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Making the business case for your intranet <br />Sam Marshall<br />Director <br />sam@clearboxconsulting.co.uk<br />01244 676097<br />www.clearboxconsulting.co.uk<br />

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Agenda<br />9.30 – 10.00 Introductions<br /> The challenge of Business Cases<br />10.00 – 11.00 Creating an Effective Business Case<br />11.00 - 11.15 Coffee<br />11.15 – 12.00 Establishing ROI<br />12.00 – 12.15 Discussion & Wrap-Up<br />

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Introduction<br />It’s good to learn from your mistakes, but its much cheaper to learn from someone else’s<br />

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Sam Marshall<br />ClearBox Consulting<br /><ul><li> Intranet & portal strategy

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Getting sponsorship and support for your intranet

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An independent view on your Steering Group

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Intranets for effective communication

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Achieving Global-Local balance

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Introducing Web 2.0

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Effective team collaboration</li></ul>Director of ClearBox Consulting<br />Former Global Portal Implementation Manager – Unilever<br />Comms, KM & IT background<br />Work with BT, PwC, BUPA, Müller, ExxonMobil etc.<br />

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You and your intranet<br />Who you are<br />What you do<br />Status of your intranet<br />Why you’re at the workshop<br />www.clearboxconsulting.co.uk<br />© ClearBox Consulting 2007<br />

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20 – 100 cm<br />

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Health Warning<br />There’s no ‘standard’ business case<br />Depends on each organisation’s<br />Culture<br />Practice<br />Scale<br />Leadership<br />Structure<br />

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Why have a business case?<br />

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Nobody asks what the phones cost us to run<br />We accept it as a cost of doing business<br />The CEO just believed it was important<br />Its like keeping the lights on<br />Some people don’t worry about it<br />

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ROI - It’s hard and you’re not alone<br />Fewer than two-thirds of companies attempt to measure the business value of IT and, of those that do, only half measure their return after IT investments are made. <br />The most popular metrics are among the most ineffective<br />Asked if their company found it difficult to calculate ROI, 62% of IT executives answered “yes”. This figure rises to 75% in organizations with revenues of $500m or more.<br />47% of this group claimed that their metrics did not accurately capture the value of IT investments<br />“time to payback” was used by 60% of those who engaged in measurement - but by 73% of those who claimed that their value metrics were failing.<br /> Source: CIO Insight<br />

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“If you can’t measure it, you can’t manage it” -Anon<br />“Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.” -Albert Einstein<br />

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Things you don’t ask the ROI of<br />Furniture beyond the bare necessities (including the ROI of carpets, plants and large desks) <br />Global workshops where execs jet in from all over<br />Most training courses <br />Most downsizing programmes<br />Attractive buildings vs. functional concrete<br />Public parks <br />Owning a cat <br />Calculating ROI <br />

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Come the revolution…<br />In a response to accusations in 1987 by a journalist from UK's Financial Times that the pace of development in Bhutan was slow, the King said that "Gross National Happiness is more important than Gross National Product.“ <br /> – Wikipedia entry on Bhutan<br />See also:<br />Balanced Scorecard<br />www.svieby.com<br />Roos: “Managing Intellectual Capital in Practice”<br />

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With the person next to you…<br />How was the case made for your current intranet?<br />What way of making the case worked?<br />What would you do differently?<br />

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Coffee Break<br />

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Determining Benefits and ROI<br />

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Hard and Soft (intangible) BenefitsDirect & Indirect benefits<br />

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Calculating Costs<br />What does it cost to run an Intranet?<br />Recurring & one-off costs<br />£450k p.a. for a typical UK Org<br />= £30 per person for 15,000 users<br />

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Costs Checklist – Another Interactive Bit<br />Recurring<br />Support Team<br />Software maintenance<br />Training (ongoing)<br />Help Desk<br />Hardware Updates<br />Network<br />Consulting<br />One Off<br />Project Team<br />Licenses<br />Intranet Design<br />Component development<br />Migration<br />Initial Hardware<br />Training (initial)<br />

