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Amara’s Law and the Business Case

Amara’s Law states:

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

When preparing a business case to identify the return on investment, we look at financial and non-financial benefits. The financial benefits are those that can raise revenue, reduce cost or contain cost growth.

Non-Financial benefits are those such as improving employee morale, providing better quality or service, improve decision making, reducing risk and so forth.

From a financial perspective, a spend control solution could be targeted to reduce costs by say 5%, or sales force automation system improvement raise revenue by 10%. Yet we need to question whether these targets are realistic. If a 5% reduction in spend can be achieved, does this mean that the current approach to purchasing is being profligate with the organisation’s money? Likewise if the sales team can increase revenue by 10% through a software solution, then is it really a piece of magic software that provides this income?

We need to be realistic and pragmatic when preparing the business case. Setting sensible targets for operational improvements, working with stakeholders to ensure they are not alienated, and noting that in the longer term, the effects of a new system can be far reaching, should ensure that the business case will stand up to robust peer review.

At Touchstone we have a wealth of experience in writing a project’s business cases to identify a realistic return on investment. Using a combination of industry best practice, such as the Cranfield School of Management with Benefit Dependency Charts; the Office of Government Commerce with Benefit Classifications; the Institute of Directors Standards for The Board; our approach will ensure that the programme or project will align itself with supporting the organisations corporate objectives, and contain a balanced financial and non-financial list of definable benefits meeting the needs of key stakeholders.

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