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Business Benefits of GIS: An ROI Approach Steve Calder PA Consulting
The objectives of today’s presentation are… <ul><li>To help you communicate the business case for Geospatial-related (data...
Customer viewpoint - What are some of the issues or challenges commonly faced when seeking to realise value from geospatia...
What’s the big deal about ROI? <ul><li>ROI can be defined many ways </li></ul><ul><ul><li>We use ROI as a generic term to ...
Key questions increasingly asked by budget holders (applied to new or on-going mature GIS implementations) <ul><li>Why  in...
So what is the ‘ROI-driven approach’ that helps answer the 5 key questions? <ul><li>It is an end-to-end approach that is r...
Our observations of typical GIS initiatives… <ul><li>A Typical initiative… </li></ul><ul><li>…  is technology-led </li></u...
Overview of the Approach Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define Project Con...
Step 1 : Prepare for the ROI Project Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define...
Step 1: Prepare for the ROI Project <ul><li>Treat the ROI study as a project </li></ul><ul><ul><li>It has a defined group ...
Step 2: Identify Business Opportunities <ul><li>Identify business opportunities for GIS by speaking to your Executives </l...
Step 3: Prioritise Business Opportunities (1) <ul><li>Use the information gathered from your Executives during interviews ...
Step 3: Prioritise Business Opportunities <ul><li>Use the template to help prioritise the benefits identified based on </l...
Step 4: Construct the GIS Program <ul><li>Practically determine what will need to be done to deliver the benefits </li></u...
Step 5: Define Project Control Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define Proje...
Step 5: Define Program Control <ul><li>Lack of governance is a leading cause of program failure </li></ul><ul><li>Ensure y...
Step 6: Calculate Costs Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define Project Cont...
Step 6: Specify & Cost GIS Program  <ul><li>Understanding key concepts </li></ul><ul><ul><li>Capital v. Operational expend...
Step 7: Calculate the Benefits <ul><li>Quantify the business benefits in tangible terms </li></ul><ul><li>One of the most ...
Step 8: Create the Benefits Roadmap <ul><li>Illustrates the program activity on a quarterly basis </li></ul><ul><li>Focuse...
Step 9: Calculate the Financial Metrics <ul><li>Team with your finance department </li></ul><ul><li>Use budget (cost) and ...
Step 10: Build and Present final Report Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Def...
Key benefits for your client’s organisation <ul><ul><li>Avoid a siloed approach to GIS </li></ul></ul><ul><ul><li>Leverage...
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Steve Calder: Business Benefits of GIS: An ROI Approach

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  • Objectives are: Provide an overview of the ROI driven strategy such that you understand why it’s important and how it can be delivered Recognize need for top down approach, executives will strongly buy-in if they understand how GIS will support the business goals Once you’ve identified individual goals and benefits, it’s important to tie them altogether and represent back across the many groups in a way that all can understand “ How to” want you to leave feeling empowered that you can deliver what is required, and understand the rationale, process and tools Lot’s of different definitions as to what is strategy and what is business case, we will explain how ROI driven strategy covers both these parts Would anybody like to add to the list that they don’t see here?
  • These are all the needs that we see clients having in their organisations Hopefully this connects with your own situation and the needs of your organisation or customers? The methodology was developed to show in a compelling way how IT can create business value and how that value can be delivered.
  • Methodology seeks to answer: How can GIS help achieve strategic goals What will it cost – project – ongoing operating costs How do we quantify benefits from investment What resources are required to deliver the program What will the NPV look like How do we structure the program for success As you can see the objective of this methodology is to help resolve these issues and challenges faced The key to success is being able to translate GIS capability into meaningful business value that executives can understand The approach has been developed to provide answers to all of these questions in a logical progression, gaining executive buy in along the way
  • The methodology takes us through nine steps &lt; click thro’ 9 steps in order &gt; Step 1 setting the ROI project up for success Step 2- 4 we build the program blueprint, understanding executives challenges and opportunities and capturing in an organized framework with project definitions Step 5 we identify the org structure, governance and resources to manage the program but also consider what support organization will be needed to manage post implementation In steps 6-8 we perform the business analysis, identifying costs, quantifying benefits and calculating overall project values Finally in step 9 we pull it altogether in a final report LHS is focused on developing the strategy, understanding the as-is and to-be situations and the initiatives to close the gap, the RHS is focused on developing the practical business case to make this happen Completing an ROI Business Case is iterative – you may not get it right on the first pass. The methodology can be used in whole or in part to meet the needs of your particular situation. With experience we estimate that you can complete the methodology in approximately 4-6 weeks of effort (this may occur over a longer elapsed time). The journey is as important as the destination.
