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2003 Demonstrating ROI of Market Intelligence


#FR365, #SLACID, #SLA2011, #AIIP, #CI2020, #ClosetLibrarian, Closet Librarian, Targeted Knowledge, Anna Shallenberger, Anna F. Shallenberger, Anna Fay Shallenberger

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									       Demonstrating the ROI of Market Intelligence:
      Building Metrics that Engage Senior Leadership
    Society for Competitive Intelligence Professionals
Cheshire Inn      May 6, 2003           7:15-9:30 a.m.
Agenda – Focus on BUILDING Metrics (selecting & setting objectives)
 GE Experience – Differentiating Between “Projects” & “Process”
     Avoiding Metric Mania – Keeping Your Eyes On The Prize
     Targeting That Which CAN be Measured

 Importance of Documentation – Why It’s Time Well Spent
     The Elevator Speech As A Tool To Illustrate Value
     Impact of Successes
     Understanding Drivers Behind / Rationale For Gaps

 Redefining ROI, But In A Way Acceptable To Senior Management

 Structuring Metrics
     Alignment with Stakeholders
     Quantitative
     Qualitative

 Closing Thoughts

 Appendix – Results of a SCIP 2003 Conference Workout Session

Today’s Presentation

 Examination Process, Questions To Ponder When Developing Personal Model
 Anna’s Experience At GE
 Comparing Practices / Experiences

 One Size Fits All Model
 Ongoing Measurement
 Maritz Detail – evolving, too new

Avoiding Metric Mania – Keeping Your Eyes on The Prize
  Understand The Drivers Behind Being Pressured To Measure
     Trendy Thing To Do – “Initiative of The Moment”
     Component of A Environmental Shift -- e.g. Performance Culture
     Financial – Where Can We Cut Costs
     Stakeholders Questioning Value For Their Dollar

  If Not Under Pressure, Assess The Payback of Proactive Measurement
     Does The Company Generally Value Long-Term Planning & Forward Looking Efforts
     Am I Prepared To Respond Quickly, Concisely & With Clarity If Asked
        To Validate My Contribution To The Organization
     Are Other Groups (Operational or Functional) Tracking This
     How Well Do I Manage Costs
     What Outsourced Alternatives For CI Are Senior Managers Aware Of

Targeting That Which CAN Be Measured ?
 Inputs
      # Queries Fulfilled / Time Spent
      Non-Labor $ Spend
      Delivery Date Met
      Request Objectives Achieved
      Client Satisfaction
      Segmented Usage (Business Unit, Functional Area, Management Level)

 Outputs (discussion to follow re ability to actually take credit for improvements)
      Revenue / Net Income – We won this contract because I …
      Cost Structure – We operate more effectively because I ….
      Margins (by BU/Product, Customer, etcetera) – We priced more effectively because I …
      Risk Avoidance – We didn’t lose $X because I … .

 In a Tight Financial Environment, Will Operating Areas / BUs Take Full
      Credit for Successes or Is There a Mechanism for Shared Glory ?
The Elevator Speech
 If You Stepped Into An Elevator With Your CEO, How Concisely &
 Clearly Could You Respond To Any of The Following Questions?
     What Is The Size of Our Market, and What is Our Share ? Our Competitors ?

     How Do We Compare ?
         Pricing
         Capabilities
         Servicing

     What Differentiates Us From Competitors in the Eyes of Our Clients & Prospects ?

     What Are The Competitors Saying About Us & Do Clients Believe It ?

     What Are Our Competitors’ Sales Strategy & Marketing Messaging ?

     Who Are The Emerging Competitors ?

    How Confident Are You in the Answers, How Do We Know This, What Role Did
    You Play in Gaining This Understanding & What (Time/Money) Did It Cost Us ?

