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#FR365, #SLACID, #SLA2011, #AIIP, #CI2020, #ClosetLibrarian, Closet Librarian, Targeted Knowledge, Anna Shallenberger, Anna F. Shallenberger, Anna Fay Shallenberger
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 2 Today’s Presentation IN SCOPE Examination Process, Questions To Ponder When Developing Personal Model Anna’s Experience At GE Comparing Practices / Experiences OUT OF SCOPE One Size Fits All Model Ongoing Measurement Maritz Detail – evolving, too new 3 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 4 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 ? 5 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 ? 6 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 7 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 8 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 ? 9 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 ? 10 An Example – Stakeholders’ Perspective BU Stakeholder / % CI Support “Current “Up & “Growing “Problem Corporate Initiative / Their Metric Success” 30% Comer” 20% Pains” 30% Child“ Leadership 10% 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 Qualitative 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 Opportunities Lead Generation – Prospecting & Client Relationship Strengthening Pricing & Production Development “Differentiation Risk / Cost Avoidance 12 Quantitative BU Stakeholder / % CI Support “Current “Up & “Growing “Problem Corporate Initiative / Our Metric Success” Comer” 20% Pains” 30% Child“ 10% Leadership 30% % Requests Delivered % % % % % (To Spec) On Time % Requests Delivered % % % % % (To Spec) On/Below Budget Degree of Proactivity & Ability To Triangulate Actionable Intelligence (survey) Overall & Segmented % % % % % Satisfaction Rating (survey) 13 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 14 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. 15 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. 16 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 http://www.amazon.com/exec/obidos/tg/detail/-/0471103721/ref=pd_bxgy_text_1/002-2931827-8319259?v=glance&s=books 2) Rachlin, R. (1997). Return on Investment Manual: Tools & Applications for Managing Financial Results. Armonk, NY: M.E. Sharpe -- see description at http://www.amazon.com/exec/obidos/ASIN/0765600145/qid%3D1039072047/sr%3D11- 1/ref%3Dsr%5F11%5F1/002-2931827-8319259#product-details 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. 17 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 18 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 e-mail firstname.lastname@example.org 19
"2003 Demonstrating ROI of Market Intelligence"