Book Gis ROI Presentation

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Presentation outlining at a high level the approach, insights and tools described in the Book "Business Benefits of GIS: An ROI Approach"

Book Gis ROI Presentation

  1. 1. Presented by Ross Smith ( [email_address] ) Business Benefits of GIS: An ROI Approach
  2. 2. Presentation Overview <ul><li>Introduction </li></ul><ul><li>The need for an ROI-driven methodology </li></ul><ul><li>Challenges with existing literature </li></ul><ul><li>Objectives of the ROI Approach </li></ul><ul><li>A tour of the Approach - key insights, tools & templates </li></ul><ul><li>Insights to consider when using this process </li></ul><ul><li>Key benefits for your organization </li></ul><ul><li>Q & A </li></ul>
  3. 3. <ul><li>A collaborative effort between ESRI and PA Consulting Group </li></ul><ul><li>The methodology was originally developed by PA Consulting group for supporting mainstream IT Programs </li></ul><ul><li>Adapted to be GIS-specific by leveraging ESRI’s GIS expertise </li></ul><ul><li>Business Benefits of GIS: An ROI Approach </li></ul><ul><li>Supporting materials @ http://www.esri.com/roi </li></ul><ul><li>Final publication was in August 2008 </li></ul>Introduction
  4. 4. The need for an ROI-driven approach for GIS <ul><li>Compete to secure an appropriate share of IT-related budget </li></ul><ul><li>Prove the real-value (ROI) of a GIS-related investment </li></ul><ul><li>Prioritize GIS-related investments based on the value delivered to the business </li></ul><ul><li>Deliver a growing portfolio of complex GIS enabled initiatives </li></ul><ul><li>Build consensus to allow ‘enterprise’ opportunities to emerge </li></ul><ul><li>Deliver successfully on expected business benefits, not just project milestones </li></ul>We recognized that customers were increasingly having to:
  5. 5. Our observations of typical Enterprise GIS implementations… <ul><li>A Typical Implementation… </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 organizational strategic objectives </li></ul><ul><li>… cannot measure success based on value delivered </li></ul><ul><li>A Successful Implementation… </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 realize value </li></ul><ul><li>… is explicitly linked to organizational strategic objectives </li></ul><ul><li>… can measure success based on value delivered </li></ul>
  6. 6. Challenges With Existing Approaches & Literature <ul><li>Hard-to-find Comprehensive GIS-specific ROI-based method </li></ul><ul><li>Limited Literature on “Return on Investment” </li></ul><ul><ul><li>Financial analyses; specific industries. </li></ul></ul><ul><li>Few examples/case studies </li></ul><ul><li>Explains what to do, but not how to do it </li></ul><ul><li>Too Technology-driven </li></ul>
  7. 7. Objectives of the ROI Approach <ul><li>Quantify Impact on … </li></ul><ul><ul><li>Revenue growth, assurance and protection </li></ul></ul><ul><ul><li>Cost containment or reduction </li></ul></ul><ul><ul><li>Service Excellence </li></ul></ul><ul><ul><li>Regulatory Compliance </li></ul></ul><ul><ul><li>Health & Safety </li></ul></ul><ul><ul><li>Shareholder Value </li></ul></ul><ul><li>Identify … </li></ul><ul><ul><li>Initial Capital Expenditure </li></ul></ul><ul><ul><li>Operational expenses </li></ul></ul><ul><li>Forecast … </li></ul><ul><ul><li>When benefits will be realized </li></ul></ul><ul><li>Define … </li></ul><ul><ul><li>Resources required </li></ul></ul><ul><ul><li>Governance, Management </li></ul></ul><ul><li>Provide … </li></ul><ul><ul><li>Financial case (NPV, IRR, Discounted Payback, FCF …) </li></ul></ul>Build consensus Take an Enterprise, not departmental view
  8. 8. Why use an ROI-Driven approach <ul><li>We advocate quantitatively modeling benefits delivered / enabled by GIS for several reasons: </li></ul><ul><ul><li>In commercial organizations, the most common is to prove a business case. </li></ul></ul><ul><ul><li>To ensure that the GIS program is benefits-driven, organizations quantify the value that will be delivered, not just the applications </li></ul></ul><ul><ul><li>In mature GIS implementations it is more relevant to prioritize future GIS initiatives to ensure they deliver maximum value. </li></ul></ul><ul><ul><li>In a complex stakeholder environment, modeling the value delivery quantitatively allows a prioritization amongst competing groups to take place in a rationale manner. </li></ul></ul>
  9. 9. The End-to-End Approach Prepare for ROI Project Prioritize Business Opportunities Identify Business Opportunities Construct GIS Program Define Program Control Specify & Cost GIS Projects Estimate Benefits Create Benefits Roadmap Calculate Financial Metrics Build & Present Report The approach is designed to be used in whole, or in part, as required by your organizations specific needs View this as a ‘journey’ not a ‘destination’
  10. 10. 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>1
  11. 11. 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 organizational strategy & objectives </li></ul></ul><ul><li>Utilize structured interview techniques and scripts </li></ul><ul><li>The focus is on what they see as opportunities or problem areas in their organization </li></ul><ul><li>Take the opportunity to engage with them and educate them, but don’t ‘sell GIS’ to them </li></ul>2 Interview Template
