3 Key Indicators for Better Planning: Impact, Effort, and Risk as Pillars of Shared Understanding
Making Better Decisions with a Smarter Planning.
👋 Ciao, Alex here. Welcome to a new free edition of Not Just Bits, and thank you to all the readers and those who support my work. Every week, my goal is to share lightweight and informative resources for CTOs.
Balancing the impact and effort for new feature development with all the rest that arrives daily as a to-do on the engineering department's table is a critical task every CTO faces on their journey. It’s not only about arrenging resources; it’s about strategically directing your efforts to ensure every project, whether aimed at external customers or enhancing internal effectiveness or experience, drives substantial business value. Achieving this balance requires a nuanced understanding of impact and alignment with overarching business goals.
In the past, I found using a simple matrix to prioritize todos based on impact/effort and risk very useful, and I would like to show here the approach I used.
The first step was setting clear objectives for each initiative. This helped me determine whether I was rolling out a new customer feature or upgrading an internal tool; defining what success looks like is the first step. These objectives should align with broader company goals, such as improving customer satisfaction, streamlining operations or accelerating product innovation.
I find this also to be a really useful exercise for engineers; in fact, it's crucial to ensure that we avoid communicating the classic:
we need to refactor/ we have tech debt
but instead focus on explaining what the impact and the risks will be. Is poorly written code risky?
When the initiatives are defined, you can start to use the matrix.
The Impact-Effort-Risk Matrix
This matrix is a tool to visualize and prioritize initiatives by categorizing them according to three critical dimensions:
Impact: The potential benefits an initiative will bring to customers, internal processes, or developer experience. This could include improved customer satisfaction, operational efficiencies, or revenue growth.
Effort: The amount of resources, time, and manpower required to execute the initiative. This helps in understanding the investment needed for each initiative.
Risk: The uncertainties associated with each initiative, including growth risk (how it might affect company growth), market certainty (external factors that could influence success), and implementation risk (technical or operational challenges).
Initially, you try to assign effort and impact. I would recommend always starting by focusing on quick wins (low effort/big impact) and then moving toward bigger effort initiatives.
High Impact, Low Effort, Low Risk: These projects are “quick wins”. They require minimal effort and carry low risk but promise significant benefits. Prioritizing these projects can lead to immediate improvements in customer satisfaction or internal efficiency.
High Impact, High Effort, Moderate Risk: These are “major projects”. They are essential for long-term strategic goals but require substantial resources and carry a higher level of risk. These initiatives need careful planning and risk mitigation strategies.
Low Impact, Low Effort, Low Risk: Termed as “fill-ins”, these projects don't offer substantial benefits but are easy to implement. They can be taken up in downtime or when resources are available without detracting from more critical tasks.
Low Impact, High Effort, High Risk: These projects are “question marks” and generally should be avoided or re-evaluated. They consume significant resources and carry high risk without promising proportional benefits.
While the Impact-Effort-Risk Matrix is a valuable tool for prioritizing projects, it's important to recognize that it is not a one-size-fits-all solution. Like any prioritization tool, its effectiveness is contingent upon the quality and completeness of the information used to fill it out.
A critical consideration is that relatively few people in an organization possess the comprehensive insight necessary to accurately assess all three dimensions of the matrix. Impact and Confidence are primarily business domain, requiring a deep understanding of market dynamics, customer needs, and strategic objectives. On the other hand the Effort falls within the technical domain, demanding a clear understanding of the complexities involved in implementing a given initiative.
This division between business and technical domains underscores the necessity for cross-functional collaboration in the prioritization process. It's essential that teams bridge this gap, bringing together stakeholders from across the organization to contribute their unique perspectives. By doing so, the organization can ensure that the projects selected for prioritization are not only technically feasible but also aligned with business goals and likely to achieve the desired impact.
Takeaways
Try to use the Impact-Effort-Risk Matrix or a similar framework for prioritizing projects by evaluating them against key business dimensions: Impact (the potential benefits), Effort (required resources), and Risk (associated uncertainties).
Always review and improve the accuracy of these evaluations, which depends on cross-functional collaboration. Impact and Effort often require insights from both business and technical domains.
✅ Before you go:
Please share this post and invite your network to subscribe to the Not Just Bits newsletter.
Feel free to connect with me on LinkedIn.
See you next week! Best, Alex Di Mango