Very often when companies are considering a business intelligence project or software purchase, a question arises that seems to stump everyone involved.
“Where is the return on investment in this project?”
This question has stopped many business intelligence projects in their tracks. Maybe requested by the CFO or CEO. Maybe it was mentioned in one of the meetings with a vendor or consultant who presented a solution. The sad truth is that if you can’t answer this question with hard numbers in specific areas, the ROI probably isn’t there.
IRACIS is a simple acronym that can be used to quantify the value of a business intelligence project to a company. It means the following:
Increase Revenue – How will this app and functionality drive more sales to new or existing customers, shorten the sales cycle, and/or lower the cost of sales?
Avoiding Costs: By far the most focused area in BI project justifications. How will this app help us improve efficiency, put more information in the hands of our business people, and eliminate unnecessary processes?
Improve service: Will this application significantly affect our customer base? Will we be able to provide more timely and valuable information to our customers, prospects and suppliers?
Many times, in a business intelligence effort, there are results that are considered desirable. Things like ad-hoc reporting, more informed operations staff, and fewer financial reporting delays are good. But they won’t justify investing in a business intelligence solution from a quality software vendor without quantified direct and secondary benefits in the areas mentioned above.
Let’s face it, business intelligence solutions don’t come cheap. There are many scalable solutions on the market today, ranging from traditional software implementations to SaaS (Software as a Service) and even open source solutions. Large enterprises have long reaped the benefits of business intelligence, and now with these diverse offerings, small and medium-sized businesses are benefiting as well. However, any business intelligence project is only as good as the planning, effort, and data that goes into whatever software platform you are using. Hence another phrase often heard in many BI projects, “garbage in, garbage out.”
By using the IRACIS model to quantify the value of the solution to the business, it provides everyone with a clear roadmap for what counts as a successful project. From the company’s executive sponsor to the vendor you’re working with, there’s no ambiguity as to what’s expected as the bottom line. I would challenge any company considering a business intelligence project of some sort, that if they can’t come up with a solution that addresses at least one of the three areas above, if not all three, then the project probably isn’t worth doing in all of them. And if the solution or software product can’t scale to address all three areas in the long term, then it’s probably not the best product for you. This may seem like strict criteria, but in an era where most large companies own 3-4 separate business intelligence tools, it’s clear that more critical thinking is needed before purchasing a solution or platform.
This acronym is not only a good way to quantify the value of a project to a business, but it can also become a brainstorming tool for the types of apps you want to build. I previously noted that the Cost Avoidance part of this acronym is by far the most focused for business intelligence projects. Why is that? Is business intelligence only good for eliminating waste and making an organization more efficient? Can’t it be used to increase revenue by putting valuable information in front of potential customers you haven’t reached yet?
I would say that some of the best and most successful business intelligence applications that I know of focus on the first category of Increasing Revenue. Business intelligence is about putting the right information in the right hands at the right time. For some companies, this could be an in-house business analyst. But for many others it can be putting information in front of their customers, prospects and partners to provide a new perspective on a buying decision. When companies sell complex products and services, it is sometimes necessary to trace the customer to find out where they live. You need to reach them with a compelling message about your product or value proposition and give them a reason to act on that information.
If you received an email from a major auto insurance provider, showing your current auto insurance provider and the estimated rate you’re paying, and then a chart showing a savings of $700 in rate comparisons for the same coverage for a year, that would be a compelling email to receive. It would probably motivate him to pick up the phone or go to a website to instigate more.
This in turn would improve the service and avoid costs. Being able to present this type of accurate and timely information to a potential customer shows them that you have systems in place to save them money and provide them with the best possible service. Shortens the sales cycle and cost of sales, increasing margin and profitability. It instills trust in the company from the customer’s point of view and also gets people talking about your product or service.
In the information age we live in, the data and information that companies have is by far their most valuable assets. Getting this information in a usable format to the right audience can be the role of business intelligence in any company. This should be a goal when looking at what business intelligence can do for a company. Don’t just eliminate waste and automate internal processes. I certainly believe that projects that focus on those topics are worthwhile and valuable to a company. But when you broaden your thinking and remember that using the Internet to deliver information in a variety of formats is the most cost-effective way to reach a critical mass of people, only then can you realize the full ROI on purchasing an intelligence solution. business. .
So the next time a discussion comes up about a business intelligence project or initiative, think about the IRACIS model as a way to discuss and evaluate worthwhile projects for your company. You may be surprised what comes to mind when your thinking turns to revenue generation and service improvement. Just remember, after you’ve finished creating a new line of business or growing an existing one, ask your boss for a commission.