you are proceeding.
I recommend that you apply some human judgement to this as well, of course. There might be data or information that a simple algorithm isn’t able to capture that may need to be factored in, once a “short list” of priorities is made using this method. That’s perfectly OK. Think of this prioritization model as a good starting point to get to a great decision.
Answering the question “what do we do next?” can be challenging and what you prioritize can have long-term positive (or negative) impacts on your organization.