Impact of Business Successes, & Attributing CI’s Role

  Qualitative Improvements
      Positive Press Around Company / Products
      Client Relationships

  Quantitative Improvements
      Revenue
      Net Income
      Margins
      Client Satisfaction

   Access To Internal Records, Some Level of Sophistication in Those
  Records & Internal Client Advocates Validating Contributions is Key
Importance of Documenting Wins

  Keeping Success Stories From Falling Through The Cracks

  Tracking Improvements Over Time

  Ability To Segment (BU, Region, Function, Level, etcetera) Mapping CI
 Success Stories To Business Wins

  Responding Quickly To Requests For Contribution Factor

  Early Warning System

  CYA Factor – BU’s Won’t Necessarily Proactively Share Business
 Wins or Say Thanks

Redefining ROI – First Step To Initiating Measurement

 Formulaic Linkage Between CI Activities & Formulaic Return is Dangerous
   “Win “ Statistics Too Imbedded
    Potentially “Liable” For Losses As Well

 What Then Is The Alternative ?

 Suggested Strategy
    Mapping CI Activities (Labor, Content) To Business Objectives
    Consensus Around CI Deliverables – Scope, Timing, Budget…
    Quantitative Assessment of Success Vis-à-vis Agreed-Upon Deliverables
    Qualitative Evaluation of Merit

 Once Linkage of CI Activities to Improvement Firmly Established,
        Begin Migration To Attribution

 Given This Model, What Then Are The Metrics ?

Structuring Metrics for Alignment With Stakeholders
 Recognize your financial stakeholders – who is paying the bill for
“you – the product” & to what degree ?

 What are those stakeholders being measured against, what are their
both their minimal & stretch goals ?

 How are those stakeholders being compensated / evaluated relative
to those metrics ?

Are those stakeholders also financing other related resources – what
is their total CI spend (their perspective) ?

 What other stakeholders have influence, despite not providing
funding directly ?

An Example – Stakeholders’ Perspective

BU Stakeholder / % CI Support
                                  “Current             “Up &           “Growing           “Problem         Corporate
Initiative / Their Metric       Success” 30%         Comer” 20%        Pains” 30%          Child“          Leadership

Revenue Growth                  10 % / 15 %           8 % / 10%         8 % / 10 %         5% / 8%          8% / 10%
(Baseline / Stretch)

Customers                        5 new major*,         Cross-sell,     Margins focus,      Lose none,     Improve Brand
                                12 total; at least   Penetrate 10%     institute track    Improve avg      Recognition,
                                   1 in target          more of        profitability by    satisfaction   Expand C-Level
                                    industry         corporate base         client         rate to 85%     Relationships

Cost Reductions                  10% / 15%           10% / 15 %         15% / 20%         30% / 35%         15 % / 25
(Baseline / Stretch)

Other                               Retain               Expand        Decrease Cycle      Complete        Realign Corp
                                Salesforce Via       Internationally   Time On New           Tech         Vision Statement
                                 Competitive                           Product Intros      Platforms
                                Compensation                                              Integration

* Based on Size of Engagement or Clients Total Revenue                                                                       11

 BU Stakeholder / % CI Support
                                      “Current       “Up &      “Growing     “Problem   Corporate
 Initiative / Our Metric            Success” 30%   Comer” 20%   Pains” 30%    Child“    Leadership
  -- Benefit Statements Linked To                                              10%

 Specific Sales

 Lead Generation –
 Prospecting & Client
 Relationship Strengthening

 Pricing & Production

 Risk / Cost


 BU Stakeholder / % CI Support
                                 “Current     “Up &      “Growing      “Problem    Corporate
 Initiative / Our Metric         Success”   Comer” 20%   Pains” 30%   Child“ 10%   Leadership

 % Requests Delivered               %           %            %            %            %
 (To Spec) On Time

 % Requests Delivered               %           %            %            %            %
 (To Spec) On/Below

 Degree of Proactivity &
 Ability To Triangulate
 Actionable Intelligence

 Overall & Segmented                %           %            %            %            %
 Satisfaction Rating

Closing Thoughts
  There Is No “Silver Bullet”

 “You Can Please Some of the People All of the Time,
        You Can Please All of the People Some of the Time,
                But You Can’t Please All of the People All of the Time”

