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VPS Innovation Case Study - Investment Logic Map

Author: Kine Nordstokka
Published Date: 12 November 2010

Most governments share one problem – abundance of business causes requesting investments and highly limited funding. In a situation like this, a government’s priority is making investment decisions which will maximise value for money and will be able to provide greater impact of government policies.

In order to solve this problem, in 2003 the Investment Management Team came up with a simple, yet innovative approach to allocating government funding. The breakthrough insight of the new strategy was the focus on defining the policy drivers and the benefits. The resulting Investment Logic Map (ILM) approach turned out to be a simple and effective instrument to bridge the gap between good policy and strategy and its implementation.

The approach has created a decision-making framework that directs resources to their best use. It brings key stakeholders to the decision-making table for a two-hour facilitated discussion that builds a shared understanding of the need for investment, the benefits sought and the preferred solution. This discussion establishes the 'investment story' that is then depicted on a single page in a way that can communicate the logic that underpins the proposal to the layperson. Subsequent two-hour discussions produce a Benefit Management Plan and an Investment Concept Brief (effectively a mini-business case).

The ILM approach has demonstrated many hallmarks of public sector innovation, particularly in four respects:

•Triumph of common sense: The ILM challenges mechanical models of investment and overcomes compliant workplaces. It harnesses the power of simplicity.

•Consensus building and peer production: The way the ILM was developed through peer production gave it high moral authority that drove its take-up through voluntary practice. The ILM is also inherently a consensus-building tool in its implementation through facilitated workshops that are critical to its success.

• Realising benefits: The key to realising benefits lies in a clear understanding of cause and effect so that the logic can be understood by a layperson.

• Extending the logic to higher levels: Over time the logic has been extended beyond looking at individual investments to looking at the program level in order to decide between competing proposals and finally to looking at what the organization can do better to achieve its mission.

The ILM approach was thoroughly scrutinized to measure its effectiveness. Since its creation, more than 3000 ILMs have been developed. A study carried out after the 2006 budget cycle showed that the application of ILM would drive down the costs of investment by 10% and drive a 20% increase in the benefits that investment would deliver. A further 2009 study showed that in many respects departments using the approach prefer it to previous schemes.

For further details, please refer to the attached PDF.