However, investing in these solutions can be costly, and it's not always straightforward to determine the KPIs that will allow you to track the return on investment (ROI) these investments can bring to your business. In this blog post, we will explain why this can be challenging and explore ways to define and measure tangible and intangible benefits.
How do you want to measure?
The first step in measuring ROI is clearly defining the desired outcomes you aim to achieve. These could include:
- Improved decision-making
- Increased revenue
- Cost reduction
- ...
Once the business objectives are clear, the challenge is to design KPIs that can track progress. For example, in the case of increasing revenue, some KPIs might be "average revenue per customer" or "customer retention rate." Similarly, the goal of reducing costs might be supported by the KPI "Customer Acquisition Cost." Additionally, it's crucial to set a benchmark and a baseline for comparison.
By measuring KPIs that align with your business objectives, you can improve the decision-making process, leading to better business performance.
No matter how much you would like to define clearly measurable statistics, the reality is that certain intangible benefits are simply difficult to track. Operational efficiency and integrated workflows that save stakeholders and employees minutes (or hours) per day are good examples of benefits not easily expressed in monetary value. Especially when considering the frustration and stress that can be reduced by allowing employees easy access to integrated information.
Our audience: the end user
Often, stakeholders in BI projects do not adequately consider the operational reality. One of the critical factors affecting the ROI of BI solutions is the level of adoption by end users. End users who are data-savvy and comfortable with technology generally achieve a higher ROI than those who are not.
Users who can quickly navigate BI reports and tools spend less time searching for the data they need and more time solving the problems for which they need that data. In addition to data maturity, easily accessible insights and sufficient user training drive adoption and operational efficiency.
In other words, governance is essential
An example of operational efficiency and good governance is how NORRIQ and its suppliers have become highly skilled at integrating BI solutions into traditional workflows. For instance, in our internal Management Team Meetings, we have opted to integrate all relevant dashboards and reports directly into our Microsoft Teams environment.
This clear integration means we spend less time searching for dashboards, switching between reports, and questioning the accuracy of our figures. Instead, we dedicate more time to discussing our projected situation and related resource needs.
Since this meeting typically includes some of our more expensive employees, it stands to reason that optimizing the time spent in such meetings represents a significant cost saving for us.
Data quality: the elephant in the room
We don't question the data we use—why? Because of data quality!
During our own BI implementation cycle, we ensured close contact with developers and end users to align expectations, clearly define KPIs (ensuring they were correct and unique by eliminating conflicting definitions), and make each user aware of these definitions.
We also underwent a process where we thoroughly examined the source data provided by our systems. This allowed us not only to carefully evaluate our operational processes but also to identify certain gaps in data quality that had previously gone unnoticed.
Accurate and reliable data is the lifeblood of trusted BI solutions. Therefore, we had to ensure the data was clean, consistent, and up-to-date. We realized that the first step in our BI journey was updating our governance policies regarding:
- Data delivery and updating
- Data quality and consistency
- Integration of various data sources
Ultimately, the return on investment for our situation can be summarized simply as:
- Operational improvement
- Evaluation and optimization of our key business processes
- Better planning and forecasting with a clear view of short- and medium-term needs
- Faster decision-making—because we all understand where the data comes from and can trust it is up-to-date.
Hedge your risks
In some cases, BI solutions are not aimed at generating direct tangible benefits. When considering ROI, it can be helpful to flip the question. Instead of asking, "What benefit does this provide me?" try asking, "What risk am I exposed to if I have no visibility into problems X, Y, and Z?" and then "Is this risk significant enough to justify investing in coverage?"
BI solutions can be viewed as insurance policies to mitigate your foreseen and unforeseen risks. For example, lacking a clear view of working capital and forecasted cash flow can lead to poorly timed investments, unexpected reductions in working capital that require short-term loans to bridge gaps, or missed opportunities due to falsely believing they are currently financially unfeasible.
Start small and scale up
If the thought of expensive BI projects not living up to their potential still scares you, even after seeing the above approaches and best practices, here’s another way to minimize your exposure to the unknown: start small.
BI solutions no longer require massive investments and lengthy implementation journeys. Today, the concepts of low-code/no-code and self-service BI allow you to enter an agile continuous development cycle that enables you to evaluate the opportunities for adoption and tangible benefits before proceeding with further developments and scaling after establishing value.
In conclusion, BI is about setting measurable KPIs that align with business objectives, allowing you to track the performance of your solutions and make informed decisions to further enhance your ROI. Therefore, the requirements and insights of the end user are very important and should be considered in the context of good governance, data quality, and integration. The success of a BI implementation project is closely linked to the success of operational excellence, and thus every aspect should be critically evaluated, tangible measurements initiated where possible, and readiness to discard what doesn’t work should be embraced.