How to make a winning business case for your intranet. Slides from a workshop given for Ark Group. If you'd like a similar in-house session or help on this topic please contact sam@clearboxconsulting.co.uk * What a business case looks like * Understanding who you're trying to influence * The benefits of an intranet * Assessing options, priorities and costs * Identifying risks * ROI and why it can be a red herring * Representing intangible benefits * The case for re-launches or intranet consolidation

1. Making the business case for your intranet Sam Marshall Director sam@clearboxconsulting.co.uk 01244 676097 www.clearboxconsulting.co.uk

2. Agenda 9.30 – 10.00 Introductions The challenge of Business Cases 10.00 – 11.00 Creating an Effective Business Case 11.00 - 11.15 Coffee 11.15 – 12.00 Establishing ROI 12.00 – 12.15 Discussion & Wrap-Up

3. Introduction It’s good to learn from your mistakes, but its much cheaper to learn from someone else’s

5. Getting sponsorship and support for your intranet

6. An independent view on your Steering Group

7. Intranets for effective communication

8. Achieving Global-Local balance

9. Introducing Web 2.0

10. Effective team collaborationDirector of ClearBox Consulting Former Global Portal Implementation Manager – Unilever Comms, KM & IT background Work with BT, PwC, BUPA, Müller, ExxonMobil etc.

11. You and your intranet Who you are What you do Status of your intranet Why you’re at the workshop www.clearboxconsulting.co.uk © ClearBox Consulting 2007

12. 20 – 100 cm

13. Health Warning There’s no ‘standard’ business case Depends on each organisation’s Culture Practice Scale Leadership Structure

14. Why have a business case?

15. Nobody asks what the phones cost us to run We accept it as a cost of doing business The CEO just believed it was important Its like keeping the lights on Some people don’t worry about it

16. ROI - It’s hard and you’re not alone Fewer than two-thirds of companies attempt to measure the business value of IT and, of those that do, only half measure their return after IT investments are made. The most popular metrics are among the most ineffective Asked if their company found it difficult to calculate ROI, 62% of IT executives answered “yes”. This figure rises to 75% in organizations with revenues of $500m or more. 47% of this group claimed that their metrics did not accurately capture the value of IT investments “time to payback” was used by 60% of those who engaged in measurement - but by 73% of those who claimed that their value metrics were failing. Source: CIO Insight

17. “If you can’t measure it, you can’t manage it” -Anon “Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.” -Albert Einstein

18. Things you don’t ask the ROI of Furniture beyond the bare necessities (including the ROI of carpets, plants and large desks) Global workshops where execs jet in from all over Most training courses Most downsizing programmes Attractive buildings vs. functional concrete Public parks Owning a cat Calculating ROI

19. Come the revolution… In a response to accusations in 1987 by a journalist from UK's Financial Times that the pace of development in Bhutan was slow, the King said that "Gross National Happiness is more important than Gross National Product.“ – Wikipedia entry on Bhutan See also: Balanced Scorecard www.svieby.com Roos: “Managing Intellectual Capital in Practice”

20. With the person next to you… How was the case made for your current intranet? What way of making the case worked? What would you do differently?

21. Coffee Break

22. Determining Benefits and ROI

23. Hard and Soft (intangible) BenefitsDirect & Indirect benefits

24. Calculating Costs What does it cost to run an Intranet? Recurring & one-off costs £450k p.a. for a typical UK Org = £30 per person for 15,000 users

25. Costs Checklist – Another Interactive Bit Recurring Support Team Software maintenance Training (ongoing) Help Desk Hardware Updates Network Consulting One Off Project Team Licenses Intranet Design Component development Migration Initial Hardware Training (initial)

26. Calculating Savings Cost Reduction (costs currently incurred) BA saved £40M by providing employee self-service over last 3 years Pay slips Flight Plans Training Cost Avoidance (costs that would be incurred without this project) Reduced cost of new intranets Unilever Branding Example

27. Unilever Branding Example Unilever introduced a new Logo and branding standards Important part of “One Unilever” to get common visual identity In Europe all intranets were on the same portal

28. Benefit Net Benefit = (direct benefits + quantified soft benefits) - (one-off costs + recurring costs)

29. Cost Avoidance Without Portal With Portal £5,000 design 25 days agree, implement & test Assume £300/day costs 300 x 25 +5000 = £12,500 Completed: day of launch 4000 intranets Assume 1000 would have re-branded Assume £1,500 per design Assume 5 days agree, implement & test Assume £300ay costs (1500 + 300 x 5) x 1000 = £3M Completed: 1 year after?

30. Where to look for savings In Business Whole FTEs removed Work with 3rd parties Reduced travel Transaction costs Expenses, travel, facilities, payroll, recruitment, phonebook etc. Procurement costs Print and distribution costs Office vs. home working In IT Integration Hosting (int. & ext.) Publishing costs Cost of new developments Cost of test & deploy Training costs Whole FTEs removed Designers Cost of E-mail and data IT support and helpdesks Tech self-help Password re-set Usability

31. Where to look for Benefits Better Increased sales time Customer Satisfaction Information quality Reduced errors risk Collaboration quality 3rd Party relationships Re-use of materials Faster Faster to market Time spent searching Cheaper More use of an asset Cost of controlling a process All the Savings earlier.. Fun Employee satisfaction Employee engagement Simplified processes

32. Calculating Benefits Cross-charging approach Aggregate individual benefits Cost of existing systems Try to do on a like-for-like basis But be grateful for anything!