  • The methodology takes us through nine steps &lt; click thro’ 9 steps in order &gt; Step 1 setting the ROI project up for success Step 2- 4 we build the program blueprint, understanding executives challenges and opportunities and capturing in an organised framework with project definitions Step 5 we identify the org structure, governance and resources to manage the program but also consider what support organization will be needed to manage post implementation In steps 6-8 we perform the business analysis, identifying costs, quantifying benefits and calculating overall project values Finally in step 9 we pull it altogether in a final report LHS is focused on developing the strategy, understanding the as-is and to-be situations and the initiatives to close the gap, the RHS is focused on developing the practical business case to make this happen Completing an ROI Business Case is iterative – you may not get it right on the first pass. The methodology can be used in whole or in part to meet the needs of your particular situation. With experience we estimate that you can complete the methodology in approximately 4-6 weeks of effort (this may occur over a longer elapsed time). The journey is as important as the destination.
  • Mission statements, to get their head wrapped around the purpose of the organization. Org chart, to identify the key stakeholders. Sponsor, or Coach, identified. Can hurdle any hierarchy impedances in the org’n and measure whether it’s good timing (i.e. undergoing a company re-org). Executive briefings drafted to prepare for interviews in step 2 Estimate project timeline. Keep in mind budget cycles, and submission dates.
  • Have a grasp of high-level benefits of a GIS – both tangible and intangible. Build interview questions – use (online) digital docs as a guide. Try to glean metrics from the interviews. Do not avoid individuals who historically may have been naysayers or critics. Circumventing them early in this process could serve to impede the success of the ROI project further along. Emphasize that this is not a needs analysis, answering how GIS can be applied in an organization. Instead, this is a formula to address business needs.
  • Avoid personnel reduction as a solution. Don’t attempt to shoe-horn GIS into the answer for every situation. There is a risk of losing credibility. Regarding Metrics: Try not to get too hung up on numbers – if you’ve collaborated with the subject matter expert – a 20+ year veteran – than the numbers are corroborated.
  • In some cases, opportunities may not fall into the upper right quadrant, but may be perceived by executives to be politically sensitive or high-profile. As a result, the quadrant diagram is a guide to assist you in weighing the value to the organization. The opportunities may afford other less-tangible, but equally important, benefits that should be considered.
  • Don’t assume the program will progress as a waterfall model, cascading from project to project. Describe post-it note scenario.
  • The methodology takes us through nine steps &lt; click thro’ 9 steps in order &gt; Step 1 setting the ROI project up for success Step 2- 4 we build the program blueprint, understanding executives challenges and opportunities and capturing in an organized framework with project definitions Step 5 we identify the org structure, governance and resources to manage the program but also consider what support organization will be needed to manage post implementation In steps 6-8 we perform the business analysis, identifying costs, quantifying benefits and calculating overall project values Finally in step 9 we pull it altogether in a final report LHS is focused on developing the strategy, understanding the as-is and to-be situations and the initiatives to close the gap, the RHS is focused on developing the practical business case to make this happen Completing an ROI Business Case is iterative – you may not get it right on the first pass. The methodology can be used in whole or in part to meet the needs of your particular situation. With experience we estimate that you can complete the methodology in approximately 4-6 weeks of effort (this may occur over a longer elapsed time). The journey is as important as the destination.
  • Measure competencies using the CMM. Very visual. Assemble the ROI team to review, discuss and possibly argue about the current and desired rankings. Must have one individual as the facilitator, use a projector, presenting the each key process area on the CMM, one at a time for discussion and debate. Be honest about how the organization is currently set up for success.
