The Art of Measuring the ROI of ELNs - Keep it Real
As a project sponsor, business unit owner, or even as a project manager, inevitability you’ll be asked to cut through the hype, the position papers, and promises surrounding ELNs and put together an actual ELN business case.
Typical corporate business cases are created to demonstrate strategic alignment, define scope, identify risks, target resource requirements, obtain funds, and show the financial and operational benefits after the project has gone live, i.e. ROI. It’s this last set of measures that often remain elusive for ELNs, but are critical for project justification.
ELN ROI calculations can be difficult to identify and calculate because process re-engineering projects are by their nature changing multiple sets of interconnected systems and subsystems. Change one thing and other things often are impacted. There are a number of factors in play for measuring, pure measurement can only happen if time were to stand still - no other change projects, no market and economy swings, no employee turnover, etc. - from the time the business case is committed through deployment on day one and until results are measured one, two, three or even more quarters later. In other words, all other factors would need to stay the same in order to purely measure the ROI impact of the initiative in question. This is never going to happen, so what are the alternatives?
Select Broad Categories
The benefits projected should be a numerical estimate of positive impacts over a timeline, and the costs should similarly project the outlays over the same timeline. Many unknown values will undoubtedly be factored into estimates of outcomes. But there are at least three broad sets of ELN ROI measures:
- Increase revenue through greater throughput (doing the process faster, with better decision making, for the same amount of resources).
- Cost reduction through greater efficiency (doing the process with less resources in the same amount of time).
- Cost avoidance through better compliance and asset protection (doing the process without incurring additional / ancillary costs associated with compliance and intellectual property defense).
Identify Assumptions and Measures
Isolate factors of measurement that are going to change as a direct function of the ELN’s impact. These will be operational in nature, and difficult to measure in isolation. A method commonly used to identify a measure is to begin at the top of a node of revenue and / or the cost “tree”, and work down the nodes until a measure can be defined as a direct impact of the change delivered. Some examples may be:
- Improved scheduling and forecasting as part of capacity and demand management
- Improved service support and service delivery to end-users
- Reduced time spent in process
- Reduced design and/or re-work
- Fewer process lags and disputes either internally or externally between staff and/or third-parties
- Faster on-boarding and faster closure
- Reduced need for methodology and skills training for in-house staff
- Increased product quality due to use of best practice standards -- more appropriate requirements, design, and reviews; more effective testing.
- More effective governance, portfolio management, tracking, project management, cost management, and resource allocation
After identifying, build out the assumptions and formulas:
- Example Assumption:Time for maintaining new training of scientists will be reduced by 10% in first year because the ELN will replace associated courses.
- Example Formula and Calculations: 100 workers x 3 weeks over the course of the year x 40 hours per week x $65/hr costs associated for old training method x 10% time savings = $78,000 savings
Beware Parallel Initiatives - Don’t Count Twice
The goals of implementing an ELN will often be broad and similar across the enterprise, which will most likely be implementing several parallel transformational projects at the same time. This will make it harder to know how much revenue or cost improvement is attributed to the ELN. Conduct baseline measures before going live with the ELN. Conduct a series of measures over a specific period of time to gather a broad picture of impact.
Assessing Asymmetric Benefits
Though only measurable results should be reported, also take time to identify (and then claim) some asymmetric benefits. ELNs are akin to building out a high speed telecommunications infrastructure, which has had such a huge impact on how people work and collaborate today. Identify some soft benefits associated with the ELN, such as collaboration and communication, and then monitor. It may be a few years before anyone sees the impact of the platform, but it will be impactful.
Keep It Simple
Don’t get bogged down in useless mental gymnastics and extrapolations for the sake of producing lengthy dashboards or overly large benefit pools. Instead, create a practical Value Measurement Plan which identifies the approach to tracking, the measures of value created, the timeframe by which it will be measured, and then put into place.
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