 The Key Is To:
      Believe in Your Value Proposition
      Be Able To Express It Clearly & Concisely
      Learn From Your Experiences
      Keep The Momentum Going

                                                                              Courtesy of: David Blenkhorn & Craig Fleisher

Results of SCIP Conference Discussion Groups
It is crucial that senior executives & CI practitioners know that the CI function is doing the right job & that its effectiveness
         can be measured. Assessing the performance of CI initiatives is doubtlessly among the most difficult tasks CI
         managers have to tackle in the course of doing their jobs. There are many critical success factors, methods &
         techniques which link CI performance with measures of effectiveness of the CI function in achieving the
         organization’s goals. ROI is one such measure that has been utilized as a very credible metric, both at the macro
         (organizational) level, & at the micro (functional) level.

This is a brief report on the results of a pilot study undertaken with 103 competitive intelligence professionals to measure
        their responses to 20 open-ended questions posed to them about the measurement of ROI of the CI function. We
        broke the 20 questions into four categories that we felt covered the principal reasons as to why attempting to calculate
        an approximate ROI on CI initiatives was a valid undertaking. The four broad categories were:
1.      Reasons for measuring CI ROI.
2.      Barriers to measuring CI ROI
3.      Methods for Measuring CI ROI
4.      Viable alternatives to measuring CI ROI

Preliminary Conclusions From the Study
These conclusions will be addressed utilizing the four main categories under which the 20 questions were grouped.

1. Reasons for measuring ROI: Respondents had no difficulty in providing justification to go through the process of
      measuring CI ROI. Similarly, they saw a wide group of users within the organization who would be interested in this
      information, ranging from executive management, business unit management, the CI group, to external customers.
      Respondents saw “good uses” of the CI ROI information as putting a mark of validity of CI within the organization &
      cost justification for CI resources such as people & tools. “Bad uses” of CI ROI information included
      political/bureaucratic posturing & budget raiding & cuts. Another justification for measuring CI ROI given was that
      other staff functions in their organizations measured their ROI, & the methods utilized were given. There was no lack
      of respondents citing benefits to their organizations with an accurate CI ROI measurement, which included: CI
      performance demonstration, justification of acquiring new resources, increasing “business” for the CI function & the
      firm, to the movement of CI from being a cost centre to a profit centre.
                                                                           Courtesy of: David Blenkhorn & Craig Fleisher

Results of SCIP Conference Discussion Groups, continued

2. Barriers to measuring CI ROI: Many barriers were cited ranging from no time to do it, don’t know how, to the measure is
       too deeply embedded in other activities. When asked for the formula for measuring CI ROI, respondents gave the
       standard earnings (benefits)/ costs of CI. They elaborated on the CI costs to include project costs, communication
       costs, capability costs, opportunity costs, & promotion. When asked where they got the appropriate information to
       derive the measure, the response was “it depends” upon the type of CI being conducted & the uses of the CI.

3. Methods for measuring CI ROI: The process given by respondents consisted of first identifying the purpose of the CI ROI
      measurement (either project vs. cost per year), identify the benefits, identify the costs, & calculate.

When asked from whom help was needed to complete the process, respondents cited two major groups – those internal in
     the organization & those external to it. The internal group consisted of sales, marketing, executives, regulatory, legal,
     & technical people, along with other internal groups calculating ROI. External groups such as suppliers would
     provide the cost numbers.

Respondents felt that those responsible for performing the process would range from the head of the CI function, to
     consultants, to a sponsoring executive. The process would require new data to be developed to determine the
     incremental benefits provided by the CI efforts in increased market share, number of new customers, cost
     savings/avoidance, head count reductions, acquisition of hardware, research/patent information, & risk reduction.

Respondents felt that it would take from 6 months to a year to develop a CI ROI process. They felt that the costs to do this
     would be from 10 – 25% of one person’s time plus potential other charges.

4. Viable Alternatives to Measuring CI ROI: Respondents did not give other economic or financial performance measures
       for CI as viable alternatives to CI ROI. They did, however, feel that CI does impact the organization’s economic &
       financial performance & felt that risk & CI’s impact on it does factor into these calculations.

