Jiri Knesl

Posted on 11th June 2020

### ICE score for decision making

Management | News |

At Flexiana, when we are deciding on improvements, we use a couple of ways to decide and prioritize. It can be a strategic objective or directly related to it. Or it can be a huge issue we have to solve. And then there are ideas for improvement that come naturally, even they are within our scope.

## For these ideas, we use ICE scoring.

So what is it?

• I means Impact
• C is Certainty
• E is for Effort

$$ICE Score = {Impact \times Certainty \over Effort}$$

Impact is expected income from given activity. 1 stands for $1000 per year (or in total if possible to estimate). These$1000 can come from new income, from savings, or indirectly. For example $10,000 in potential deals might generate$1000 of real income.

$$Impact = {Revenue|Savings \over \1000}$$

Certainty is how sure we are we will get the value. At this moment, we use a scale from 0 to 1. We multiply how much we believe it will happen times how much we have outcome under control times how big part of expenses we can save (minimum is 0.1).

$$Certainty = SuccessEstimate \times OurControl \times min(ExpensesRecoverable, 0.1)$$

SuccessEstimate and OurControl are on scale 0-1, ExpensesRecoverable are on scale 0.1-1. Average item we implement has average Certainty 0.42, average Certainty overall is 0.36.

Effort is calculated as expense where 1 is \$1000 spent per year on people, licenses, or other expenses.

$$Effort = {Expenses \over \1000}$$

All this leads to interesting conclusion:

$$ICEScore = {{{Revenue|Savings \over \1000} \times Certainty} \over {Expenses \over \1000}}$$

Which after simplification leads to:

$$ICEScore = {{Revenue|Savings \times Certainty} \over Expenses}$$

Or:

$$ICEScore = {{Revenue|Savings \over Expenses} \times Certainty}$$

Where:

$$ROI = {Revenue|Savings \over Expenses}$$

$$Risk = {1 \over Certainty}$$

So:

$$ICEScore = {ROI \over Risk}$$

So at Flexiana we use ICE score as some kind of risk-aware ROI. And to invest into some initiative, it should have positive ROI with risks accounted in.

This approach promotes:

• Activities with lower commitment
• Activities which we believe will work
• Activities where we have the result under control

With this approach, we ended up with:

• Paying for SaaS as a monthly commitment for the first few months
• Building our own systems
• Doing smaller experiments before committing to larger ones

Internally we have some tables and default measures for estimation. So 1 average new customer is worth X revenue. An Internal employee working fulltime on a given agenda is worth Y expenses, etc. With that, we are able to calculate ICE score for tons of ideas in under a minute.

Then, in our Notion, we have a backlog of ideas sorted by ICE score. Once we have an empty slot for new change (more about this in a different article), we pull the one that’s the highest and evaluate it more. Then, we probably proceed with the implementation.

We don’t delete ideas that have a low ICE score, because the impact of some things scales with company size but the expense is basically the same (typically some SaaS we pay on a per user basis).

At this moment I am very happy to have ICE scoring implemented because it is not only a tool that pushes us to think about potential revenues and expenses, but also about risks and at the same time, revenues and expenses are inputs for our budgeting & project success evaluation.

Although Flexiana is already established, profitable and growing on our scale, in most cases we focuse on only one thing with big expenses & large risks at a time. On top of that, we usually work on multiple improvements that are quite cheap and safe.