Most organisations operate an annual budget cycle where the need for new investment is considered, potential investments are identified, and decisions are made as to how the budget will be spent.
These decisions are sometimes made without the benefit of a clear understanding of the challenges to the organisation or criteria to evaluate competing bids. In the absence of such criteria, investment decisions are often determined by ‘the loudest voices’.
Benefits of using this practice
Organisations that have used this practice have found it provides a range of benefits including:
- better engagement of senior executives and key stakeholders;
- improved articulation of the need for new investment and the establishment of strong prioritisation criteria;
- substantial reduction in the number of ‘irrelevant’ investment ideas;
- better investment solutions; and
- time and cost efficiencies.
There are five steps involved in this exercise as depicted below. Steps 1, 2 and 3 establish the need, the preferred strategic response and the criteria for selecting the best investments.
Step 4 defines how the strategic response should be put into effect. When candidate investments have been shaped, step 5 uses the criteria developed earlier to prioritise them and make investment decisions.
- Problem definition (program)
- Benefit definition (program)
- Strategic definition (program)
- Solution definition (program)
- Investment prioritisation
The physical output of these discussions is a service logic and prioritisation SLIP. This articulates the problems confronting the organisation/program and the response that will address the problems. It documents how candidate investments have been prioritised based on their ability to respond to the problem and deliver the benefits.
While the IMS practices were originally used for single investments, they are increasingly being used to establish the logic for investment programs.