Written by Dennis Strieter, Product Manager
In Part One, we looked at the “Simple ROI” approach. As you’ll recall, this is based heavily on how a new technology can save you Time. It tells you how much time you need to save to justify an investment in new technology.
While at DASI Solutions, I’ve also had the pleasure to work with prospects and customers who want to understand how technology will impact their company. Sometimes the technology and its benefits are obvious. A decision can be reached very quickly.
More and more often, though, that decision comes in the form of doing some type of a technology justification, or return-on-investment (ROI). In this situation, you’re probably going to create a report for upper management. Any time this is the situation you should first learn what type of information they’ll expect to see. Not doing so is a recipe for wasted time. …And we’ve already discussed the value of time!
In part two, I’ll take a look at two other considerations for an ROI report…
- Determine how your ROI will be used?
- Understand who will be reading your ROI report?
Answering both these questions will help us understand what information we should be gathering, aside from the numbers we calculated in Part One. Part Three will wrap up with a look at the more complex details you may need for an organization-wide ROI.
Defining the “How” of an ROI
When defining “how” an ROI is to be used, you can go back to one of the early questions… Is this technology for a department like engineering, or the entire company?
If it’s the former you will probably know exactly where the time savings lie. So a brief summary could be all you require. At most, you might need to add a short feature check list to your Simple ROI to show the criteria used for the final decision. Either of these would show your team or department manager the areas you expect to save the time you’ve calculated in your ROI.
However, if it’s the latter, you will probably need to include a list of features that effect each department in the company using the new technology. Along with their expected time savings. This type of report is generally going to upper management or a guiding committee. If that’s your situation, it’s helpful to have either an introduction or summary paragraph for each department to illustrate how this technology will improve their current environment. (More on this in Part Three.)
Understanding “Who” is Your Audience
Once you know “How” your ROI report will be used, you will have a pretty good idea on “Who” will be reading it. In the previous section I mentioned the two most common groups reviewing your ROI report; individuals and the manager of your department, or upper management and sometimes a company committee for larger technology investments that effect multiple departments of the company.
Let’s look at you some insights for these two groups…
Department level ROIs are pretty straightforward. Most of the people in your department are going to recognize the challenges and see the benefits of a given technology to solve those challenges. Everyone is generally “speaking the same language”. Knowing where and how you need to save time becomes the focus for this group. Having those numbers to document though is not always as straightforward as you might think.
TIP: If you’re looking at a new technology, start to accumulate time spent in the areas identified for improvement. You may also want to contact DASI Solutions for a list of areas each of our solutions addresses. This will give you a starting point to begin documenting current times.
Company level ROIs get more involved. As noted before, you’ll want to have a summary for each area that is being addressed. Management teams have a sound overview of department challenges and goals. However, it’s often the details that need to be addressed from a solution that aren’t as apparent. That summary can help shine a light on those areas. This gives you the chance to add value for your management team.
TIP: When you’re going to the management team, you’ll want your time savings wired tight. You might even consider a chart to show current process times versus projected time savings. (Again, more on these details in Part Three.)
Wrapping it Up
Let me leave you with this example from my past engineering life and a few takeaways…
As we began to fully adopt CAD it started to provide big gains. Next we began to see other areas that took time out of our day. Making Assembly and Project Bill of Materials, Packing Lists and Packing Labels meant double data entry to create labels, spreadsheet BOMs and Lists. It easily took 50-75% of the design time just for all the paperwork needed for sales, manufacturing, purchasing and customers.
After evaluating a number of solutions it was decided to implement an MRP system. After integrating MRP together with CAD it literally turned into the Staples’ “Easy Button” to generate all this documentation. What had taken up to two weeks for documentation time now turned in to 2-3 hours.
That project took management buy-in. However, it didn’t take long once the bottleneck was identified because I had the numbers on the time spent in those areas. In less than two months we had a MRP solution selected and running with the help of our VAR.
- Know the ROI criteria in your company that management expects.
- Keep an open mind when evaluating new technology. It’s an opportunity to improve how things have been done in the past. We’re all guilty of say those infamous words… “But that’s that way we’ve always done it before!”
- Be an agent for change… This is your chance to get creative and learn what’s new in technology. Be a positive force for change in your company. Don’t miss that opportunity!