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Identifying the Business Value of What We Do

by Jared M. Spool
on April 15, 2005

Imagine we’re starting work on the user registration functionality of a web site.
After conducting a thorough set of user tests, we discover that half of all users
who attempt to register can’t successfully complete the process. Those who do
register find the process very frustrating. Fixing the registration process to
eliminate any frustration would be important, right? Not necessarily.

How does an improved registration process help the business? How does increasing
the number of registrations help the bottom line, either immediately or in
the long term? If we can’t answer these questions, why should our organization
invest any resources to fix it?

Money is the Great Equalizer

Usually, resources are too constrained to do everything the organization wants
to accomplish. Therefore, decisions need to be made, based on some priority

As we look at how various organizations decide what projects to take on, we
see more and more of them are using money as the common unit to compare the
effort and contribution of different efforts. They are comparing everything,
from direct revenue to customers’ brand engagement, in terms of the dollars
they expect to see. By reducing all business effects to money, they easily
compare the value of one outcome to another. They can then make informed decisions
on where to spend their limited resources.

A Simple Trick: Take It Away

How do we tell what the contribution of registration is to our business? One
simple trick is to play with the idea of taking it away.

If we removed the registration process entirely from the site, what would
the effects be? Well, because almost everyone who uses it is frustrated, we’d
be eliminating their frustration right off. And it probably wouldn’t cost too
much to just pull it off the site.

However, what would we lose? Would the absence of new names hurt our marketing
efforts? Would it make customer service more difficult? Could we quantify what
the long-term effects of the lost functionality would be?

Often the simple exercise of pretending to remove the functionality and looking
for the downstream effects can help us understand how important a feature is
to our business. With a little research on the feature’s impact, we can start
to quantify the true value of the functionality. This trick doesn’t always
work, but when it does, it can be extremely insightful.

Where Business Value Shows Up

Fortunately, there are only five places in a business where we can see the
value of our work. These are the same for any type of organization, whether
it’s a commercial enterprise, a government entity, or a non-profit group (similar
to how accounting practices are essentially the same across each type).

We can identify business value by asking the following questions about the
end results of our project:

  1. Will it increase revenue?
  2. Will it decrease expenses?
  3. Will it bring in new customers?
  4. Will it bring in more money from existing customers?
  5. Will it increase shareholder/taxpayer value?

Depending on the nature of our business, a given project could effect any
of these value areas. It could increase revenues or decrease expenses. In fact,
sometimes a project could effect two or three simultaneously, such as increase
revenues, bring in more new customers, and increase revenue from existing customers.

Talking about the Value

Even something as simple as fixing a problem with registration would effect
the business value differently, depending on how the organization uses that
registration information.

For, the online edition of the
New York Times, registrations are free, so no revenue comes from the people
who actually register. However, the registration process allows the New York
Times to learn more about each person signing up. In turn, they can tell their
advertisers more about the people they are advertising to. Advertisers will
pay more for ads, when they are sure they are targeting the right people. So,
for, a better registration process could yield more advertising

Contrast that with Stop & Shop stores.
Shoppers at this large chain have bar-coded key-chain tags which give them
discounts all over the store. Many of Stop & Shop’s best customers signed
up for their tags years ago, before they had email addresses.

Since Stop & Shop knows what products each customer has purchased, they
can notify that customer when their favorite items are on sale in a personalized
circular. Stop & Shop extends "“personal sales” — discounted
prices for items a shopper regularly purchases that aren’t advertised in the
store. By encouraging existing customers to register, Stop & Shop can encourage
shoppers to spend more in a shopping visit saving money. For Stop & Shop,
the improved registration process plays an important role in increasing revenue
from existing customers.

Verizon, a large telecommunications
utility, sends out millions of phone bills every month, spending millions of
dollars on the printing, handling, and postage. Encouraging customers to trade
their paper bill for an electronic bill eliminates these costs. Verizon’s registration
improvements could help with dramatic cost savings.

A registration process can even effect shareholder value, which is most driven
by long-term sustainable income. A recent example is Amazon’s introduction
of Amazon
, a service that delivers, for a single annual fee, free 2-day shipping
and discounted next-day shipping on all products purchased from the online
retailer. Amazon hopes that this new service will “lock” the frequent
Amazon purchasers in, forcing them to increase their regular purchases over
time. Making Amazon Prime registration easier could contribute to the shareholder
value of the organization.

Identifying Your Business Value

With a bit of practice, it is easy to identify business value for our important
improvement projects. First, we have to accept that not every project will
be valuable to the business, so identifying the ones that are will make things

Second, we can start the process by imagining what life would be like if we
just removed the functionality. This often gives us insight into the “downstream” effects
of what we do.

And finally, when we identify which business value areas the project is most
likely to impact, we can clearly communicate why investing resources in the
improvements will benefit the organization. This dramatically increases our
chances of getting approval to do the interesting, challenging projects.

About the Author

Jared M. Spool is the founder of User Interface Engineering. He spends his time working with the research teams at the company and helps clients understand how to solve their design problems. You can follow Jared on Twitter at @jmspool.