Measuring and Assessing the ReturnOnInvestment for Your Information Initiative

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Measuringand Assessing the Return-On-Investmentf
or Your Information Initiative
Anne Caputo Director, InfoPro Academic
Programs Melbourne 23 January 2001
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What do others think?

• The corporate library has long been a backwater
  of modern business, an underused service
  department offering research assistance,
  reference information, and historical archives.
• Kevin Davis, The Changing Role of the Business
  Librarian, Knowledge Management, December 1998.

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What do others think?

• The message over the discussion list was all too
  common another corporate librarian has been
  summarily dismissed with no advanced warning by
  her billion-dollar organization and the library
  fettered and locked that very same day. An
  aberration.apparently not. Similar scenarios
  are being played out all over the country.
• Frank H. Portugal, Valuing Information
  Intangibles Measuring the Bottom Line
  Contribution of Librarians and Information
  Professionals.
• Special Libraries Association, 2000.

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What do others think?

• Knowledge is more valuable than stuff
• Jonathan Littman, Valuing Intellectual
  Capital, Upside, March 1997.

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What do others think?

• Thirty-eight per cent of managers waste
  substantial amounts of time trying to locate the
  right information.
• Forty-three per cent think important decisions
  are delayed and the ability to make decisions is
  affected as a result of having too much of the
  wrong information.
• Dying for Information? An Investigation into the
  Effects of Information Overload Worldwide.
  Reuters Research Study, 1996.

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What do others think?

• 80 Percentage of information that is filed
  but never used
• 44 Percentage of managers who believe the
  cost of collecting information exceeds its
  value to the business
• 25,000 Amount that an an executive paid 60,000
  is being paid just to read
• 150 Hours the average person spends looking
  for lost information each year.
• 71 Percentage of workers who say their main
  job is tracking down information
• Data Data, Inc. Magazine, 1999.

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What do others think?

• If only HP knew what HP knows, we could be 3
  times more productive.
• -- Lew Platt (former CEO of HP)
• By the year 2002 enterprises lacking formal
  infrastructure and technology for knowledge
  management will experience productivity losses in
  excess of 10 percent as a result of
  Infoglut. -- Gartner Group

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Need for ROI

• Justify expenditures
• Benchmark against others
• Measure value for future planning
• Enhance your position
• Survival

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ROI Measurements

• Intellectual assets of a corporation are usually
  worth three or four times the tangible book
  value.
• Jane Cooney, Intellectual Capital, Business
  Quarterly, Summer 1997 quoting Charles Handy
• US researchers have discovered that if an
  organizations information system is down for
  more than five working days, then the
  organization would be out of business in five
  years.
• Andrew Kent, Information Assets The Auditors
  Dilemma, Australian Accountant, ,June 1997

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ROI Measurements

• Chevron
• Achieved a 30productivity gain, a 50
  improvement in safety performance and more than
  2billion in operating cost reductions during the
  1990s attributed to the techniques for managing
  knowledge and building a learning organization.
• M2Presswire, 12 January 1999 Chevron
  Knowledge Management is now a business
  necessity, says Chevron chairman
• IBM
• Consultants have reportedly cut proposal writing
  time from an average of 200 hours to 30 hours
  because they can share information
• Jenny C. McCune, Thirst for Knowledge
  Management Review,
• 1 April 1999

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ROI Measurements

• Ford Motor Company
• the most successful KM programs focus on
  building deeper customer relationships and
  increasing the speed of innovation.Michigan
  based Ford Motor Company has saved more then 600
  million over the past three years by implementing
  KM programs.
• Brian Hackett, The Conference Board,
  ComputerWorld, 3 July 2000

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Return On Investment

• Quantitative
• Anecdotal
• Dow Jones Interactive saved nearly 250,000
• Clare Hart quoted on Factiva.net, Factivas Best
  of Both Intranet
• ROI vs. focus on creativity, innovation and
  moving the business forward
• Beth Davis and Brian Riggs. Whats the
  Investment Worth? InformationWeek 5 April 1999.

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Value Measures

• Quantitative
• Method One
• Return on Investment
• Cost Benefit Analysis
• Method Two
• Knowledge Value-Added
• Method Three
• Intranet Team Forums
• Method Four
• Intellectual Capital Valuation
• Portugal, Valuating Information Intangibles
• .

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Value Measures

• Return on Investment
• Ratio of net profits to total assets
• Advantages
• simple and straightforward, traditional measure
  recognized by management
• Does not
• capture the intangible value that the information
  center represents to the organization
• Best for
• for-profit organizations

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Value Measures

• Cost Benefit Analysis
• Focuses on measuring benefit to user
• Value of time users willing to spend on library
  services compared to cost of providing services
• Value of cost used for alternative services
• Avoidance costs of having to obtain materials on
  their own
• Advantages
• Straightforward to calculate
• Does not
• Show intangible benefits
• Best for
• Costs easy to track. Requires valuation be place
  on services which can be difficult to estimate.
  (Griffiths and King, Special Libraries
  Increasing the Information Edge, 1993)

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Value Measures

• Knowledge Value-Added
• Tracks flow and cost of informed wealth (data,
  information and knowledge) through organization
• Time to learn subprocesses
• Number of words used to provide instructions for
  subprocesses
• Length of sequence of binary yes/no answers for
  describing process
• Advantages
• Opportunity to obtain data tied to intangible
  value of services of information professionals
• Does not
• Examine in one analysis the overall value of the
  information center, but focuses on the
  contributions of librarians
• Best for
• Commercial enterprises who are willing to track
  (and recognize) informed wealth. (Kanevsky and
  Housel- The Learning-
• Knowledge-Value Cycle.)