                                                                            Courtesy of: David Blenkhorn & Craig Fleisher

For Those Interested in Learning More
 Suggested Further Reading on Calculating ROI

 1) Plewa, F.J. & G.T. Friedlob. (1996). Understanding Return on Investment. New York, NY: John Wiley & Sons.

 This book is part of the Finance Fundamentals for Non-financial Managers Series -- see description at

 2) Rachlin, R. (1997). Return on Investment Manual: Tools & Applications for Managing Financial Results. Armonk, NY: M.E.
 Sharpe -- see description at

 Journal Article on ROI & CI:

 1) Hilmetz, S.D. & S. Bridge. (1999). "Gauging the Returns on Investments in Competitive Intelligence: A Three Step Analysis for
 Executive Decision Makers," Competitive Intelligence Review 10(1): 4-11.

 Books dedicated entirely to ROI:

 1) Manners, G.E. Jr. & J.G. Louderback III. (1981). Managing Return on Investment. Lexington, MA: Lexington Books.

 2) Peters, R.A. (1979). ROI: Practical Theory & Innovative Applications. New York, NY: AMACOM.

 3) Rachlin, R. (1979). Return on Investment: Strategies for Profit. Upper Saddle River, NJ: Prentice Hall.

 4) Rachlin, R. (1987). Return on Investment Strategies for Decision-Making. New York, NY: Franklin Watts.

 5) Sweeny, A. (1979). ROI Basics for Nonfinancial Executives. New York, NY: AMACOM.

                                                                             Courtesy of: David Blenkhorn & Craig Fleisher

For Those Interested in Learning More, continued

 Textbooks with significant treatment of ROI:

 1) Atkinson, A. Banber, R.D., Kaplan, R.S. & S.M. Young. Management Accounting. Upper Saddle River, NJ: Prentice Hall. pp.
 13, 542-552

 2) Damodaran, A. (1999). Applied Corporate Finance: A User's Manual. New York, NY: John Wiley & Sons. Chapter 5,
 "Measuring Return on Investments," pp.120-186

 3) Ezzamel, M. (1992). Business Unit & Divisional Performance Measurement. New York, NY: Academic Press. Chapter 2,
 "Traditional Accounting Measures of Performance," pp.19-44.

 4) Horngren, C.T., Sundem, G.L., Stratton, W.O. & H.D. Teall. (1996). Scarborough, ON: Prentice Hall Canada. pp. 449-452

 5) Ingram, R.W., Albright, T.L. & J.W. Hill. (2001). Managerial Accounting: Information for Decisions. Cincinnati, OH: South-
 Western College Publishing. pp. M306-M312

 6) Lumby, S. & C. Jones (1998). Investment Appraisal & Financial Decisions. London, UK: International Thompson Business
 Press. pp. 48-51

 7) McMenamin, J. (1999). Financial Management: An Introduction. New York, NY: Routledge. pp. 12, 16-18, 23, 44, 50-51, 301-304,
 312, 317, 319-321, 324-325, 331, 360, 362, 419

 8) Riahi-Belkaoui, A. Advanced Management Accounting. Westport, CT: Quorum Books. pp. 186, 258-263

 9) Weston, J.F. & T.E. Copeland. (1989). Managerial Finance. Chicago, IL: The Dryden Press. pp.108-109, 186, 228-231

     Speaker Bio

Anna Shallenberger is the Director of Business Research @ Maritz Inc.
Previously, Anna served as Director, Knowledge Leverage for GE Capital’s
GEFA division (now known as GE Insurance.) Her experience prior to GE
includes running her own consulting business & managing Investment
Banking Research Centers on Wall Street.

Anna recently returned to St. Louis after 17 years in the NYC metro area. She
holds a BA in Economics & German from Westminster College & an MS in
Information Science from Rutgers University. Her studies include sessions @
Albert-Ludwigs Universitat (Freiburg, Germany) & Washington University’s
International Affairs Program.

Contact information:
Phone 636.827.2469
Fax      636.827.2801
Cell     314.954.0519


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