In a webinar hosted by FinLync, The Hackett Group, Amazon, Walmart, E&Y and Accenture came together to address the issue of implementing new technology, what to consider in how you evaluate new technology, and how to prove ROI to stakeholders.
Setting the Stage: The Current State
Business improvement begins with an assessment of the current state. A solid understanding of how core operational systems and processes are functioning within the business is necessary before any change that will make a difference can be implemented.
It is no different when looking at new technology to implement in your business. According to Paul Bramwell from E&Y and Borja Buenadicha from Accenture, it is important to clearly understand the current situation and define the business problems you are trying to solve that the current situation doesn’t allow you to do or does less effectively.
For example, are you trying to achieve a goal or aiming to alleviate a pain point? What is the root cause? Are there times of year, personnel changes, or market conditions that exacerbate this problem? Document a problem statement that describes what, where, how and the magnitude of the problem.
By laying out this baseline of where you are today vs where you want to be, you establish the foundation upon which your needs assessment and, ultimately, your business case, can be built for new technology.
To RFP or Not?
When considering new technology, most companies perform an internal assessment of the business requirements to determine if it is something they can build themselves or something they should buy. This assessment is typically based on varying factors, including the detailed requirements, industry best practices for the technology, impact on other areas, and, finally, whether they have the capacity to do it themselves or do they need outside help.
For companies like Walmart and Amazon, when an RFP process is deployed, it is guided by their internal Project Management Office, who provide them with detailed documents to use to perform this assessment. Though these detailed documents help them assess the technology, according to both organizations they can tailor the documents to address specific needs not only in the area that is considering the technology, but also in areas that may be impacted by the technology. It is this ability to cross interrelated departments that is key to ensuring the RFP covers all the applicable areas for the new technology.
According to Michael Rodrigues at Amazon, the sooner you bring other departments into the process, show them what you have determined up to that point, and get their feedback, the better the results. Because many RFPs are notoriously broad in their questions, it’s critical to be as specific as possible in detailing the specific information you want answered in the RFP. By engaging with other stakeholders early, it will allow you to build a solid business case with concrete metrics and an established roadmap to get to the best end results for the business.
Creating the “Decision Package”: Building the Business Case
According to Bryan DeGraw of The Hackett Group, implementing new technology starts with creating the business case to gain buy-in for the new technology and the funding required to support it. The business case creates a “decision package” stakeholders will use to assess funding and contains four key elements:
- Clearly identify the business merit of the project. Identify the problem(s) the new technology will solve, explain how it will be used and define its potential impact on the organization. Since most problems have multiple solutions, identify the potential solutions reviewed and why this technology is the best option. Focus from a strategic perspective, showcasing the impact on revenue or efficiencies the technology will bring to the business.
- Identify the ROI metrics. There are a variety of ways to measure ROI, so determine the calculation you intend to use to measure it. Whether you measure it by core financial elements like net present value, internal rate of return or return on invested capital, don’t forget to consider the functional side the new technology will bring that can impact ROI: will it drive greater revenue or reduce costs – or a combination of the two? Treasury tools are unique in that they often impact cash – faster collection of receivables, better management of payables, etc. – so it is important to highlight those elements as well when determining ROI.
- Some elements in determining ROI are harder to measure, but according to the panel are worth evaluating as you build your business case. According to Trevor Bateman from Walmart, visibility and timeliness are key elements to consider when you are looking to establish ROI metrics in some of these harder to quantify areas. For example, it may be hard to develop a single metric for something such as fraud, but by assessing how fraud is currently analyzed and comparing it to what the new technology can process, monitor or track, you can develop a compilation of points that the new technology addresses such as increased visibility, and determine a percentage metric of improvement, whether that improvement is in time savings, cost savings, etc.
- Determine the operating costs. It’s important to look at the operating costs beyond just the hard costs of acquiring, implementing, and maintaining the new technology. In addition to those factors, which primarily show the cost of ownership, consider how the new technology will impact the team. Is it going to result in less people working on a particular process? Can they be redeployed? How many people will be involved in the new process? Are you leveraging any outsourced support? Will it benefit or impact another business area in your company? All these factors come into play when you look at how the new technology will change the process and experience of your team.
- Take a holistic approach. Business cases that are successful show value holistically. While it is important to show the tangible dollars and cents value, highlighting the impact on your clients, suppliers, other departments and employees adds depth to the business case that lends itself to successful buy-in from your stakeholders.
Research by Harvard Business School Professor John Kotter shows that 70% of organizational change efforts fail simply because people don’t get enough buy-in, from enough people, for their initiative.
When Michael Rodrigues from Amazon is building a business case, he assesses if a project will span other business areas like accounting, AP or Cash Management. He then works with these teams to agree on three or four metrics that are important to those teams. By creating this alignment beforehand, they are not only better able to scope and plan the overall project, but also gain critical stakeholder buy-in that carries throughout the project.
Trevor Bateman from Walmart agrees that early interaction and building that buy-in early is essential to creating an effective business case and project plan for new technology. “It was probably a little bit of a novel concept to me years ago, to understand networking within your company to get buy-in from other business partners. If we are going to roll out new technology, any department that might be affected by a process has to feel comfortable with a change to our technology.”
Factors after New Technology Implementations
Once a new technology project is accepted and implemented, according to the panel, it’s important to have a post implementation evaluation in place that includes lessons learned. But, most significantly, this post project evaluation should be a compilation of the elements included in the business case to ensure key components have been effectively assessed and measured.
According to Paul Bramwell and Bryan DeGraw, they recommend that companies perform a continuous assessment throughout the project, so that you can tangibly measure success. This waterfall effect of assessing milestones throughout the project ensures that the project sponsor, team and process owners will be able to show specific benefits, that the project criteria has been met and that the project objectives have been achieved, while limiting staff fatigue and burdensome changes to the project at the end of the process.
By incorporating these critical factors to help you determine ROI for new technology, you will set the stage not only for a successful project and project acceptance by your stakeholders, but also better position your business for future technology projects as they arise.