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Value Measures

• Intranet Team Forums
• Tracks flow of information once it is delivered
  to initial user
• Uses chat and discussion forums
• Requires extensive analysis and software
• Advantages
• Complex to calculate, but tracks flow of
  information past initial ownership stage to
  value added stage of use
• Does not
• Show accurately the course of data unless
  participants use monitored channels
• Best for
• Organizations with an intranet structure and
  significant number of participants.

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Value Measures

• Intellectual Capital Valuation
• Uses two general groups of metrics
• Asset performance over time
• Outcome of performance over time
• Customer focus, Process focus, Development focus,
  Human focus
• Advantages
• Complex to calculate, but offers large picture
  of strengths and weaknesses of each unit and how
  it contributes to overall success of organization
• Does not
• Show absolute values, but rather relative changes
  in performance and outcomes
• Best for
• Any type of organization willing to use extensive
  surveys and measurements to assign and track
  values.

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Return On Investment

• Factiva Return-On-Investment Survey Findings
• White paper by Jan Sykes, Information Management
  Services, December, 1999
• Saving time
• Preventing duplication of efforts
• Respond more quickly to a competitive threats
• Opportunities
• Improved decision making
• Job satisfaction
• Cost savings

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Challenge of Calculating ROI

• Information is an intangible entity
• Users dont understand value
• Soft benefits hard to quantify
• Organization might not have right measures to
  translate data into dollars, pounds, shillings,
  lira.
• Easier to quantify negatives than positives

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Factiva Return on Investment Survey Initial
Results

• Surveyed 241 users
• Across industries in North America
• Delivered via web
• First step in larger project
• Customized for each client

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Executive Summary

• Survey data from Enterprise Customers
• Increased productivity
• Improved decision-making
• Continuing to collect data
• To provide data to specific firms
• To assure more reliable results
• To remind users of the connection between info
  and

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Use of Dow Jones Interactive
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ROI - Saving Time
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Anecdotal Measures

• Time has become such a precious commodity, and
  efficiency and productivity such a mantra that we
  tend to discount the value of activities such as
  reading non-industry or non-job specific
  information. Yet, as our level of awareness and
  understanding about issues in the "outside world"
  declines, the quality of our internal decisions
  also declines.
• Having access to pertinent information from a
  variety of credible sources at my fingertips
  allows me to manage my time, without compromising
  my level of awareness. This translates into
  better, more robust decisions.
• Factivas ROI White Paper, 1999

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Anecdotal Measures

• Your product is a great one-stop-shop for
  information. Although I cant directly tie it to
  revenue, it has saved me time in a lot of the
  research I do for my job.
• Factivas ROI White Paper, 1999

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Calculating ROI

• Assumptions
• 33.65 average hourly salary
• 3,000 persons subscribe to information service
• Calculation of Cost Savings
• 33.65 x 2 hours/week x 3,000
• Estimated Savings
• 201,920/week or almost 1,050,000/year

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ROI - Competitive Threat
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Anecdotal Measures

• Increased my productivity. Nullified my
  dependence on brand x. Significantly lessened
  my routine demands on research staff.
• We provide the information that better prepares
  our sales team to sell against the competition.
  Having access to this tool helps this cause,
  helping to drive the line line (revenue/sales) in
  our income statement.Your product is a great
  one-stop-shop for information. Although I cant
  directly tie it to revenue, it has saved me time
  in a lot of the research I do for my job.
• Factivas ROI White Paper, 1999

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ROI - Opportunities
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Calculating ROI
Assumptions Revenue per employee is 550,000
or 264/hour Company employs 30,000 persons 25
are active users of Factiva information
resources. Calculation of Impact to
Revenues 30,000 employees x 25 x 264/hour x 2
hours Estimate of additional revenue which could
be realized if employees are generating revenue
rather than searching for information
3,960,000/ year
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Improved Decision Making

• 73 of survey participants agree that access to
  Dow Jones Interactive has helped either them
  and/or their group reach business objectives.
• 78 of survey participants agree that business
  decisions are based on more comprehensive
  information and knowledge of a given situation.

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Additional ROI Benefits

• Depending on the type of business
• Revenue stream started sooner
• Improved product-to-market delivery time
• Improved customer satisfaction levels by timely
  product delivery

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Challenges

• Hard to define value of information integrated
  into intranet
• Presenting comments to management in a convincing
  way
• Creating internal measures necessary to quantify
  new values

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Conclusion

• Better time management
• Greater knowledge of customers, competitors,
  markets
• Faster response to business opportunities

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. (http//www.factiva.com/infopro

• White Papers
• Global Study of Information Professionals
  Emerging Issues and Trends
• Selecting Business Intelligence Sources The
  Public Web vs.. Value-Added Online Services
• Factiva Return on Investment Survey Findings

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anne.caputo_at_factiva.com