Okay... But what's the impact?

Evaluating the business impact of technology projects is hard. Really hard. So hard, in fact, that if you try to find definitions for business impact online, you’re not going to find much guidance. And what you do find is often at odds with other definitions. Strange.

And yet, as business leaders, the impact of our decisions is what matters most. Not the activities we engage in, the budgets we manage, or the people who report to us, but the tangible outcome of how we utilize those people, processes, and resources that drive real impact for our teams and for our company.

As a result, there’s one question I’ve been asked consistently during my career in the tech industry that’s really hard to answer. It normally goes like this:

“That all sounds great… but what’s the impact to our customers? Partners? Stakeholders? Employees?”

I’m guessing you’ve been asked permutations of that question too, and if you’re anything like me, you’ve struggled to answer it concisely. In this article, I’m going to teach you how.

Business Impact: The Definition

First, it’s important to get grounded in some definitions. For purposes of this article, business impact is defined as the benefit realized from a project or initiative. It’s a quantifiable, data-driven outcome that accrues to team mission, strategy & purpose. At Microsoft, where we use OKRs (Objectives and Key Results) to ensure we’re tracking and measuring the right objectives, you can think of it as the net result of an Objective at the conclusion of a given semester. The Business Impact of an objective is ultimately the difference that outcome made, versus the opportunity cost of pursuing an alternative strategy, or doing nothing at all (the baseline).

Business impact is defined as the benefit realized from a project or initiative. It's a quantifiable, data-driven outcome that accrues to team mission, strategy & purpose.

It's easier to see this as a continuum, which starts with the objective, which leads to actions and ultimately a business outcome. The resulting business impact is the difference between your desired outcome and the actual outcome at the end of the measuring period. That’s the impact to your business.

Why is it important to measure your impact?

In challenging economic times, businesses are constantly striving to reduce costs. Teams or departments who can’t clearly communicate and prove their value – expressed as their business impact – are at greater risk of reduction than those who can clearly articulate the unique value of their team. Some reasons why measuring impact rather than simply describing activities your team engages in include:

·      Impact addresses “the why”. It’s easy to understand what your team does. Impact conveys why the team does it. The organization has cultivated unique skills to support targeted business outcomes – if you can clearly articulate business results aligned to company objectives as strong impact statements the question of why your team exists is clear to everyone in the organization.

·      It’s the story! Which is stronger? “The team fixed six bugs?”, or “We improved the product driving $10m in new revenue”? Leaders above you will be skeptical of investing in your team based on the activities you perform but will be rushing to invest if they can directly see how you’re supporting company or organizational results through tangible impact.

·      Activities mean nothing without results! Impact provides meaning to the activities your team engages in. In complex, matrixed environments it can be hard for your upper management to understand exactly why you do what you do. Clearly stating your business impact helps them to understand the true value of your team and where they’d be without you.

Business Impact: the formula

In my experience, it helps to think of impact as a simple formula:

(Objective Outcome – Opportunity Cost) = Business Impact

In other words, your impact is equal to what you actually achieved minus the opportunity cost of pursuing an alternative strategy. The greater the difference between the Objective Outcome and alternative strategies (the Opportunity Cost) by the end of a fiscal year (or other measurement of time), the greater the overall impact will be (or was) to the business.

Activities that your team performs – which is how your team achieves impact – are important, but they’re simply the means to the end.

Hopefully that all sounds pretty clear and obvious. So why do most of us struggle to describe the impact our teams are driving? I would posit it’s because it often gets lost in the activities that support the outcome. Activities that your team performs – which is how your team achieves impact – are important, but they’re simply the means to the end. Your objective should never be to complete a set number of activities. Instead, you engage in activities to achieve the objective! Interestingly, measuring the former is easy, but measuring the impact of the latter is more difficult.

Hallmarks of Business Impact

There are many dimensions of business impact – here are a few key ones to consider:

·      Always focuses on the outcome, not the activity. “Increase user retention by 10%” not “Deliver 5 features.”

·      Represents clear benefit to the business. For example, saving money, lowering expenses, or increasing NSAT.

·      Supports the team elevator pitch. “You have 30 seconds to tell me why I should care.” What do you say?

·      Accrues to team, organization, and company mission. If it doesn’t, why are you doing it?

·      It’s easier to quantify in retrospect. It’s easy to know what you did – it’s hard to know what impact you’ll drive in advance.

How do you put these dimensions of business impact into practice? Let’s start by reviewing a few activity-based statements, then convert them into statements that focus on business impact.

Consider this statement, which focuses on activities. As stated, the impact is implied by summing the totals of the different activities:

“This fiscal year, I conducted 40 awareness events attended by 5,000 potential customers.”

Rewriting that statement to focus on the business impact might look something like this:

“This fiscal year, I conducted 40 events that resulted in attendees being 40% more likely to purchase our solution, driving $20 million in incremental revenue.”

The challenge, of course, is to identify the right methodology to prove the impact. In this case, it might be a customer survey that tracks their perception of your solution to inform the likelihood of purchasing. And tracking the incremental revenue should be relatively easy and is far more impactful than simply speaking to potential customers.

Here’s another example to consider:

“Write six blog posts for the company website.”

While no doubt there is value in sharing your expertise with others, writing blogs is an activity and not impact. An impact-oriented statement would look more like:

“Identify and track $500k in new revenue opportunities through social media engagement with strategic customers.”

The revised impact statement would require you to instrument your website to better track customer engagement and sales opportunities but would also give you a challenging revenue target that clearly demonstrates the value of producing blog posts in support of company objectives. I can guarantee you that you won’t be writing six more blog posts in the future if you can’t demonstrate the value of the activity with your upper management! But if you achieve the rewritten objective, you just might see your team grow!

Writing Impact Statements that work

Your impact statements can take lots of different forms but will almost always include three key parameters, 1) an action verb, 2) a data set, and 3) the expected outcome.

In fact, you can use the following sentence templates to help you get started crafting impact statements that focus on measurable business outcomes rather than activities:

1) <impact> by <action verb> <data> (to solve/improve) <noun/product>.

Example: Increase employee NSAT 5 points by harvesting and reviewing usage data to improve application reliability.

2) <action verb> <noun> from <data> (that lead to) <impact>.

Example: Generate actionable insights from customer engagements that lead to $50 million in new sales pipeline for my solution.

Play around with different permutations – so long as your statement includes an action verb, a data set, and the expected outcome, you’ll have a statement that does a great job at describing your business impact, not the activities your team engages in to achieve it.

Conclusion

While simple to understand conceptually, proving the impact of your actions is much harder in principle. Here are four things you can do today to help build an organization that’s focused on impact rather than activities:

1. Consider your team’s impact. Do your OKRs or other business metrics track activities, or do they clearly align to outcomes with a clear business impact? If the former, use the templates above to rewrite them to be impact oriented.
2. Challenge your team members and peers to think beyond activities… Ask them “What’s the impact?” then coach them to understand why it’s important and how to craft impact statements.
3. If you can’t measure it, you can’t prove your impact. Work with your engineering or data science team(s) to identify ways to instrument what matters so you can measure and prove the impact your team is driving.
4. Build a team culture that celebrates and rewards impact over activities!

And the next time someone asks you “What’s the Impact?” you can start by saying, “I’m glad you asked… Let me tell you!”.