  12. 12. Prioritize 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 an SCQA 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>3 Interview Notes Benefits Template
  13. 13. Prioritize Business Opportunities (2) <ul><li>Use the template to help prioritize the benefits identified based on </li></ul><ul><ul><li>Value to the organization </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>3 Quadrant Diagram
  14. 14. What have we accomplished so far? <ul><li>We have: </li></ul><ul><ul><li>Engaged with key stakeholders in the business in a professional, structured way </li></ul></ul><ul><ul><li>Assembled a fact-based SWOT analysis </li></ul></ul><ul><ul><li>Identified and prioritized the key business benefits </li></ul></ul><ul><ul><li>broken down organizational barriers </li></ul></ul><ul><ul><li>Identified ‘quick wins’ for the business </li></ul></ul><ul><ul><li>Gathered a majority of information we’ll need to model the benefits quantitatively </li></ul></ul>Step 1-3
  15. 15. Construct the GIS Program <ul><li>Practically determine what will need to be done to deliver the benefits </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><li>Be pragmatic </li></ul><ul><li>Use Post-it © notes as a means to deal with complexity! </li></ul>4 Program Pyramid Discrete Projects
  16. 16. Define Program Control <ul><li>Governance is a leading cause of program failure </li></ul><ul><li>Ensure you have adequate controls in place to be successful </li></ul><ul><li>Use the Project Governance Capability Maturity Model (CMM) to rank your team </li></ul><ul><ul><li>Exposes your strengths and weaknesses </li></ul></ul><ul><li>Shore up any weak spots and be realistic </li></ul><ul><li>Define your delivery team structure (in-house vs external) </li></ul>5
  17. 17. Specify & Cost GIS Program (1) <ul><li>Assemble your GIS Program budget forecast (CapEx & OpEx) </li></ul><ul><li>Team with your finance department </li></ul><ul><li>Build your budget from the bottom-up, in a robust, defensible manner </li></ul>6 Discrete Projects 3-Year CapEx & OpEx Budget <ul><li>Use the Budget Template to guide you through the budgeting process </li></ul>
  18. 18. Specify & Cost GIS Program (2) <ul><li>Guidance is provided </li></ul><ul><ul><li>Capital v. Operational expenditure </li></ul></ul><ul><ul><li>Depreciation </li></ul></ul><ul><ul><li>Internal Capitalization of Labor </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 6
  19. 19. 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>7 <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 Realization Curve </li></ul></ul>Realization Modeling Clear Benefit Definition Benefit Summary Year on Year Value Calculations Fixed, Variable, & Derived Inputs Sensitivity Analysis
  20. 20. Create the Benefits Roadmap <ul><li>Illustrates the program activity on a quarterly basis </li></ul><ul><li>Focus 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>8 Quick wins “ Value drops” for the business “ Value drops” for the business “ Value drops” for the business Project C Project B Project A Project D Project E Project F Q1 Q2 Q3 Q4 Q1/09 Q1 Q2 Q3 Q4 Q1/09
  21. 21. 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>9 Budget (cost) from Step 6 Quantified Benefits from Step 7 / = NPV, IRR, MCFCFS, ROI, Payback
  22. 22. Prepare and Deliver Report <ul><li>Pulling it all together </li></ul><ul><li>Final stage simply summarizes the results of the study </li></ul><ul><li>At this stage, it should be for completeness; not to win budget </li></ul><ul><li>Hearts and minds should have been won long ago, well before executives read the report (which they likely won’t do!) </li></ul><ul><li>Normally a Word-based report plus an Executive Presentation or summary </li></ul>10
  23. 23. Insights to consider when using this approach… <ul><li>Getting at the numbers </li></ul><ul><li>Proving the impact if you don’t ‘do it’ (e.g. risk management) </li></ul><ul><li>Don’t focus on time-based studies and headcount </li></ul><ul><li>Team with your finance department </li></ul><ul><li>Don’t go it alone </li></ul><ul><li>Sell business value, not GIS </li></ul><ul><li>Be led by the business, not the technology </li></ul><ul><li>Invest the time to plan </li></ul><ul><li>Speak the language of your executives </li></ul><ul><li>Don’t over evangelize. GIS is not the center of the universe! </li></ul>
  24. 24. Key benefits for your organization <ul><li>Avoid a siloed approach to GIS </li></ul><ul><li>Leverage existing investment in GIS technology, data or processes more fully to benefit your organization </li></ul><ul><li>Establish strong stakeholder buy-in, commitment and understanding </li></ul><ul><li>Further validate and refine the work already completed for existing GIS implementations </li></ul><ul><li>Mutual agreement between senior business leaders of the potential opportunities for leveraging GIS </li></ul><ul><li>A common understanding and prioritization, based on fact-based, benefits-focused metrics, of the business benefits </li></ul><ul><li>A defensible budget forecast and achievable roadmap for your Enterprise GIS Program </li></ul><ul><li>And….career advancement! </li></ul>
  25. 25. Further Information <ul><ul><li>Further information on his methodology can be found on the PA website and in the joint publication by PA Consulting Group & ESRI Inc. </li></ul></ul><ul><ul><li>It is accessible from the following links: </li></ul></ul>http://www.paconsulting.com/gis OR www.esri.com/roi

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