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Calculating Savings<br />Cost Reduction (costs currently incurred)<br />BA saved £40M by providing employee self-service over last 3 years<br />Pay slips<br />Flight Plans<br />Training<br />Cost Avoidance (costs that would be incurred without this project)<br />Reduced cost of new intranets<br />Unilever Branding Example<br />

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Unilever Branding Example<br />Unilever introduced a new Logo and branding standards<br />Important part of “One Unilever” to get common visual identity<br />In Europe all intranets were on the same portal<br />

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Benefit<br />Net Benefit = (direct benefits + quantified soft benefits)<br /> - <br /> (one-off costs + recurring costs)<br />

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Cost Avoidance<br />Without Portal<br />With Portal<br />£5,000 design<br />25 days agree, implement & test<br />Assume £300/day costs<br /> 300 x 25 <br /> +5000<br />= £12,500<br />Completed: day of launch<br />4000 intranets<br />Assume 1000 would have re-branded<br />Assume £1,500 per design<br />Assume 5 days agree, implement & test<br />Assume £300ay costs<br />(1500 + 300 x 5) x 1000<br />= £3M<br />Completed: 1 year after?<br />

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Where to look for savings<br />In Business<br />Whole FTEs removed<br />Work with 3rd parties<br />Reduced travel<br />Transaction costs<br />Expenses, travel, facilities, payroll, recruitment, phonebook etc.<br />Procurement costs <br />Print and distribution costs<br />Office vs. home working<br />In IT <br />Integration<br />Hosting (int. & ext.)<br />Publishing costs<br />Cost of new developments<br />Cost of test & deploy<br />Training costs<br />Whole FTEs removed<br />Designers<br />Cost of E-mail and data<br />IT support and helpdesks<br />Tech self-help<br />Password re-set<br />Usability<br />

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Where to look for Benefits<br />Better<br />Increased sales time<br />Customer Satisfaction<br />Information quality<br />Reduced errors risk<br />Collaboration quality<br />3rd Party relationships<br />Re-use of materials<br />Faster<br />Faster to market<br />Time spent searching<br />Cheaper<br />More use of an asset<br />Cost of controlling a process<br />All the Savings earlier..<br />Fun<br />Employee satisfaction<br />Employee engagement<br />Simplified processes<br />

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Calculating Benefits<br />Cross-charging approach<br />Aggregate individual benefits<br />Cost of existing systems<br />Try to do on a like-for-like basis<br />But be grateful for anything!<br />

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Quantifying Intangibles<br />Time Savings<br />Ethnography<br />Time Survey<br />External Sources e.g. time seeking data<br />Ideally do something you can repeat post-implementation<br />

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Ethnography (professional stalking)<br />Approach<br />Pros<br />Pick a representative range of subjects (7-15)<br />Age<br />Seniority<br />Attitude to IT<br />Shadow doing relevant tasks<br />Record activity<br />Ask clarification questions only when task complete<br />Use video photo to get context <br />After use quotes video photo to bring to life<br />Insightful<br />Detailed data<br />Hard to challenge<br />Replicable<br />Cons<br /><ul><li>Small sample size

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Time-consuming

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Risk of Taylorism if done inexpertly

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Needs specialist skills</li></li></ul><li>Survey<br />Approach<br />Pros<br />Pick a representative range of subjects (100-200)<br />Age, seniority, attitude to IT<br />Use online survey with pick-list for time spent (0, 5, 10, 15 etc.). <br />Max 10 questions.<br />Ask about tasks intranet could affect:<br />Seeking information<br />Seeking contact details<br />Manual or service desk processes<br />Having wrong template policy etc.<br />Have free field box at end for quotes<br />Relatively quick to administer<br />Large-scale samples possible<br />Replicable<br />Cons<br /><ul><li>Fewer insights

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Getting responses can be hard (<50%)

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People poor at estimating things like this</li></li></ul><li>FTE = Avg. cost per employee <br /> = salary + benefits+costs<br />Cost per day (CPD) = FTE/200<br />Days Saved (DS) = 5 p.a. <br />Prob. Realization = P%<br />Annual Saving = Num. Employees x CPD x P x DS<br />Time Savings<br />