  • The methodology takes us through nine steps &lt; click thro’ 9 steps in order &gt; Step 1 setting the ROI project up for success Step 2- 4 we build the program blueprint, understanding executives challenges and opportunities and capturing in an organized framework with project definitions Step 5 we identify the org structure, governance and resources to manage the program but also consider what support organization will be needed to manage post implementation In steps 6-8 we perform the business analysis, identifying costs, quantifying benefits and calculating overall project values Finally in step 9 we pull it altogether in a final report LHS is focused on developing the strategy, understanding the as-is and to-be situations and the initiatives to close the gap, the RHS is focused on developing the practical business case to make this happen Completing an ROI Business Case is iterative – you may not get it right on the first pass. The methodology can be used in whole or in part to meet the needs of your particular situation. With experience we estimate that you can complete the methodology in approximately 4-6 weeks of effort (this may occur over a longer elapsed time). The journey is as important as the destination.
  • Might want to discuss cost types: Resource Driven, Fixed Price, Point Purchase. Also, managing cash flow – spreading expenditures equally throught the fiscal year.
  • Show the template “live” – zooming in on each section so they can see it in-action.
  • Mention themes/categories (i.e. Foundational projects). Collections of projects delivering benefits. Use Familiar and Standard organizational techniques and approaches. Be conscious of the manner in which your executives like to receive and consume informaiton.
  • Capital budget planning. As a budget is re-cast year on year, there will be a need to modify the capital expenditure (CapEx) projections to reflect changing business priorities, technologies, environment, etc. Increasing capital expenditure profile over the years should be avoided. The budget must convey a clear sense of when something will finish .
  • The methodology takes us through nine steps &lt; click thro’ 9 steps in order &gt; Step 1 setting the ROI project up for success Step 2- 4 we build the program blueprint, understanding executives challenges and opportunities and capturing in an organized framework with project definitions Step 5 we identify the org structure, governance and resources to manage the program but also consider what support organization will be needed to manage post implementation In steps 6-8 we perform the business analysis, identifying costs, quantifying benefits and calculating overall project values Finally in step 9 we pull it altogether in a final report LHS is focused on developing the strategy, understanding the as-is and to-be situations and the initiatives to close the gap, the RHS is focused on developing the practical business case to make this happen Completing an ROI Business Case is iterative – you may not get it right on the first pass. The methodology can be used in whole or in part to meet the needs of your particular situation. With experience we estimate that you can complete the methodology in approximately 4-6 weeks of effort (this may occur over a longer elapsed time). The journey is as important as the destination.
  • look across the enterprise and not simply at one business function or department Stakeholder buy-in to what benefits could be realized in the use of geospatial technology
  • Transcript of "Steve Calder: Business Benefits of GIS: An ROI Approach"

    1. 1. Business Benefits of GIS: An ROI Approach Steve Calder PA Consulting
    2. 2. The objectives of today’s presentation are… <ul><li>To help you communicate the business case for Geospatial-related (data/technology) investment using ROI-based ‘value’ methods </li></ul><ul><li>To practically describe ‘how to’ build the ROI-based Strategy/Business Case, not just tell you why it’s important </li></ul>www.esri.com/roi