33. Quantifying Intangibles Time Savings Ethnography Time Survey External Sources e.g. time seeking data Ideally do something you can repeat post-implementation

35. Time-consuming

36. Risk of Taylorism if done inexpertly

38. Getting responses can be hard (<50%)

40. Time Saving – worked example FTE = £30 ,000 + £20,000 = £50, 000 Cost per day (CPD) = 50, 000/200 = 250 Days Saved = 3 Prob. Realization = 33% Num. Employees = 10 000 Saving = 10,000 x 250 x 3 x .30 = £2,475 000

41. ROI Calculations

42. A bit about financials There are many ways to assess the value of expenditure Present Value Net present value Internal Rate of Return Payback Period ROI Find out what your organisation uses and recruit a friendly finance person

43. Present Value Present Value Value of money in the future if you were to have it today The ‘interest’ you would have earned is called the ‘discount rate’ = Y1 saving/(1+DR) +Y2 saving/(1+DR)² +Y3 saving/(1+DR)³ Net Present Value Recognises that an initial investment is required = Present Value – Initial Cost

44. Payback Period The break even point = Initial Cost/annual Saving e.g. if Intranet costs £200,000 and savings are £100,000 a year then payback period is: 200,000/100,000 = 2 years Useful, but not enough on its own because you don’t know if investing in something else would have been better

45. ROI ROI works like Net Present Value, but you need to work out the Net Benefit for each year to account for recurring costs. Net benefit = Savings + Increased Revenue – Recurring Costs 3 Year ROI Formula = (Y1 Net Ben/(1+DR) +Y2 Net Ben/(1+DR)² +Y3 Net Ben/(1+DR)³) / Initial Cost

46. ROI Worked Example Assumptions: Intranet costs £200,000 to set up. Annual costs are £20,000 Savings are £100,000 a year DR=10% Revenue increase is: Y1=£0 Y2=£60,000 Y3=£150,000 Net Benefits = Savings + Increased Revenue – Recurring Costs Y1 = 100 000 + 0 – 20 000 = 80 000 Y2 = 100 000 + 60 000 – 20 000 = 140 000 Y3 = 100 000 + 150 000 – 20 000 = 230 000 ROI (Y1 Net Ben/(1+DR) +Y2 Net Ben/(1+DR)² +Y3 Net Ben/(1+DR)³) / Initial Cost = (80 000/1.1) + 140 000/(1.1)² + 230 000/(1.1)³) / 200 000 = 220%

47. Pulling it All Together Spreadsheet to include: Initial Costs Annual Costs Revenue Increases Direct Savings Indirect Savings Cost Avoidance Time Savings ROI

48. Using Assumptions - Tips View the ROI spreadsheet as a basis for discussion Document assumptions as you go – you can always revise if you need to Include Typical cost to company per workeranager day Number users affected Time periods e.g. to implement, to fully adopt Reasoning behind probabilities Get help from finance – they will have strong opinions about this!

49. Creating an Effective Business Case

50. What’s in a typical business case? Scope & Objectives Strategic Context Benefits & Risk of Not doing Risks Budget & Finance Team & Sponsorship Communication Plan Change Management Plan Assumptions

51. Planning the business case Audience – who is it for? Behaviours – what do you want them to do? Content – what do you need to cover? Delivery – what channels will you use? Evaluation – how will you know it has worked?

52. Interactive Bit Interview each other to work out the ABCDE for your own organisations’ business case

54. Process Support (e.g. dashboards)

55. Collaboration (unstructured)

56. Services (e.g. expenses, travel)

58. Linking to Strategy - Examples Restructuring Offshoring Outsourcing Process cost reduction Process improvement (e.g. faster to market) Improved Execution (e.g. sales closure) Risk avoidance (e.g. post calamity) Downsizing (via productivity) Learning and knowledge-sensitive objectives Culture (esp. “One” initiatives) Engagement Any of the above but with function geography BU focus

59. Value to the Employee Job satisfaction removing onerous tasks Enhanced productivity Enhanced performance (e.g. better decisions) Engagement Beware the things that only the users love Weather For sale & wanted Lunch Menu

60. Tip: Visualise with a Benefits Tree All employees see same msg. Single identity Corp-Wide Comms Single CMS Employee engagement “One” Organisation Less churn 2-way comms channel Blogs Project Spaces Single place to collaborate Flexible project resourcing Best people on a task Time savings Improved Response Times Customer satisfaction Quicker access to data Better stock control Fewer outages ERP Dashboard Strategic Objective Benefit Outcome Delivers Feature

61. Benefits What to measure Whole system – no decent model for this yet Specific projects – e-procurement, employee self-service, etc. Hard vs. Soft Balance depends on your organisation’s culture and climate