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Time Saving – worked example<br />FTE = £30 ,000 + £20,000<br /> = £50, 000<br />Cost per day (CPD) = 50, 000/200<br /> = 250<br />Days Saved = 3<br />Prob. Realization = 33%<br />Num. Employees = 10 000<br />Saving = 10,000 x 250 x 3 x .30<br /> = £2,475 000<br />

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ROI Calculations<br />

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A bit about financials<br />There are many ways to assess the value of expenditure<br />Present Value <br />Net present value<br />Internal Rate of Return<br />Payback Period<br />ROI<br />Find out what your organisation uses and recruit a friendly finance person<br />

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Present Value <br />Present Value<br />Value of money in the future if you were to have it today<br />The ‘interest’ you would have earned is called the ‘discount rate’<br />= Y1 saving/(1+DR) <br /> +Y2 saving/(1+DR)² <br /> +Y3 saving/(1+DR)³<br />Net Present Value<br />Recognises that an initial investment is required<br />= Present Value – Initial Cost<br />

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Payback Period<br />The break even point<br />= Initial Cost/annual Saving<br />e.g. if Intranet costs £200,000 and savings are £100,000 a year then payback period is:<br /> 200,000/100,000<br /> = 2 years<br />Useful, but not enough on its own because you don’t know if investing in something else would have been better<br />

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ROI<br />ROI works like Net Present Value, but you need to work out the Net Benefit for each year to account for recurring costs.<br />Net benefit = Savings + Increased Revenue – Recurring Costs<br />3 Year ROI Formula<br /> = (Y1 Net Ben/(1+DR) <br /> +Y2 Net Ben/(1+DR)² <br /> +Y3 Net Ben/(1+DR)³) / Initial Cost<br />

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ROI Worked Example<br />Assumptions:<br />Intranet costs £200,000 to set up. <br />Annual costs are £20,000<br />Savings are £100,000 a year<br />DR=10%<br />Revenue increase is: Y1=£0 Y2=£60,000 Y3=£150,000<br />Net Benefits = Savings + Increased Revenue – Recurring Costs<br /> Y1 = 100 000 + 0 – 20 000 = 80 000<br /> Y2 = 100 000 + 60 000 – 20 000 = 140 000<br /> Y3 = 100 000 + 150 000 – 20 000 = 230 000<br />ROI (Y1 Net Ben/(1+DR) +Y2 Net Ben/(1+DR)² +Y3 Net Ben/(1+DR)³) / Initial Cost<br />= (80 000/1.1) + 140 000/(1.1)² + 230 000/(1.1)³) / 200 000<br /> = 220%<br />

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Pulling it All Together<br />Spreadsheet to include:<br />Initial Costs<br />Annual Costs<br />Revenue Increases<br />Direct Savings<br />Indirect Savings<br />Cost Avoidance<br />Time Savings<br />ROI<br />

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Using Assumptions - Tips<br />View the ROI spreadsheet as a basis for discussion<br />Document assumptions as you go – you can always revise if you need to<br />Include<br />Typical cost to company per workeranager day<br />Number users affected<br />Time periods e.g. to implement, to fully adopt<br />Reasoning behind probabilities<br />Get help from finance – they will have strong opinions about this!<br />

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Creating an Effective Business Case<br />

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What’s in a typical business case?<br />Scope & Objectives<br />Strategic Context<br />Benefits & Risk of Not doing<br />Risks<br />Budget & Finance<br />Team & Sponsorship<br />Communication Plan<br />Change Management Plan<br />Assumptions<br />

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Planning the business case<br />Audience – who is it for?<br />Behaviours – what do you want them to do?<br />Content – what do you need to cover?<br />Delivery – what channels will you use?<br />Evaluation – how will you know it has worked?<br />

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Interactive Bit<br />Interview each other to work out the ABCDE for your own organisations’ business case<br />

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Scope & Objectives<br />What flavour intranet do you have want?<br />What value does your intranet bring?<br />How does this link to current priorities?<br /><ul><li> Communication & Culture

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Process Support (e.g. dashboards)