    3. 3. Customer viewpoint - What are some of the issues or challenges commonly faced when seeking to realise value from geospatial technology? <ul><ul><li>Compete to secure an appropriate share of IT-related budget </li></ul></ul><ul><ul><li>Prove the real-value (ROI) of a GIS-related investment </li></ul></ul><ul><ul><li>Prioritise GIS-related investments based on the value delivered to an organisation </li></ul></ul><ul><ul><li>Deliver a growing portfolio of complex GIS enabled initiatives </li></ul></ul><ul><ul><li>Build consensus to allow ‘enterprise’ opportunities to emerge </li></ul></ul><ul><ul><li>Deliver successfully on expected business benefits, not just project milestones </li></ul></ul>Time Sophistication ROI GIS technology
    4. 4. What’s the big deal about ROI? <ul><li>ROI can be defined many ways </li></ul><ul><ul><li>We use ROI as a generic term to indicate that a given investment will have a positive return to the organisation </li></ul></ul><ul><ul><li>It can be described in many forms </li></ul></ul><ul><ul><ul><li>ROI % return </li></ul></ul></ul><ul><ul><ul><li>Net Present Value (NPV) </li></ul></ul></ul><ul><ul><ul><li>Impact to operating free cash flow </li></ul></ul></ul><ul><ul><ul><li>Impact to Profit & Loss </li></ul></ul></ul><ul><ul><ul><li>Internal Rate of Return (IRR) </li></ul></ul></ul><ul><li>In our experience, ROI (however defined) alone doesn’t secure funding </li></ul><ul><li>The key is to build consensus and commitment across the organisation, and to structure a program of work that will deliver tangible value that everyone believes in </li></ul>
    5. 5. Key questions increasingly asked by budget holders (applied to new or on-going mature GIS implementations) <ul><li>Why invest, or re-invest, in a particular GIS capability / solution? </li></ul><ul><li>How much investment is needed? </li></ul><ul><li>When will the benefits be delivered? </li></ul><ul><li>Who is going to deliver these benefits and what resources are required </li></ul><ul><li>What is the financial case? </li></ul>How will it impact revenue growth, assurance & protection; cost reduction; service excellence; regulatory compliance, health & safety or shareholder value? What is the initial capital expenditure required, and on-going cost of ownership? When will the business realise these benefits? (Not to be confused with project milestones!) What resources are required to realise the benefits? What type of delivery organisation is required during implementation and post-implementation in order to sustain it? How does the project prove itself financially – that is, what is the return on this investment (using NPV, IRR etc)? If you can’t answer these questions for your customer, then how can they answer them for the Executive Budget holder?
    6. 6. So what is the ‘ROI-driven approach’ that helps answer the 5 key questions? <ul><li>It is an end-to-end approach that is repeatable and supported by a set of templates and toolkits (although it’s iterative, not linear!) </li></ul><ul><li>It is a highly participative approach that builds consensus and commitment at all levels of the organisation </li></ul><ul><li>It is part strategy planning and part quantified business case </li></ul><ul><li>It is a pragmatic, step by step process that is repeatable and fully codified </li></ul><ul><li>It incorporates a significant body of knowledge pertaining to business strategy, complex program planning, sourcing, organisational design and financial analysis </li></ul>
    7. 7. Our observations of typical GIS initiatives… <ul><li>A Typical initiative… </li></ul><ul><li>… is technology-led </li></ul><ul><li>… is technology-driven </li></ul><ul><li>… seeks to deliver against project milestones </li></ul><ul><li>… is focused on delivering applications and functionality </li></ul><ul><li>… has limited or short-lived buy-in from stakeholders </li></ul><ul><li>… seeks to sell GIS through demonstration of technology </li></ul><ul><li>… is not linked explicitly to organisational strategic objectives </li></ul><ul><li>… cannot measure success based on value delivered </li></ul><ul><li>A Successful initiative… </li></ul><ul><li>… is business-led </li></ul><ul><li>… is benefits-driven </li></ul><ul><li>… seeks to deliver measurable value to stakeholders </li></ul><ul><li>… is focused on delivering business capability </li></ul><ul><li>… has long-term stakeholder commitment to success </li></ul><ul><li>… builds consensus & commitment by demonstrating opportunities to realise value </li></ul><ul><li>… is explicitly linked to organisational strategic objectives </li></ul><ul><li>… can measure success based on value delivered….the return on investment… </li></ul>
