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Ian Lawrence

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Evaluating projects for their return on social investment

”When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the state of science.” —William Thomson

I have just published the software I wrote for my MBA in Strategic Management of Technology Innovation.

A slightly customized version of the software is currently in use as a innovation funnel at INdT.

It is a commonly accepted fact in business that social projects bring some tangible benefits to an organization. Unfortunately, even if the project is very successful this often does not impact directly on the financial bottom line. And, in a world of razor-thin margins, a set of activities that drive up corporate cost without any directly identifiable return is a tough sell, no matter how worthwhile and noble the project might be. The business case for social projects is therefore contingent on finding a suitable method for valuation — one that allows managers to understand the implications of an indirect benefit and then make ’intelligent’ decisions about which projects to choose and the most feasible level of resources to commit.

I approached the problem using techniques from agile development. Scrum sizings were run with stakeholders experienced in the type of project under evaluation which estimated the intangible values present in the social project.The values were then passed into an algorithm which ran an economic analysis of the project with its associated series of estimates as projected 'cash-flows'. The economic indicators calculated are net present value, internal rate of return and efficiency of investment

Projects are then ranked on their efficiency of social investment score.

The customization used at INdT is that instead of using scrum estimates the software has values assigned by answering questions. This makes the software then useful for all kinds of projects.The following questions were used

  • What is the quality of information presented.?
  • How much does this project align with strategy?
  • What is the probability that the project will build competencies?
  • The project opens new, significant markets for customers (What is the potential for market and revenue creation?)
  • What is the project's capacity to leverage competitive position (Impact on competition)
  • If the project is approved what is the span of possible applications that the resulting product might be applied to?
  • Are there any IPR implications?
  • What is the technological feasibility of the project?
  • Assuming the project is implemented the set up costs of it are likely to be?
  • What are the technological risks?
and the software also has a 'stage-gate' built in now so that projects can be eliminated early on if some basic requirements are not met. Things like the project conflicting with the current portfolio or not adding value fit this description.

The software is published under the AGPL and it uses a standard Django set up. It should be relatively bug free but YMMV depending on what you want to do with it. The full thesis - How to choose social investment projects by calculating their efficiency of investment using agile software development techniques - is available to download here. Enjoy!

Monday, April 25, 2011 in CodeWork  | Permalink |  Comments (0)   Digg   Yahoo   Google   Spurl