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Collaboration (unstructured)

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Services (e.g. expenses, travel)

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Learning</li></li></ul><li>Linking to Strategy<br />Stuck in Economy class?<br />Often there are high-visibility initiatives that are leadership-driven not spreadsheet-driven<br />May be part of explicit or only de-facto strategy<br />Look for the hot buttons and hop-on<br />Demonstrate to the sponsor that their project needs the intranet to deliver<br />Find case-studies<br />Try to do a pilot before asking for budget<br />

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Linking to Strategy - Examples<br />Restructuring Offshoring Outsourcing<br />Process cost reduction<br />Process improvement (e.g. faster to market)<br />Improved Execution (e.g. sales closure)<br />Risk avoidance (e.g. post calamity)<br />Downsizing (via productivity)<br />Learning and knowledge-sensitive objectives<br />Culture (esp. “One” initiatives)<br />Engagement<br />Any of the above but with function geography BU focus<br />

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Value to the Employee<br />Job satisfaction removing onerous tasks<br />Enhanced productivity<br />Enhanced performance (e.g. better decisions)<br />Engagement<br />Beware the things that only the users love<br />Weather<br />For sale & wanted<br />Lunch Menu<br />

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Tip: Visualise with a Benefits Tree<br />All employees see same msg.<br />Single identity<br />Corp-Wide Comms<br />Single CMS<br />Employee engagement<br />“One” Organisation<br />Less churn<br />2-way comms channel<br />Blogs<br />Project Spaces<br />Single place to collaborate<br />Flexible project resourcing<br />Best people on a task<br />Time savings<br />Improved Response Times<br />Customer satisfaction<br />Quicker access to data<br />Better stock control<br />Fewer outages<br />ERP Dashboard<br />Strategic Objective<br />Benefit<br />Outcome<br />Delivers<br />Feature<br />

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Benefits<br />What to measure<br />Whole system – no decent model for this yet<br />Specific projects – e-procurement, employee self-service, etc.<br />Hard vs. Soft<br />Balance depends on your organisation’s culture and climate<br />

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Risks and Issues<br />Risks impacting completion<br />Risks if it does succeed<br />Risks of not doing<br />Stakeholders & politics<br />

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Structuring the Case<br />Headline ROI<br />Reminding people of the “invest” bit<br />The 3 Phase curve<br />Cost per user or Decreased cost of ownership<br />Tip: if cost base static, focus on projected usage<br />Sell the Soft Benefits<br />Benefits Tree<br />Personas<br />Storytelling<br />Case Studies from other orgs<br />

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Influencing and building support<br />Which method for which audience?<br />Detailed ROI<br />‘Anecdotal ROI’ and Soft Benefits<br />Align to something where Soft accepted or Soft-Hard established<br />Oil Company: risk-reduction<br />Retailer: increase time on shop floor > increased sales<br />Use KPIs strategically, not just operationally<br />Tie to benefits tree<br />e.g. % Marketing people using learning system<br />

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Tip: Use Personas to bring this to life<br />Sponsors are users too!<br />Bob is 52 years old and works as a mechanic with an organisation offering road service to customers when their car breaks down. He has worked in the job for the past 12 years and knows it well. Many of the younger mechanics ask Bob for advice when they meet up in the depot as he always knows the answer to tricky mechanical problems. Bob likes sharing his knowledge with the younger guys, as it makes him feel a valued part of the team…..<br />Ref: www.steptwo.com.au/papers/kmc_personas<br />

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Tips: When to ask for budget<br />Its tempting to put all the big costs in year one, but phasing can help<br />Split the 12 months over two financial years – you only need to secure half the budget to get going<br />Getting the 2nd half usually easier as you can pitch the risk as being lower<br />Keep the annual costs down and do as much as you can as projects<br />Get the foundation in place then go for multiple budget holders e.g. HR, Marketing, Comms<br />Use secondments or other temporary resourcing to demonstrate control over ongoing headcount<br />

