The Value of Value Realization
In these days of tight times, the most common modus operandi/strategy of IT and Business Process re-engineering or Optimization projects has been twofold:
- Keep the wheels on the wagon, or
- Fund only projects that have a good opportunity for real ROI.
If you have had problems getting funding (like everyone else) for worthwhile projects, consider taking the justification a step further. Pick projects that not only offer a good investment for your company as projected in a “measurable” ROI, but also plan to be able to prove it, document the results and show the “value realization”.
Once you develop a strategy to make all projects measureable and then actually measure the results before and after, you can demonstrate the actual gain and publish the results to your management and others. The key is to start by defining the baseline, understanding where you are today, what are your current processes and the costs to execute a business process with today’s systems. Document all of the items that go into the baseline costs and the length of time taken to complete the transaction. Be sure to include all of the components of costs in the baseline. Any item left out will most likely diminish impact of the gain. Be sure to communicate the objectives to the project team, so that they know specifically what they are working towards. Documented results go a long way, especially versus perceived results, or results planned but never realized.
As an example, one of the most measurable ROI and Value Realization opportunities is with eProcurement and Supplier Relationship Management (SRM). Many organizations are spending anywhere between $125 and $175 to generate a single PO utilizing manual processes. Not only that, but their purchasing agents spends most of their time chasing paper and doing tactical tasks (e.g. finding out where someone’s materials are), versus more strategic activities, like negotiating quantity purchase agreement discounts. Utilizing eProcurement can often get the costs down per PO to $25 to $45 per PO, saving $100 or more per PO. Depending on the number of PO’s an organization does each year, which can be a big savings to the organization.
There. That’s realized value, and it all started with knowing and defining your baseline costs with current systems. It’s classic before vs. after. And it’s not as hard as you might think. In fact, you probably have opportunities to do this right now within your organization.
Final thoughts: utilizing a “strategic maintenance” program or systematic preventive maintenance, such as PeopleSoft Asset Lifecycle Management versus a “break-fix” strategy, is another example of a good ROI and Value Realization. Supply Chain is another.
Questions about any of this? Want to explore further? Email me.
###
More links:
MIPRO Consulting main website.
