Showing ROI for Your Analytic Project

1. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 1 Unlock Potential William McKnight President McKnight Consulting Group Showing ROI for Your Analytic Project @williammcknight

2. Proprietary + Confidential Powering Data Experiences to Drive Growth Joel McKelvey, Looker Product Management Google Cloud

3. Proprietary + Confidential 1 https://www.forrester.com/report/InsightsDriven+Businesses+Set+The+Pace+For+Global+Growth/-/E-RES130848 “Insights-driven businesses harness and implement digital insights strategically and at scale to drive growth and create differentiating experiences, products, and services.” 7x Faster growth than global GDP 30% Growth or more using advanced analytics in a transformational way 2.3x More likely to succeed during disruption

4. Proprietary + Confidential *Source: https://emtemp.gcom.cloud/ngw/globalassets/en/information-technology/documents/trends/gartner-2019-cio-agenda-key-takeaways.pdf Rebalance Your Technology Portfolio Toward Digital Transformation Gartner: Digital-fueled growth is the top investment priority for technology leaders.* Percent of respondents increasing investment Percent of respondents decreasing investment Cyber/information security 40% 1% Cloud services or solutions (Saas, Paa5, etc.) 33% 2% Core system improvements/transformation 31% 10% How to implement product-centric delivery (by percentage of respondents) Business Intelligence or data analytics solution 45% 1% Digital Transformation

5. Proprietary + Confidential Governed metrics | Best-in-class APIs | In-database | Git version-control | Security | Cloud Integrated Insights Sales reps enter discussions equipped with more context and usage data embedded within Salesforce. Data-driven Workflows Reduce customer churn with automated email campaigns if customer health drops Custom Applications Maintain optimal inventory levels and pricing with merchandising and supply chain management application Modern BI & Analytics Self-service analytics for install operations, sales pipeline management, and customer operations SQL In Results Back

6. Proprietary + Confidential ‘API-first’ extensibility A Modern Approach Semantic modeling layer In-database architecture Built on the cloud strategy of your choice

7. Proprietary + Confidential 1 in 2 customers integrate insights/experiences beyond Looker 2000+ Customers 5000+ Developers Empower People with the Smarter Use of Data

8. Proprietary + Confidential Thank you

9. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 2 Presentation Objectives At the end of this hour, you should be able to Navigate an analytic project justification Distinguish between tangible and intangible benefits Present an itemized ROI Articulate the value of an information program Adapt a methodology in your program that includes ROI attainment and measurement

10. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 3 ARCHITECTURE BUSINESS Sample Analytic Projects Justified Healthcare • Claims Routing • $25M Financial • Loan Origination • $22M Pharmaceutical: • Offer Analysis • $35M Telecommunications: • Full CDR Analysis • $22M Retail: • Offer Optimization • $35M

11. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 4 Measuring is Important to Business “The essence of a corporate culture is the firm’s measurement system. It is the lens through which reality is perceived and acted on.” Paul A. Strassman, “The Business Value of Computers, 1990”

12. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 5 Acknowledging the Strategic A Place for Learning and Innovation The Unknown Upside The intuitive thinking employed by HiPPOs (highest-paid person’s opinions)

15. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 8 Ordered Benefits: What Makes it Difficult Benefits can be direct or indirect First order benefits have a direct relationship to the bottom line Second order benefits have an indirect relationship The system will enable an activity that in turn provides the benefit Third order benefits have a transitive relationship The system enables an activity that allows performance of another activity which actually provides the benefit

16. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 9 Historical Justification What we're good at Tasks and activities What we're bad at Realistic returns (overconfidence) Risk Costs Timelines

18. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 11 Analytics Programs and Projects Justifying an Analytics Project Analytics seen as a stand alone project Built for one application Justifying an Analytics Program Analytics store enterprise data Inclusion of data is based on governance The goal of the program is to enable the component of the applications it supports

19. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 12 What is being justified? An information management program which will store data for several projects Why use a data warehouse architecture versus independent data marts? A project which will use a data store to store data Why do this project? The inclusion of new projects into an existing data store program Why architect this project into the data store instead of building an independent data store?

20. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 13 Return on Investment (Returns - Investment)/Investment ROI should always be supported with a time period (i.e. 401% return in 3 years) ROI should be presented with assumptions and risks and be itemized By source system, subject area, business problem solved, users, levels of summary, and/or amount of history data Add the possibilities! But don’t oversell Used for Predicting and Measuring

21. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 14 Information Management Program Justifications (TCO) Operational System Impact One way of doing things Tools competence Consolidating Expense Streams Enterprise Subject Areas

22. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 15 Typical Approach by Domain Domain Approach Data Warehouse ROI or TCO Big Data ROI Master Data Management TCO foremost Analytics ROI Customer Relationship Management ROI or TCO Stream Processing ROI

24. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 17 Presenting the ROI Possibilities For each suggested business project, present at least 3 possible scenarios along with the odds of that scenario happening, forming a probability distribution Best Case Little Goes Wrong Worst Case Most everything goes wrong Planned Case

26. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 19 Tangible versus Intangible Returns Tangible Returns - Returns you decide to measure More activities have a measurable return than you may think Usually 1-2 returns are reasonable to measure for each phase Intangible Returns - Returns you decide not to measure These will not justify data warehouse efforts

27. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 20 Tangible Returns Increase in sales Efficiencies in processes Reduction in inventory carrying costs and returns increases cash position Automated processing reduces mailing, copying, telephone, car phone, printer, and distribution costs Reduction in returns Reduction in fraud

28. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 21 Tangible Returns Procurement savings Savings in material costs for processing Savings from volume discounts on materials purchases Savings in inventory holding costs Operational savings Savings in capital improvement projects due to predictive replacement and predictive improvement to facilities Savings by avoiding regulatory fines Savings from incurring maintenance expenses based on actual usage instead of scheduled, unnecessary intervals

29. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 22 Intangible Returns Speed to solutions Clean data “Single version of the truth” Improved customer satisfaction Improved internal morale and ability to attract staff Enhanced corporate image Improved overall quality More time for management to mentor staff Faster response to customers

32. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 25 Worksheet: Sample Total Year 1 Year 2 Year 3 Cost savings $140,000.00 $0.00 $60,000.00 $80,000.00 Financial Return $140,000.00 $0.00 $60,000.00 $80,000.00 Hardware $120,000.00 $100,000.00 $10,000.00 $10,000.00 Investment $120,000.00 $100,000.00 $10,000.00 $10,000.00 ROI -100.00% -45.45% 16.67%

33. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 26 Worksheet: Results ROI -100.00% -45.45% 16.67% Cash Flow -$100,000.00 $50,000.00 $70,000.00 Cumulative Cash Flow (Break Even) -$100,000.00 -$50,000.00 $20,000.00 IRR 0% -50% 12% NPV @ 4% COM ($96,153.85) ($49,926.04) $12,303.71

34. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 27 Worksheet: Probability Distribution Probability of ROI 1 40% Probability of ROI 2 30% Probability of ROI 3 30% Total Year 1 Year 2 Year 3 Cost savings $140,000.00 $0.00 $60,000.00 $80,000.00 ROI -100.00% -45.45% 16.67% Total Year 1 Year 2 Year 3 Cost savings $80,000.00 $0.00 $30,000.00 $50,000.00 ROI -100.00% -72.73% -33.33% Total Year 1 Year 2 Year 3 Cost savings $260,000.00 $10,000.00 $100,000.00 $150,000.00 ROI -90.00% 0.00% 116.67% Weighted ROIs: -97.00% -40.00% 31.67%

35. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 28 To Use a Worksheet Get the discount rate Know the Revenue Generation and Cost Reduction dollars by year for the next 3 years Break out Labor Reduction by Resource Persondays and Rate Know the Costs to Implement

36. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 29 To Use a Worksheet Estimate the costs and benefits for 3 scenarios Expected Low High Estimate the probabilities of each scenario Total adds to 100%

38. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 31 Cost Reduction – Fraud Reduction Total Year 1 Year 2 Year 3 Fraud Reduced $1,250,000.00 $0.00 $500,000.00 $750,000.00 Financial Return $1,250,000.00 $0.00 $500,000.00 $750,000.00 Hardware $105,000.00 $75,000.00 $15,000.00 $15,000.00 Software $144,000.00 $100,000.00 $22,000.00 $22,000.00 Consulting $50,000.00 $50,000.00 $0.00 $0.00 Investment $299,000.00 $225,000.00 $37,000.00 $37,000.00 ROI -100.00% 90.84% 318.06%

39. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 32 Healthcare Example COSTS REDUCTION Year 1 Year 2 Year 3 Claims Saved 0 100 150 Avg Cost/Claim $25,000 $25,000 $25,000 Total Claim Cost Savings - $2,500,000 $3,750,000 Total Impact - $3,125,000 $4,500,000 REVENUE GENERATING Year 1 Year 2 Year 3 # Customers added or retained 0 25 30 Average Customer Premium $125,000 $125,000 $125,000 % Gross Profit 20% 20% 20% Total Customer Benefits - $625,000 $750,000

40. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 33 Results Total Year 1 Year 2 Year 3 Customer Benefits $1,375,000.00 $0.00 $625,000.00 $750,000.00 Claim Cost Savings $6,250,000.00 $0.00 $2,500,000.00 $3,750,000.00 Financial Return $7,625,000.00 $0.00 $3,125,000.00 $4,500,000.00 Hardware $230,000.00 $200,000.00 $15,000.00 $15,000.00 Software $294,000.00 $250,000.00 $22,000.00 $22,000.00 Consulting $550,000.00 $350,000.00 $200,000.00 $0.00 Investment $1,074,000.00 $800,000.00 $237,000.00 $37,000.00 ROI -100.00% 201.35% 609.96%

41. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 34 Other Examples Increased revenue per customer Increased customer acquisition Savings due to reduced cost of marketing campaigns Cost benefits of decrease in customer attrition Improved marketing employee productivity Reduced IT spend in supporting databases Reduced likelihood of regulatory fines Reduced cost to recover from a breach Improved efficiency in fraud management Reduced cost of infrastructure

43. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 36 Large Group Impact Level Impossibly measurable at the individual level Must measure at large group impact level Like Customer Lifetime Value/Spend Decile Use indirect measure like customer satisfaction index (CSI) Projects target this level

44. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 37 TCO Examples Data Warehouse or Data Marts? What should I use for Storage Layer/Platform? HDD, SSD, Memory, Tape, Hybrid Is the Cloud Worth It? Should I use a Big Data (Hadoop, NoSQL) solution or RDBMS? Is Master Data Management Worth It?

46. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 39 ROI Methodology Summary Cost Analysis Tangible Benefits Analysis Cash Flow Analysis Probability Distribution Intangible Benefits Analysis Prioritization and Planning Decisions

47. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 40 Presentation Summary Target the business deliverable of the project Use a repeatable, consistent process using governance for project justification ROI is an important component of justification, but not the only one Use lower TCO for Program Justification

48. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 41 Presentation Summary Isolate project benefits and costs If it’s important, you can measure it and you can improve it, the project will almost always pay for itself Judgment is essential

49. Copyright © 2021 McKnight Consulting Group, LLC All Rights Reserved Slide 42 Showing ROI for Your Analytic Project Presented by: William McKnight President McKnight Consulting Group (214) 514-1444 wmcknight@mcknightcg.com www.mcknightcg.com

Showing ROI for Your Analytic Project

You are reading a preview.

Check these out next

Showing ROI for Your Analytic Project

More Related Content

Slideshows for you (20)

Similar to Showing ROI for Your Analytic Project (20)

More from DATAVERSITY (20)

Recently uploaded (20)