A better compass for guiding tech investments

Gettyimages.com/ Yuichiro Chino

Justin Fanelli and Jonathan Aberman, two experts on technology investing, share their thoughts on how to know when you are getting what you paid for when you buy technology.

In industry and in government, we buy a lot of technology.

Across public and private sectors just last year, the U.S. spent $2.1 trillion on IT. The worldwide total reached $4.4 trillion. The total addressable market for technology has grown every year of our lives. Since 1999, software took the pace of change and the tech spend into overdrive. AI promises that we will hit the next level up of fast and furious spend.

But how do we know if we are getting what we are paying for?

We keep spending money on technology and the U.S. Gross Domestic Product keeps increasing. We overwhelmingly judge winning and losing by stock price in the publicly-traded private sector. Profitability and growth tells us some of what we want to know in privately-owned industry.

In government, it can be less clear whether organizations are carrying out their missions successfully, especially as it relates to information and technology. The most widely referenced and trusted metric of the lot (stock price) includes speculation, sentiment and only applies to 14,400 organizations; less than 1% of digital organizations.

None of this is particularly accurate or satisfying.

If we are living in the pivotal time that we think we are and if advancement matters as much as we think it does and this tech-business intersection is a key to unlocking outcomes, then we need a better way to measure. And we believe we have found one.

How we got here

OKRs (objectives and key results) and KPPs/KPIs (key performance parameters and key performance indicators) have been around for 20 and 120 years respectively. One is primarily for setting big hairy audacious goals and one is for tracking progress. We have methods for measuring activities and productivity, especially in highly stable sectors. Outcomes and what impacts them most has been more elusive.

This is where “Outcome-Driven Metrics” (ODMs) shine. By creating a line of sight between technology and business outcomes, they provide a repeatable way for digital and want-to-be-more digital organizations to improve.

Just three years after the introduction of ODMs, organizations from publicly-traded companies to small businesses to the federal government have jumped ahead in how they evaluate, prioritize and most importantly deliver. 

Getting more connected to our work and its impact

Too often folks who are working on individual tasks do not know how their activity moves the needle for the organization. Or whether it does at all.

Much like the legendary JFK story of every employee at NASA being able to describe how their effort helped get Apollo 11 to the moon, we are all better when we know how our efforts (and the technologies we are working with) make the difference needed to accomplish the mission.

ODMs for an organization start outwardly from high level business or mission objectives and map downward through technology-driven outcomes to operations. The many activities that happen at the ground level align to a narrow point at the top – like a wide bottomed triangle (or Christmas tree, tis the season). These business/mission outcomes at the top are the essence of the organization. How each organization’s purpose is achieved.

For FedEx, business outcomes might be fast delivery, high quality (never miss a stop), keeping costs down resulting in happy, loyal customers and more of them.

For a digital first organization, one of Justin’s government teams generated mission outcomes of world-class user experience and operational resilience. In other words, everything we do should be aimed at our solutions and thus our workforce performing well and always being available.

Other private sector teams that we have advised have tailored their own four-layer cascade that connects every important action to the impact it has. If one action at the operational level is creating much more impact than another, if one technology is creating much more difference at the top than another, that tells us a lot more about return on investment than we had before.

After 18 months of use, monthly improvement is the norm, the activities moving the needle are clear, prioritizing investment and issue resolution has moved from the gut to the dashboard. While young as metrics frameworks go, ODM adoption has made a huge impact in the publicly-traded companies we have worked with, the small businesses we have advised and partnered with and in the government, one of the hardest places to determine return on investment.  

Manifest Destiny

Technology is moving faster than ever before. Technology is a part of more organizations than ever before and utilizing it properly is the key to unlocking value to organizations and customers across all sectors.

We have much progress to make and this will require better tools than a telescope and a magnifying glass. Outcome driven metrics are the translator and guide, the compass and oars, needed to navigate the business-technology river to the ocean of next level results.

Justin Fanelli is the acting CTO of the U.S. Navy and Jonathan Aberman is a partner with the investment firm Ruxton Ventures.

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