Have you ever seen a product business case, especially for a new product, that didn’t look like a blockbuster? They’re rare. And how often do the revenue projections match reality? It’s hard to say. No one ever compares projections to actuals after the product hits the market. Here are three steps for creating more realistic product business cases and simplifying apples to apples comparisons for multiple product investment opportunities. The Playbook:
The single biggest reason for the huge gap is that multiple versions of the truth exist everywhere and those creating business cases use the version that best supports their cause. Can you blame them? While this approach helps those competing for resources win small battles against one another, the company may ultimately lose the war over a single decision where the business case looked like a no-brainer but didn’t reflect reality.
Here are three tactics that will bring an element of consistency and reality to all business cases.
- Designate a single owner for all market data. Product Management or Product/Industry Marketing are the most logical functions to own the market data. The key to using market data successfully is to create simple profiles for each market segment under consideration and use those profiles as the basis for every business case. An annual refresh is sufficient in most B2B product companies. The key to using market data successfully is simplicity. Reduce the volumes of market information (quantitative and qualitative) to something that’s simple to understand and interpret. It’s the only way others will embrace it.
- Define a single set of criteria by which all business cases will be measured. Include key metrics on market size and growth rates from a source you trust. Determine the percentage of each market, including existing customers, that’s realistically in your sweet spot and use that as a base. When forecasting revenue potential, use “your” average revenue or transaction amount per customer to keep the numbers grounded in reality. To save cycles, set minimum thresholds that must be met for a business case to even be considered. These thresholds are typically commensurate with the size of your company and its growth objectives.
- Look beyond each silo before approving. A small cross functional team should convene regularly to review business cases and determine which initiatives go forward. When considered standalone, many new initiatives seemed destined for success, only to find out later they conflict with other projects already in the works. The best chance for success beyond a solid business case is to embark on projects that support the overall strategy of the customer and leverage momentum that’s already been established in existing product lines or market segments.
Business cases will never be an exact science. Don’t try to make them one. Assume the numbers you have are wrong by some factor. It’s OK. Using the same numbers for all business cases means they’re all wrong by the same variation. It’s still OK. It’s not the numbers themselves that matter so much. It’s the deltas between business cases that matter more because they illustrate the relative value of each opportunity as compared to the others. If your goal is to invest only in the projects with the best ROI for the organization as a whole, these numbers will more than suffice.
And in this day and age of lean resources and a low-risk, sure-bet investment mindset, it’s as good as anything.
If market data and business cases are all over the board in your organization, sign up for Product Management Courses and learn the simple way to develop objective business cases that more closely reflect reality. It’s all about winning the market share war.