CSI: “Enter Location Here”

Last time I talked about how benchmark data can be used in IT and business use cases to illustrate the financial value of data management technologies.  This time, let’s look at additional use cases, and at how to philosophically interpret the findings.

ROI interpretation
We have all philosophies covered

So here are some additional areas of investigation for justifying a data quality based data management initiative:

  • Compliance or any audits data and report preparation and rebuttal  (FTE cost as above)
  • Excess insurance premiums on incorrect asset or party information
  • Excess tax payments due to incorrect asset configuration or location
  • Excess travel or idle time between jobs due to incorrect location information
  • Excess equipment downtime (not revenue generating) or MTTR due to incorrect asset profile or misaligned reference data not triggering timely repairs
  • Equipment location or ownership data incorrect splitting service cost or revenues incorrectly
  • Party relationship data not tied together creating duplicate contacts or less relevant offers and lower response rates
  • Lower than industry average cross-sell conversion ratio due to inability to match and link departmental customer records and underlying transactions and expose them to all POS channels
  • Lower than industry average customer retention rate due to lack of full client transactional profile across channels or product lines to improve service experience or apply discounts
  • Low annual supplier discounts due to incorrect or missing alternate product data or aggregated channel purchase data

I could go on forever, but allow me to touch on a sensitive topic – fines. Fines, or performance penalties by private or government entities, only make sense to bake into your analysis if they happen repeatedly in fairly predictable intervals and are “relatively” small per incidence.  They should be treated like M&A activity. Nobody will buy into cost savings in the gazillions if a transaction only happens once every ten years. That’s like building a business case for a lottery win or a life insurance payout with a sample size of a family.  Sure, if it happens you just made the case but will it happen…soon?

Use benchmarks and ranges wisely but don’t over-think the exercise either.  It will become paralysis by analysis.  If you want to make it super-scientific, hire an expensive consulting firm for a 3 month $250,000 to $500,000 engagement and have every staffer spend a few days with them away from their day job to make you feel 10% better about the numbers.  Was that worth half a million dollars just in 3rd party cost?  You be the judge.

In the end, you are trying to find out and position if a technology will fix a $50,000, $5 million or $50 million problem.  You are also trying to gauge where key areas of improvement are in terms of value and correlate the associated cost (higher value normally equals higher cost due to higher complexity) and risk.  After all, who wants to stand before a budget committee, prophesy massive savings in one area and then fail because it would have been smarter to start with something simpler and quicker win to build upon?

The secret sauce to avoiding this consulting expense and risk is a natural curiosity, willingness to do the legwork of finding industry benchmark data, knowing what goes into them (process versus data improvement capabilities) to avoid inappropriate extrapolation and using sensitivity analysis to hedge your bets.  Moreover, trust an (internal?) expert to indicate wider implications and trade-offs.  Most importantly, you have to be a communicator willing to talk to many folks on the business side and have criminal interrogation qualities, not unlike in your run-of-the-mill crime show.  Some folks just don’t want to talk, often because they have ulterior motives (protecting their legacy investment or process) or hiding skeletons in the closet (recent bad performance).  In this case, find more amenable people to quiz or pry the information out of these tough nuts, if you can.

CSI: "Enter Location Here"
CSI: “Enter Location Here”

Lastly; if you find ROI numbers, which appear astronomical at first, remember that leverage is a key factor.  If a technical capability touches one application (credit risk scoring engine), one process (quotation), one type of transaction (talent management self-service), a limited set of people (procurement), the ROI will be lower than a technology touching multiple of each of the aforementioned.  If your business model drives thousands of high-value (thousands of dollars) transactions versus ten twenty-million dollar ones or twenty-million one-dollar ones, your ROI will be higher.  After all, consider this; retail e-mail marketing campaigns average an ROI of 578% (softwareprojects.com) and this with really bad data.   Imagine what improved data can do just on that front.

I found massive differences between what improved asset data can deliver in a petrochemical or utility company versus product data in a fashion retailer or customer (loyalty) data in a hospitality chain.   The assertion of cum hoc ergo propter hoc is a key assumption how technology delivers financial value.  As long as the business folks agree or can fence in the relationship, you are on the right path.

What’s your best and worst job to justify someone giving you money to invest?  Share that story.

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