The new ROI: making the case for smart
We live with a conundrum. On the one hand, businesses and governments are struggling with limited resources. We will have to do more with less for the foreseeable future. On the other hand, we see enticing examples of how our world could work better—from smarter transportation, utilities and retail to smarter banking, shipping and cities.
The challenge we face is how to bring those two hands together. And the key to doing so is being able to show cash-strapped CFOs, budget directors, elected officials and citizens around the world that investing in a smarter planet isn't just about planning for a brighter future, but also realising near-term ROI.
To make that case, we'll have to expand our view of "return on investment." We are learning from forward-thinking leaders in both the private and public sectors that the ROI from smarter systems is created on multiple levels. It starts with the familiar and necessary measures of near-term cost reduction, operational efficiency, increased productivity and energy savings. But it doesn't stop there. Additional value is being realised in dimensions ranging from brand reputation and strategic positioning to an organisation's impact on society.
The leaders who have discovered and unlocked these multiple forms of value have been able to make a persuasive case for the benefits of a smarter planet to their colleagues, finance managers and other constituents whose buy-in can be essential for adoption.
The Memphis Police Department, for example, is unlocking and analysing enormous volumes of crime data with a single application. Strong leadership and statistical data have improved officer reaction time and positioning, and the city's crime rate has been reduced by 27 percent over four years. The long-term impact of greater public safety on the city's brand value improves its ability to attract business and talent..
Infinity Property & Casualty Corporation employs predictive analytics to help identify potential recovery and fraudulent claims—and has achieved a 403 percent return in just three months. That translates into strategic value for the business, through less expensive policies, a growing pool of insured drivers and the potential to transform other areas of the business.
A large Chinese shipping company used an investment in advanced analytics to realign its geographic locations for increased efficiency while maintaining high customer-service levels. Reducing distribution centers from 100 to 40, the shipper's operational ROI is measured by a 23 percent reduction in logistics costs and optimized route planning—and the company is contributing a 15 percent reduction in its CO2 emissions to its communities.
And agricultural innovator Sun World International is analysing large amounts of data to improve harvest yields, boost field worker productivity, minimise operational costs and increase go-to-market efficiency. By determining which crops benefit most from newer drip irrigation systems, Sun World has decreased water usage on those crops by 8.5 percent since 2006, while reducing fuel usage by 20 percent. That's an attractive case for societal value—which could help reduce the need for large-scale investments in dams and cross-state irrigation networks.
Smarter ROI lets us move past "on the one hand, on the other hand" approaches into a world where we can use both hands to applaud a more efficient and progressive future.