    8. 8. Overview of the Approach Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define Project Control Prepare for the ROI Project Build & Present Report 2 1 3 5 4 6 7 10 9 Identify Business Opportunity Prioritise Business Opportunities 8 Benefits Roadmap Develop Quantitative Business Case Toolkits used: Budget Model Template, Benefits Modeling Toolkit, Financial Analysis Toolkit (NPV, IRR, ROI) Develop Strategy Toolkits used: Interview Templates Business Opportunities, Prioritisation Model Program Planning Pyramid Overview of the Methodology…
    9. 9. Step 1 : Prepare for the ROI Project Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define Project Control Build & Present Report 2 1 3 5 4 6 7 10 9 Identify Business Opportunity Prioritise Business Opportunities 8 Benefits Roadmap Prepare for the ROI Project
    10. 10. Step 1: Prepare for the ROI Project <ul><li>Treat the ROI study as a project </li></ul><ul><ul><li>It has a defined group of stakeholders who will contribute </li></ul></ul><ul><ul><li>It has a project plan with start, end dates and well defined activities </li></ul></ul><ul><ul><li>It has active stakeholder management </li></ul></ul><ul><ul><li>It has deliverables </li></ul></ul><ul><li>Define your ROI Project Plan </li></ul><ul><li>Build SWOT Analysis of your existing GIS implementation or past attempts. </li></ul><ul><li>The rule here is “ Plan and be prepared ” </li></ul>
    11. 11. Step 2: Identify Business Opportunities <ul><li>Identify business opportunities for GIS by speaking to your Executives </li></ul><ul><ul><li>Objective is to link GIS opportunities to organisational strategy & objectives </li></ul></ul><ul><li>Utilise structured interview techniques and scripts </li></ul><ul><li>The focus is on what they see as opportunities or problem areas in their organisation </li></ul><ul><li>Take the opportunity to engage with them and educate them, but don’t ‘sell GIS’ to them </li></ul>Interview Template
    12. 12. Step 3: Prioritise Business Opportunities (1) <ul><li>Use the information gathered from your Executives during interviews </li></ul><ul><ul><li>And any follow-up meetings with their direct reports </li></ul></ul><ul><li>Collate it together in the Template </li></ul><ul><li>Flesh out the opportunities identified by adding business context for each opportunity </li></ul><ul><li>Also identify metrics that relate to each opportunity </li></ul><ul><li>Avoid politically sensitive benefits e.g. cost reduction via headcount </li></ul>Interview Notes Benefits Template
    13. 13. Step 3: Prioritise Business Opportunities <ul><li>Use the template to help prioritise the benefits identified based on </li></ul><ul><ul><li>Value to the organisation </li></ul></ul><ul><ul><li>Ease of Implementation (delivery) </li></ul></ul><ul><li>At this stage “value’ is subjective, but is guided by Executives </li></ul><ul><li>The template will generate a quadrant diagram </li></ul><ul><li>Focus on the benefits falling in the top right quadrant </li></ul>Quadrant Diagram
    14. 14. Step 4: Construct the GIS Program <ul><li>Practically determine what will need to be done to deliver the benefits </li></ul><ul><li>Keep the BIG PICTURE (Enterprise view) </li></ul><ul><li>Distill the Program into component parts (hardware, software, data, etc) </li></ul><ul><li>Seek to combine ‘like projects’ together and not 1:1 to benefits </li></ul><ul><ul><li>Take an enterprise view, not application view </li></ul></ul><ul><ul><li>Don’t get tripped up by budget allocations and models (yet) </li></ul></ul><ul><li>Be pragmatic </li></ul>Program Pyramid Discrete Projects
    15. 15. Step 5: Define Project Control Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define Project Control Build & Present Report 2 1 3 5 4 6 7 10 9 Prioritise Business Opportunities 8 Benefits Roadmap Prepare for the ROI Project Identify Business Opportunities
    16. 16. Step 5: Define Program Control <ul><li>Lack of governance is a leading cause of program failure </li></ul><ul><li>Ensure your clients have adequate controls in place to be successful </li></ul><ul><li>Use the Project Governance Capability Maturity Model (CMM) to understand team readiness </li></ul><ul><ul><li>Exposes strengths and weaknesses </li></ul></ul><ul><li>Shore up any weak spots and be realistic </li></ul><ul><li>Help define their GIS delivery team structure (in-house vs external) </li></ul><ul><li>Consider post-delivery operational requirements </li></ul>