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Using an External View<br />Pros<br />External view often given more intrinsic kudos (regrettably)<br />Comparative view – hard to see other intranets<br />Focus – investigating the value of an Intranet takes time that many people just don’t have<br />Specialism – someone who’s done it before<br />Politically neutral – can sometimes ask the questions you can’t<br />Cons<br />Cost<br />Won’t understand culture or politics<br />

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Business Case - Review<br />Scope & Objectives<br />Strategic Context<br />Benefits & Risk of Not doing<br />Risks<br />Budget & Finance<br />Team & Sponsorship<br />Communication Plan<br />Change Management Plan<br />Assumptions<br />

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Open Forum: Issues of Establishing Returns<br />

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The biggest problem with the ROI claim is the letter I, which stands for Investment. Contrary to almost all thinking in this profession, training is not an investment it is simply an expense. While investment sounds more important than expense, training is nonetheless, an expense. Investment is a business term that implies the adding of capital to an organization. Unfortunately, human capital does not qualify<br />Bob Dust, on training<br />

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Proving return<br />Diffuse ‘purpose’ of an intranet<br />Competition for the ‘benefit’<br />That slippery time issue <br />you can’t fire 10 minutes of a person<br />

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Scenario 1: Whose benefits?<br />HR launch a new self-service payroll system integrated with the intranet. Their position is that all the benefits should accrue to HR and not to the intranet as its infrastructure.<br />What do you do?<br />

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Scenario - thoughts<br />Barter for a % of benefits (esp. if intranet and HR part of a single plan)<br />Accept the ‘infrastructure’ argument – just as the intranet gains from the network, PCs etc. already in place<br />Promote it as a success story for sponsorship purposes<br />Look for opportunities to cross-fund something of mutual benefit e.g. network quality, single sign-on, other functionality<br />

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Scenario 2: The case for consolidation<br />You want to replace 15 intranets that were developed in-house with a single Intranet and CMS. The intranet owners argue that the current intranets don’t cost anything, so there’s no business case.<br />What do you do?<br />

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Scenario Thoughts<br />Asset costs likely to be written off<br />Publish assumptions and let intranet owners challenge them<br />Work on soft benefits angle – is there an organisational advantage to consolidating?<br />Recognise it as politics dressed as ROI – you need to overcome the resistance first<br />E.g. are there other pain points like support issues that you can take away?<br />Do you need to reassure them about ownership & control?<br />

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Why Business Cases Are Hard<br />It’s the rational face of an often irrational and political process<br />It can be a good way of stalling something you don’t like<br />It can lead to endless debates about the data<br />Data may be withheld as a form of resistance to change<br />There will be other things that get done despite a very weak business case<br />Getting decent data takes substantial effort<br />Requires “before” data that may not exist<br />Business is not a controlled experiment<br />Where the benefit accrues to can be a power struggle<br />

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The Beer Mat Summary<br />Know what flavour intranet you have and be consistent abut purpose<br />Aim to show your intranet is cost-neutral based on tangible savings<br />A 1-3 year time span seems about right<br />Don’t treat the ROI as all-or-nothing, but use it to get people thinking around the assumptions<br />Include cost-per-user figures<br />Use detailed calculations to discuss budgets, but compelling anecdotes to secure buy-in<br />Position your intranet as delivering to one or two strategic priorities and market that fact<br />Lobby for a budget to keep you afloat, and then look to fund innovation through cross-charging<br />

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Wrap Up<br />

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Further Resources<br />www.clearboxconsulting.co.uk<br />www.steptwo.com.au<br />www.intranetblog.com<br />www.prescientdigital.com<br />http://www.boxesandarrows.com/view/value_driven_intranet_design<br />www.GerryMcGovern.com<br />The Springboard (storytelling book)<br />

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ClearBox Consulting<br /><ul><li> Intranet & portal strategy

81.
Getting sponsorship and support for your intranet

82.
An independent view on your Steering Group

83.
Intranets for effective communications

84.
Achieving Central-Local balance

85.
Introducing Web 2.0

86.
Effective team collaboration</li></ul>Sam Marshall<br />Director <br />sam@clearboxconsulting.co.uk<br />01244 676097<br />www.clearboxconsulting.co.uk<br />