Justify ROI for Your Data Analysis Initiatives

On the face of it, this should be easy, right? You know how much advancing your analytics would help. You’re in this data all day and you know there are gems to be mined. How can business folks not let you go ahead with your Business Intelligence initiatives?

Reports show that on average, an analytics dollar yields more than $13 in return. Thirteen to one! And the pace seems to increase at a rate of around 7% per year. Companies who utilize BI analytics see an average of 8% increase in revenue and a 10% reduction in costs, an 18% swing. Those companies are five times more likely to make faster decisions. Of companies that are using big data, 92% of executives are satisfied with the results and 89% say big data is very important. Eighty-nine percent who have implemented at least one big data project see it as a way to revolutionize business operations and 85% believed big data would dramatically change the way business is done. Slam dunk.

But how do you show potential ROI for YOUR project?

Build Your Budget, but Build Your Case

To budget a project, figure how long it would take a single, in-house developer to handle that project. Know that any General Contractor working on your house renovation will tell you to allow for about 15% in overrun, for problems you’ll find along the way. So, if you think it would take your in-house developer six months to do a project him/herself and those resources come with a salary of about $100,000, then six months would be $50,000 and with the overrun, budget $57,500.

When building your case, ask your business users how long they are spending gathering, cleaning and preparing data. If your project solution would replace repetitive work from three different people and automate that with a report or dashboard that could be ready in real time, then estimate the time each of those positions is spending on a report or project and multiply by the salary of each position. If you don’t know salary information, simply use a job board to find an average estimate of that position for your calculations. Remember, these business analysts also get time back to add higher quality analysis, rather than repetitive data wrangling.

“Soft ROI” is the hardest to quantify. Include these benefits in your analysis regardless, but if you can quantify them, all the better. If you know that the project results generally lead to better job satisfaction and less turnover, then include that point and add that a 5% reduction in turnover equates to $X in savings. Don’t just look for soft savings ROI, look for revenue increases, too.

Also note that BI initiatives are ongoing processes, with constant alterations, but also recurring benefits.  One of our manufacturing customers, after consolidating many operations into a data warehouse and reporting from it, discovered a way to change how they delivered product. That saved them 5%. What is 5% for them? They now reap $2M annually in transportation cost savings.

Also, try to do some analysis on the cost of doing nothing. This may be the hardest of all to quantify. The reality is, the cost of doing nothing is not zero. The ROI is actually negative. A “do nothing” company not bringing sufficient value to its customers and owners might see them take their business and capital to competitors. This negative ROI for stagnant companies worsens in a slowing economy.  While most companies choose to trim spending through a downturn, smart companies have determined which processes and technologies bring the highest return, and will continue investing in these, taking advantage of their idle competitors. A good economic environment like we have right now is the perfect time to begin these BI initiatives.

Don’t be afraid to contact a consulting team to assist with this process.  At Kingfisher, we helped countless customers with a discovery call. We were able to get a feel for pain points, take a look at a companies’ situations and, utilizing our experience and best practices, give a pretty good idea of a BI plan, how to get there, how much it may cost and help cost-justify it to assist with getting funding approved. Often a short “proof of concept” will solidify the vision at low risk while helping improve specifications and understanding of scope.

What Can You Do for You?

If you need to save some more money, look at what your team does best. When working with your consulting team, let them know you need to save a bit more and where you may be able to help. That said, be honest with yourself. It’s likely that you’ll have an easier time achieving full ROI by allowing consultants to handle what they’re good at in a short period of time, while you unleash your resources doing what you should have been doing all along with your resources. Our clients commonly see the projects they engage us with pay for themselves within six months. The benefits continue every year after the project is paid for and the improved practices and knowledge of the clients adds further improvements independently.

Don’t wait to begin, though. We recently helped another client who had renewed trials of desktop Lumira for eighteen months without really getting the time to analyze the tool. In one call followed by a WebEx demo, we established the full value of Lumira server for his organization, instead of him trying to figure it out in his “spare time.” We also pointed out his company owned this tool already, preventing his organization from investing six figures in a competing technology to one they already owned, but hadn’t used.

Start Small

Look to find areas where you may be able to deliver the highest value at the lowest cost to start. Use existing tools wherever possible at this early stage. We can help you discover tools you may be paying maintenance on as part of your “package” that may be able to help you.

If you don’t know where to begin, ask the business users. These are your customers and often financial data has the clearest and most structured needs. Operational improvements like production, purchasing, inventory management, and sales often give tremendous widespread value. Start with one functional area. Often, companies begin with enriching Sales data with forecast and year over year metrics to put pipeline information in context.

Break up a large BI implementation plan into multiple cascading sub-projects. Execute a strategic number of steps with each phase, so you can handle the budget and the ROI from one might pay for the next step. This may create a low-risk, high-reward project that a CFO could be convinced to execute.

Conclusion

The idea of your business stagnating is frightening. However, allowing your Business Intelligence to stagnate makes it inevitable. Budgeting and procuring funding are often the two biggest hurdles to BI initiatives. Certainly, the cost of purchasing tools can be a pain point as well.  However, it may be a cost you don’t need to incur. With one quick call, we can help you see what tools you may already be entitled to, potentially saving you thousands, and what those additional tools in your suite do. You may be able to tackle even more projects with less overhead by unlocking the potential of your entire BI suite. That BI vision you are piecing together “when you have a minute” can be solidified quickly in a conversation. We can share ways other companies have secured budget and executive buy-in.

Most of our engagements have paid for themselves in three to six months and the benefits beyond that are pure profit. So, the next time you “have a minute,” share your thoughts with us and we’ll help you put a strategy together that ensures your success. The call requires no budget, but getting that next step towards BI maturity underway could be priceless.

Read More about business insight in these recent articles

increase your knowledge

See more Business Intelligence insights or get future articles sent right to your inbox

increase your knowledge