Tell me how many times you’ve heard this one: the CEO or line of business leader reads an article in a business magazine or the newspaper on digital disruption, IoT or any other new technology trend (“Blockchain cocktails with a twist of shared ledgers, anyone?”).
Things are now in downhill motion, where the CEO/LoB leader talks to the CIO or CTO, and asks: “What are we doing with IoT? We need to do something to create a new sensor-driven service, or we are going to be disrupted by our competition.” Maybe it is expressed this way: “I do not want our competitors to get a leg up on us in monetizing data. Let’s get ahead of this. Keep me posted on your progress.”
The CIO/CTO then delegates to an IT manager or solutions architect, saying: “We need to be doing something with IoT. Keep me posted on your progress.” Before you know it, the lucky winner at the bottom of the management chain hears: “Congratulations, you are the proud owner of another science project!”
The company then embarks on an internal effort to determine the feasibility of instrumenting systems, getting connectivity through metal, water or concrete, embarking on a quest for the best battery life and a GPS lock, from a room in the basement without windows. Questions abound:
“Will we be able to capture the right data?” “Whose hardware do we need to solve the problem?”
“What is the response time for acting?”
These are all good questions that inevitably need to be answered before a successful technical proof-of-concept can check the proverbial technology validation box. However, we would argue that these are absolutely the wrong questions with which to begin.
Start with why, as the great sage Simon Sinek postulates in his book of the same name. This is the only valid first question, and the “why” here is all about building the business case.
For those of you familiar with Gartner’s Hype Cycle analysis, new technologies tend to flow from an “innovation trigger,” up to the “peak of inflated expectations,” down into the “trough of disillusionment,” before finally rising again on the “slope of enlightenment.”
Some would argue that IoT is well past overhyped, and is somewhere between the “peak” and the “trough.” We disagree and so do our clients.
Sometimes the best answers really are the simplest ones. If you do not understand your business case, it will be extremely difficult, if not impossible, to show a compelling result where the company saved money, made money, improved customer service, or increased safety and reduced risk.
We have had far too many conversations with companies that want to jump right into the technical solution without understanding the goals, objectives or desired outcomes. This is precisely the reason that “why” is the first question we ask after hearing what a company wants to achieve.
When we begin engaging with new clients, we typically begin with a discovery workshop, where we seek to understand the client’s environment, their goals and, critically, their business operational baseline. While it is always fun to grab the whiteboard marker and start crafting a new process and technical solution, it is important to first get a client to understand where they are starting from and where they are headed.
The goals and metrics will vary significantly from client to client, and from one industry to the next, but the underlying principle always needs to be, “if you can measure it, you can act on it.”
Building a Business Case
Now let us try to make this real. As an example, take a company that believes it has a problem with waste and expired product in its plants. Ok, that’s a start.
Equation, part one: Can they quantify how much waste? Can they put a percentage on it? What does that translate to in terms of cost and/or lost sales opportunity? Answering these questions begins to paint the picture, but it is still just one fourth of the total equation.
Equation, part two: What percentage improvement would be deemed material by the business? At some companies, a 2% improvement would be grounds for a ticket to the Achievers Club, while at other firms, a 10% improvement would be within the standard margin of error.
Equation, part three: What will the solution cost to install, operate and maintain? How quickly can it begin to achieve results?
Equation, part four: What is the company’s investment guideline for showing an ROI? Twelve months? Twenty-four? Thirty-six?
Line all these factors up, and if the results exceed the corporate threshold, chances are the project will get a green light — especially if it will rely more heavily on OpEx funding than CapEx.
This is not rocket science. And the odds of receiving support will increase with the degree of homework and analysis.
“Welcome to the Real World” — Morpheus, from The Matrix
The challenges come, of course, when a company cannot easily answer one or more of the above questions. Perhaps there is no baseline. Perhaps the solution relies too heavily on CapEx, and those funds are already accounted for in the fiscal year. Perhaps the ROI calculation isn’t compelling enough to tie up management time and effort on the initiative.
And then there may be doubts about the actual capabilities of the proposed technical solution. Enter a proof-of-concept (PoC), which may be technical, visual or possibly financial. A PoC and/or a pilot is often effective for removing technical or operational uncertainties. These vehicles are also very useful in helping to calculate future implementation costs, which will factor into the business case calculation.
Business Case? We Don’t Need No Stinking Business Case
A business case justification would seem to apply to most, if not all, investment decisions, but there are definitely situations where the business case will not be the overarching consideration.
Consider regulatory/compliance requirements. For example, food products and medicines need to be maintained within defined environmental parameters, or they may be subject to reduced shelf life, at best, or be deemed a danger, at worst.
Or look at safety and risk management solutions. Does your plant operate in a dangerous environment? What does it mean to your employees (not to mention your shareholders and insurers) to deploy solutions that will keep them safe? Ironically, some safety solutions, even where cost is no object, can still have a business case made on the basis of reduced insurance premiums, increased productivity and happier employees.
There may also be considerations around the need to create new services and/or provide better customer service. Here the justification will come from strengthening the brand, building trust and demonstrating core values.
A Path Forward and Avoiding “Analysis Paralysis”
By now, we trust that you have bought into the need for a business case, and we suspect you are beginning to think through whether or not your operations are measurable, and whether or not you can establish a baseline.
Many clients tell us that they have gone through significant internal thrashing and turmoil on business case development. Many have gotten stuck on the technical aspects of the problem first, and failed to have the business case ready when it was time to make the proposal to their leadership in order to proceed.
The CTP team has the tools and experience to help you build your IoT business case while architecting and helping you build a solution that will achieve your objectives. Our lean/agile approach to developing IoT solutions can accelerate your time to market, and help you deploy outcome-based solutions with full management support.
