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Business Value of BI - Is the ROI Obvious?

I had a conversation the other day with a prospective client (the president of a company) where we discussed the value of embarking on a program to improve data analytics. I was actually impressed with the conversation - this gentleman had a background similar to mine (Computer Science degrees, time spent in the financial sector, entrepreneurial), and I could tell that he had a good understanding of what could be done when data is presented properly for analysis. Yet at the end of the conversation, I felt that we hadn't gotten anywhere...

Basically, the prospect already had a good grasp of data analytics; they already did some rudimentary analysis, segmenting their customer base into qualitative segments, and using predictive analysis about customer/product lifecycles that indicated continued customer loyalty or attrition. They were interested in doing more of this kind of exploration, yet their staff is working to capacity, so it is the president that actually does all the analysis.

The real question turned out to be: what would his company's return on investment were they to engage us to build an analytical platform? The impasse I saw was that I find it hard to project an ROI when I don't have much of an idea of what is buried within their data asset, nor can I predict what kinds of questions the organization needs answers, nor, most importantly, how the organization will make the answers actionable.

At the end of the conversation, we were both asking what the next steps would be. I proposed a longer conversation to determine business analysis criteria, and he demurred, citing a busy schedule, and a lack of being overwhelmed by the potential of what I was describing. In other words, because I could not project actionable knowledge with a calculable ROI before deploying the system, there was no business case to build a system.

This highlights a gap we often see in client BI engagements: the technology provider is building a capability that allows the client to ask the right questions, while the client expects the provider to provide the right answers. I believe that the most successful programs are the ones where expectations are "level-set": the providers and the clients team to determine how the right questions will improve the business, there is an understanding of how the technology enables asking the right questions, and the client has a plan to exploit actionable discoveries.

  Posted by David Loshin on August 7, 2005 7:49 PM |

Comments

David:
I'm also puzzled in this ROI topic. My company provide BI and DW service in china, when customers ask for the ROI, I can't tell obviously.
My own company aslo use a little CRM system,but how much does this system contribute for the company? I can't tell it obviously too, but I know this system is very important to us.
I'm reading some BSC books recently, maybe only connect BI of IS to business can we tell the ROI.

Posted by: Xiaohua Li | August 16, 2005 7:43 PM

Xiaohua Li;

I completely understand your frustration, especially because there is very little published on information valuation and project ROI. Might I suggest that you consider a pragmatic approach and do this little bit of homework:

For the past 3 projects on which your company has provided service, anser the following two questions:
1) What was the client able to do using the BI results that they were unable to do before the project was started?
2) What problems were resolved through the use of the BI project that were unsolvable before the project was started?

Using the answers to those questions, we can start looking at the corresponding value that was introduced by a BI program.

-David

Posted by: David Loshin | August 22, 2005 6:53 AM

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