For a manufacturing plant investing in a machine that can cut the time to produce an item by 75 percent, calculating the return on investment is fairly straightforward. As you move to the digital world, however, determining your ROI becomes a little murkier. To further complicate matters, every C-level executive is likely to have a different standard for measuring return. Following these tips can help you measure your ROI in a more understandable manner.
Poor Prior Planning Produces Poor Payoffs (The 6 Ps)
Before you even start a digital initiative, you need to establish clear objectives or goals. What exactly do you hope to accomplish? What benefits will your enterprise gain from the initiative? Are you responding to customers' comments regarding slow response time from reps, or are you trying to boost revenue? Know your destination before embarking on the journey.
Involve the Right People
Decisions you make regarding digital initiatives have the potential to impact every department and every employee. Early in the planning stages, discuss proposed digital initiatives with the stakeholders who will be affected by the project. The right people in your organization may be the CMO and the CFO, or it could be the COO and the CEO. Each will approach the project from a different perspective. For example, the CFO will likely want to quantify the return in terms of dollars while the COO might view return in terms of efficiency. Be prepared to discuss the digital initiative from each executive's point of view. The more support you can garner from the C-suite, the more likely your initiative is to enjoy widespread adoption. It is also important to note that statistically projects, in which the CFO is engaged early on, are more likely to succeed.
Plan for Success
If your digital initiative is successful, there will be repercussions. If your initiative is to leverage technology to increase your share of the market, there will be additional orders to process, which can affect the sales, production, shipping, and accounting departments. Will you be able to scale up to meet increased demands? On the other hand, if your digital initiative is intended to automate processes that are currently performed manually, you might have more employees than you will need. Can you reassign these people, or do you have a plan to deal with morale among remaining employees in the event of a layoff? Develop strategies for coping with the success of your digital initiative.
Consider Your Total Ownership Costs
Your cost of ownership covers expenses related to acquiring, deploying, supporting, troubleshooting, maintaining, and upgrading your project. It may involve additional hardware, licensing fees for software, personnel or fees for outside consultants. Given the rapid pace of technology, you will probably need to make frequent updates to your software and possibly your hardware. Licensing fees often cover a set time requiring periodic renewals. Plan to include such costs when determining your true ROI.
Never Overlook the Intangibles
Many digital initiatives cannot be clearly quantified in terms of dollars. Will the initiative help defuse a public relations issue that could damage the company's reputation? Is one goal of the initiative to put the company's name before a wider audience? Are you attempting to increase customer loyalty or improve customer experience? Is your initiative designed to boost employee morale in the hope that productivity will increase accordingly? Never overlook the intangibles when determining your rate of return. Sometimes, the goodwill of your customers and employees can have a noticeable impact on your bottom line, even if you cannot assign a dollar value to it.
When Considering a Digital Initiative
Going digital can involve a lot of different devices. Online stores, mobile apps and cloud-based CRMs are part of the current digital landscape. At EX2 Solutions, our predictions for 2015 included an expansion in the Internet of Things and wearable technology. We also believe that kiosks will become increasingly valuable for a variety of purposes. To learn more about the benefits of kiosks, download our whitepaper here.