    17. 17. Step 6: Calculate Costs Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define Project Control Build & Present Report 2 1 3 5 4 6 7 10 9 Prioritise Business Opportunities 8 Benefits Roadmap Prepare for the ROI Project Identify Business Opportunities
    18. 18. Step 6: Specify & Cost GIS Program <ul><li>Understanding key concepts </li></ul><ul><ul><li>Capital v. Operational expenditure </li></ul></ul><ul><ul><li>Depreciation </li></ul></ul><ul><ul><li>Internal Capitalisation of Labour </li></ul></ul><ul><ul><li>Cash flow implications </li></ul></ul><ul><ul><li>Sign-off limits </li></ul></ul><ul><ul><li>Procurement rules/preferences </li></ul></ul><ul><li>Output used to populate the “cost” side of the ROI calculation </li></ul><ul><li>Dashboards are automatically generated to provide a full 3 year view </li></ul>3-Year Capex & Opex Budget
    19. 19. Step 7: Calculate the Benefits <ul><li>Quantify the business benefits in tangible terms </li></ul><ul><li>One of the most challenging aspects of any ROI calculation </li></ul><ul><li>Requires you to model the impacts of GIS as an enabling technology on workflow (base case vs GIS case) </li></ul><ul><li>Key concepts: </li></ul><ul><ul><li>Value Driver Tree concept (benefits that enable other benefits) </li></ul></ul><ul><ul><li>Expert witness – getting to the numbers </li></ul></ul><ul><ul><li>Sensitivity Analysis </li></ul></ul><ul><ul><li>Benefits Realisation Curve </li></ul></ul>Realisation Modeling Clear Benefit Definition Benefit Summary Year on Year Value Calculations Fixed, Variable, & Derived Inputs Sensitivity Analysis
    20. 20. Step 8: Create the Benefits Roadmap <ul><li>Illustrates the program activity on a quarterly basis </li></ul><ul><li>Focuses on benefit delivered , not project milestones </li></ul><ul><li>Provides a clear ‘roadmap’ for the program </li></ul><ul><li>Built from the discrete project’s defined in Step 4 </li></ul><ul><li>Must be realistic, achievable and have broad commitment from the business to succeed </li></ul>Project C Project B Project A Project D Project E Project F Q1 Q2 Q3 Q4 Q1/09 Quick wins “ Value drops” for the business “ Value drops” for the business “ Value drops” for the business
    21. 21. Step 9: Calculate the Financial Metrics <ul><li>Team with your finance department </li></ul><ul><li>Use budget (cost) and benefits calculated in earlier steps to calculate ROI, NPV, IRR etc </li></ul><ul><li>Template provides ‘fill in the blank’ entry and automatically calculates financial metrics </li></ul><ul><li>Template also provides guidance on interpreting the results e.g. ‘creates value’ or ‘destroys value’ </li></ul><ul><li>Not just about a positive NPV, it is about successfully delivering on the promised benefit! </li></ul>Budget (cost) from Step 6 Quantified Benefits from Step 7 / = NPV, IRR, MCFCFS, ROI, Payback
    22. 22. Step 10: Build and Present final Report Construct GIS Program Calculate Costs Estimate Benefits Financial Calculations Define Project Control Build & Present Report 2 1 3 5 4 6 7 10 9 Prioritise Business Opportunities 8 Benefits Roadmap Prepare for the ROI Project Identify Business Opportunities
    23. 23. Key benefits for your client’s organisation <ul><ul><li>Avoid a siloed approach to GIS </li></ul></ul><ul><ul><li>Leverage existing investment in GIS technology, data or processes more fully to benefit your organisation </li></ul></ul><ul><ul><li>Establish strong stakeholder buy-in, commitment and understanding </li></ul></ul><ul><ul><li>Validate and refine the work already completed for existing GIS implementations </li></ul></ul><ul><ul><li>Build mutual agreement between senior business leaders of the potential opportunities for leveraging GIS </li></ul></ul><ul><ul><li>Set up a common understanding and prioritisation, based on fact-based, benefits-focused metrics, of the business benefits </li></ul></ul><ul><ul><li>Formulate a defensible budget forecast and achievable roadmap for your Enterprise GIS Program </li></ul></ul><ul><ul><li>And….obtain career advancement! – make your customer a hero </li></ul></ul>

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