Assess The Value of a Business Initiative

My former manager had posted on his computer monitor a simple note that caught my attention one day several months back. The note was a one line type-written equation that read as follows:

Value = Acceptance x Impact x Execution

I asked him what this equation meant and he explained it roughly as I describe below.

Value can refer to many things but in our case, let’s apply it to a Six Sigma project or program. Value, in this case, is a measure of the benefits that the project or program brings to the company.

Acceptance is the extent to which employees, leaders, and team members of the Six Sigma project support the project. Like it or not, the extent to which others at your organization support a Six Sigma project determines whether it will succeed or fail. Having a sense for this at the outset of the project can help the team determine whether they should proceed with the project.

Impact is the extent to which the project or program decreases costs, increases revenue, or positively impacts business metrics used by your organization. If an initiative does not impact one of these important metrics, the initiative provides no more than subtle, immeasurable benefits to the organization.

Execution refers to how well the business initiative, a Six Sigma project in this case, is implemented. If your project actually fails to effectively find efficiencies that benefit the business in a tangible way, it is likely because your execution was not effective. This can take many forms with a Six Sigma project including, but not limited to, a poor problem definition, failure to effectively analyze the problem to ensure it exists, use of poor measurement systems such that your experiments result in no improvement in your output variables, etc.

Now this may seem obvious but I must note that if any one of the three input factors in this equation are zero, the business initiative will provide no value.

This little equation can prove helpful in assessing which projects are most worthwhile before you even begin implementation. You can simply ask yourself whether acceptance, impact, or execution run any significant risk of equaling zero. If so, you might be wise to work on another initiative first.

I have found this equation useful in determining how to use my time. For example, a colleague came to me and asked for help analyzing some data from a test his team had conducted. I quickly realized that they had not controlled their input variables and suggested to him that instead of analyzing their original hypothesis (which they couldn’t given the lack of control), that instead they spend their time analyzing why they had trouble controlling their input variables. In this case, the question of why they had trouble controlling the input was a useful exercise because it helped them identify a potential opportunity to address a part of the process that was not working well.