62. Risks and Issues Risks impacting completion Risks if it does succeed Risks of not doing Stakeholders & politics

63. Structuring the Case Headline ROI Reminding people of the “invest” bit The 3 Phase curve Cost per user or Decreased cost of ownership Tip: if cost base static, focus on projected usage Sell the Soft Benefits Benefits Tree Personas Storytelling Case Studies from other orgs

64. Influencing and building support Which method for which audience? Detailed ROI ‘Anecdotal ROI’ and Soft Benefits Align to something where Soft accepted or Soft-Hard established Oil Company: risk-reduction Retailer: increase time on shop floor > increased sales Use KPIs strategically, not just operationally Tie to benefits tree e.g. % Marketing people using learning system

65. Tip: Use Personas to bring this to life Sponsors are users too! Bob is 52 years old and works as a mechanic with an organisation offering road service to customers when their car breaks down. He has worked in the job for the past 12 years and knows it well. Many of the younger mechanics ask Bob for advice when they meet up in the depot as he always knows the answer to tricky mechanical problems. Bob likes sharing his knowledge with the younger guys, as it makes him feel a valued part of the team….. Ref: www.steptwo.com.au/papers/kmc_personas

66. Tips: When to ask for budget Its tempting to put all the big costs in year one, but phasing can help Split the 12 months over two financial years – you only need to secure half the budget to get going Getting the 2nd half usually easier as you can pitch the risk as being lower Keep the annual costs down and do as much as you can as projects Get the foundation in place then go for multiple budget holders e.g. HR, Marketing, Comms Use secondments or other temporary resourcing to demonstrate control over ongoing headcount

67. Using an External View Pros External view often given more intrinsic kudos (regrettably) Comparative view – hard to see other intranets Focus – investigating the value of an Intranet takes time that many people just don’t have Specialism – someone who’s done it before Politically neutral – can sometimes ask the questions you can’t Cons Cost Won’t understand culture or politics

68. Business Case - Review Scope & Objectives Strategic Context Benefits & Risk of Not doing Risks Budget & Finance Team & Sponsorship Communication Plan Change Management Plan Assumptions

69. Open Forum: Issues of Establishing Returns

70. The biggest problem with the ROI claim is the letter I, which stands for Investment. Contrary to almost all thinking in this profession, training is not an investment it is simply an expense. While investment sounds more important than expense, training is nonetheless, an expense. Investment is a business term that implies the adding of capital to an organization. Unfortunately, human capital does not qualify Bob Dust, on training

71. Proving return Diffuse ‘purpose’ of an intranet Competition for the ‘benefit’ That slippery time issue you can’t fire 10 minutes of a person

72. Scenario 1: Whose benefits? HR launch a new self-service payroll system integrated with the intranet. Their position is that all the benefits should accrue to HR and not to the intranet as its infrastructure. What do you do?

73. Scenario - thoughts Barter for a % of benefits (esp. if intranet and HR part of a single plan) Accept the ‘infrastructure’ argument – just as the intranet gains from the network, PCs etc. already in place Promote it as a success story for sponsorship purposes Look for opportunities to cross-fund something of mutual benefit e.g. network quality, single sign-on, other functionality

74. Scenario 2: The case for consolidation You want to replace 15 intranets that were developed in-house with a single Intranet and CMS. The intranet owners argue that the current intranets don’t cost anything, so there’s no business case. What do you do?

75. Scenario Thoughts Asset costs likely to be written off Publish assumptions and let intranet owners challenge them Work on soft benefits angle – is there an organisational advantage to consolidating? Recognise it as politics dressed as ROI – you need to overcome the resistance first E.g. are there other pain points like support issues that you can take away? Do you need to reassure them about ownership & control?

76. Why Business Cases Are Hard It’s the rational face of an often irrational and political process It can be a good way of stalling something you don’t like It can lead to endless debates about the data Data may be withheld as a form of resistance to change There will be other things that get done despite a very weak business case Getting decent data takes substantial effort Requires “before” data that may not exist Business is not a controlled experiment Where the benefit accrues to can be a power struggle

77. The Beer Mat Summary Know what flavour intranet you have and be consistent abut purpose Aim to show your intranet is cost-neutral based on tangible savings A 1-3 year time span seems about right Don’t treat the ROI as all-or-nothing, but use it to get people thinking around the assumptions Include cost-per-user figures Use detailed calculations to discuss budgets, but compelling anecdotes to secure buy-in Position your intranet as delivering to one or two strategic priorities and market that fact Lobby for a budget to keep you afloat, and then look to fund innovation through cross-charging

78. Wrap Up

79. Further Resources www.clearboxconsulting.co.uk www.steptwo.com.au www.intranetblog.com www.prescientdigital.com http://www.boxesandarrows.com/view/value_driven_intranet_design www.GerryMcGovern.com The Springboard (storytelling book)

81. Getting sponsorship and support for your intranet

82. An independent view on your Steering Group

83. Intranets for effective communications

84. Achieving Central-Local balance

85. Introducing Web 2.0

86. Effective team collaborationSam Marshall Director sam@clearboxconsulting.co.uk 01244 676097 www.clearboxconsulting.co.uk