Quantifying Return on Investment on Digital Transformation Initiatives
...by Greg L Towne“You can’t manage what you can’t measure”
Organisations the world over are becoming more and more focused on this famous Peter Drucker statement, especially when determining any type of impact assessment and the ROI (Return on Investment) of Digital transformations and BPI Initiatives (Business Process Improvement) within their businesses.
More than just KPI’s
Measuring the current state and the desired future state of business process outcomes involves more than just establishing and measuring KPI’s (Key Performance Indicators); especially when it comes to determining a desired ROI and impact assessment for the long haul.
The metrics we use (both quantitative and qualitative) need to reflect the manner and influences of doing business and performing salient business processes.
Therefore, an effective ROI needs to articulate a performance state rather than just a numerical measure of cost or productivity effectiveness; and to do this it needs to include influences such as those proposed in PMI’s PMBOK (Project Management Body of Knowledge) around EEF (Enterprise Environmental Factors) and OPA (Organisational Process Assets).
What is an EEF or OPA
EEF (Enterprise Environmental Factors) influence any organisation, its projects, and its outcomes. They consist of items such as governmental regulations, market conditions, political interference; or the organisation’s culture, structure, strategies, resource models and guiding concepts.
OPA (Organisational Process Assets) are the instruments, codes, tools, history and directives that help organisations achieve their objectives. OPA’s include such items as policy, protocols, processes, procedures, work practices, standards, risk registers, situational management, and historical records.
Inclusive approach to measures
The common element between EEF’s and OPA’s is continuous process change; therefore we need to establish organisational buy-in as part of any new initiative.
Workshops to establish current and future states need to be fully inclusive; which means that multi-level stakeholders and participants need to be involved. For example; Executives and Business Unit Managers need to clearly state to all stakeholders what the enterprise goals are; what business drivers and imperatives need to be considered; share their clearly stated objectives; and any relevant or constraining tactics.
Only when these directives have been clearly articulated can a BPI initiative, a gap analysis and impacts assessment workshop proceed.
It is suggested that well used and effective models be used to establish the workshop directives. At Diriger, we use the familiar HoShin KanRi models for this purpose.
Quantitative measurement approach
Diriger has developed a propriety approach to establishing quantitative measures for ROI, gap analysis and impact assessments. This takes the form of a unified business model that uses Domain and Process Workbooks that assess weighted gap states, identify and score EEF and OPA influences and criticality, and provide an automated prioritisation of sub-optimal components.
The workshop EEF and OPA categories or areas we have found most useful to measure and assess criticality for inclusion.
Diriger’s propriety planning tool (OutPerform) or similar is used to formulate tactics and plans to execute the required BPI initiatives
About the Author...
Greg Towne is a Co-Founder of Diriger with 35+ years of experience implementing Enterprise Resource Planning solutions and Business Process Improvement Initiatives in Mining, Utilities, Energy and Defence industries. He is dedicated to working closely with our Customer’s in order to help them solve the BIG problems that have been in play for far too many years.