Home Articles Creating a methodology was the key

Creating a methodology was the key


David Maguire
Director of Products
ESRI

Q. What motivated and inspired you to work on this project and write a book on ROI?

I wanted to look at the business case of GIS so that I could describe to people at the helm of affairs and to newcomers to the field, why I felt that GIS is such a valuable problemsolving technology and how it could be used to solve some of the world’s most challenging problems. I searched around for good case studies, and numerical information describing the value GIS brings to business and IT projects, but I couldn’t find any. The more I read, the more I realised that very few people in the GIS field even know what return on investment (ROI) is all about, let alone how to use it to measure the success of GIS projects. I felt that the best way to get lots of case studies with specific metrics about the value of GIS was to create a methodology so that many organisations could create and publish their business cases for the benefit of the whole community.

I recruited Victoria Kouyoumjian of ESRI and Ross Smith of PA Consulting Group to help me write the book. Ross had been using a methodology developed by PA Consulting for a number of years and we focussed on adapting this for use by GIS professionals. Eventually, using the case studies created with the methodology I would like to write another book that is a high level description of how GIS really brings value to organisations. However, I will have to wait 2 to 3 years before I start this project!

Q. Do you think that an ROI methodology is the only way to quantify the implementability of a GIS project?

ROI is not the only way of building a case for funding a GIS project. There are many ways to do that, but I certainly feel that measuring the return on investment is a new and interesting way of assessing success. Most of the attempts in the past have focussed either on the technology case or on how GIS can do things in a better way than before. The approach we take is a bit different.

Instead of added value, we focus on ROI because we find that people are willing to spend, for example, $300K- $500 K if they can get $ 2, 3 or 4 million back. It is the ratio between the investment put in and the return an organisation gets that makes the most persuasive case to executives.

Q. The benefits of a GIS project are both tangible and intangible. How do you convince the stakeholders on the intangible benefits?

Intangible benefits are those which are difficult to measure or difficult to put a monetary value on whereas tangible benefits are those which you can put a monetary value on. In the past, a lot of GIS business cases have been built only on intangible benefits which makes ‘selling’ GIS to senior executives quite difficult and time consuming. Our methodology allows organisations to identify the potential benefits of GIS and then express them as tangible benefits with a monetary value. We ‘mine out’ the value from benefits to build a compelling case for GIS.

Q. The procedure listed considers the psychology of the key stakeholders. Apart from addressing and acknowledging the critics or naysayers among the stakeholders, are there any other strategies that the GIS proponent needs to consider?

We feel it is extremely important to work with senior executives in an organisation. In the past, GIS professionals were quite comfortable working with middle level executives, but for large enterprise GIS systems, it is vital to get the buy-in from senior people in an organisation, such as the chief executive officer, chief technologist or other key board members. We start by meeting the key leaders of the organisation and asking them to describe what their vision for the organisation is; what the challenges are and what the key business opportunities are for the next few years. Then, we use this information to arrive at the business opportunities to which GIS can be applied. By taking this type of approach, we hope that the GIS projects will be directly relevant to the business issues which the organisation faces in sharp contrast to what was being done in the past where people took a dominantly technological approach and tried to embark upon projects driven by technical interests rather than serving the business challenges of the organisation.

Q. GIS is technology intensive. How does an in-house ‘GIS project’ initiator convince the stakeholders that a GIS can also be used effectively in change management?

GIS is often a major change agent in an organisation and can enable major business and technical transformations. In our ROI methodology, we advocate a ‘before and after’ approach to measuring the impact of GIS. For example, we use the methodology to determine how much it costs to do something without GIS and then look at how much it costs to do it with GIS – that could be saving money, meeting regulatory requirements, or making money for an organisation. We also advocate the need to manage change effectively in terms of mitigating the risks, and having proper governance structure to ensure that projects are successfully delivered according to budget, time and quality criteria.

Q. You use a CMM (Capability Maturity Model) to rank organisational competencies using a 0 to 10 scale. The realistic portrayal of current project delivery capabilities of an organisation is based on self assessment. How reliable and justifiable are such methods of quantification?

Our CMM is based on 10 different criteria. We found that the exact detail and scale of the criteria are not really so important as measuring the current and desired level of capability, and then focussing on what the organisation needs to do to get from where it is now to where it needs to be to deliver the project successfully.

The best way to do this is to get a group of people together and ask them all independently to assess the organisation in terms of current and desired capabilities and then have a discussion that compares the results. It is the discussion that is more valuable than the actual scores that people come up with.

After reaching consensus and determining the strategy to ensure that the team has the right level of capability to be successful, the team needs to identify and acquire the resources required to undertake the necessary organisational transformation.

Q. How is an organisation to tackle attrition and/or the addition of new members in the ROI team, as well as in the GIS project team?

In selecting the members of the ROI team, it is best to ask for volunteers who want to stay through the duration of the project and are committed team players. We also have to accept that in some projects there will be staff turnover. A useful risk mitigation strategy is to develop understudies for key positions in case someone does leave the project. New people joining a GIS ROI project will need some training on how the methodology works.

Q. What is the significance of applying ROI principles to GIS implementations?

First, it is important to understand that the ROI calculations are only one piece of the complete process. Calculating the ROI for a GIS programme is one aspect, but delivering on the benefits expected in a consistent and complete manner is also equally important. Organisations must be able to:

  • Link the business benefits sought via GIS initiatives to the organisations’ strategic goals and objectives
  • Build a community of GIS advocates across the business, moving beyond a single department and into the enterprise
  • Ensure the programme is businessled, and not just technology-driven
  • Consistently deliver benefits through a well structured and well governed programme that has at its core the notion of delivering value, not applications.

Our ROI methodology focusses on six key topics that we believe are critical to creating a strong GIS business case or strategy for any organisation:

    Demonstrate real business value

  • Determine specific costs
  • Estimate timeframe for delivery of benefits
  • Understand resource requirements
  • Define the governance and management
  • Calculate return on investment.