ROI For AI-Driven Strategic Planning
If a corporation is asked to invest in one of our systems, its top
management will want to know what return it will earn on that investment. This
section explores the ways in which we
will attempt to demonstrate that return on
investment (ROI).
If a corporation is asked to invest in one of our systems, its top management will want to know what return it will earn on that investment. This section explores the ways in which we will attempt to demonstrate that return on investment (ROI).
The costs of investing in AI-driven strategic planning are significant but are more than offset by the payoffs. The challenge is to scientifically prove the positive return on the initial investment. It is not difficult to keep track of the dollars and other resources spent to launch and maintain the AI-driven planning platform. Some of the benefits that result are just as tangible; however, many are amorphous and imprecise.
A corporate executive asked to invest in an AI-driven strategic planning system like ours will want to know what return on investment (ROI) she will realize or when it will reach breakeven on the investment. It is in our best interests to be able to provide this information. It will not be easy to accomplish this, but we will become more and more adept at measuring the ROI for our products.
Bearing in mind that our products will be custom designed for each customer, we will work closely with each organization to measure its strategic planning variables to determine their effects on the ROI. Where appropriate, adjustments will be made in product design to maximize the return.
There are two dimensions of the ROI for our products: one is the ROI on the strategic planning process itself, the other is the ROI results achieved by that process. The first is easier to demonstrate and can be done faster. It requires measuring the time and costs expended in the traditional, historical planning process, and contrasting them to the resources consumed by our product. This assumes that all that matters is money and time.
That takes us to the second calculation, which calls for a close look at the more amorphous outcomes of the process – the results that are its primary intent. For example, has it enabled more adroit, agile strategic decisions, has it successfully predicted the opening of potentially profitable new market segments, has it accurately foreseen that a leading competitor would introduce a range of new products, has it steadily increased its share of a key market, or has it gained a credible competitive advantage over its rivals? In addition to the hard-to-define nature of many of these strategic objectives, it often takes several years for definitive measures to develop.
ROI for the Mechanics of Our Products
- Employees’ time (at all levels) spent on preparing for and conducting planning, and implementing the resulting plans
- Cost of those employees’ time
- Specific type and volume of data used in the planning process
- Cost of those data
- Ancillary costs (off-site meetings)
- Reengineering of customers’ internal systems to accommodate our products (time and cost)
- Re-training of employees (at all levels) to utilize our product systems
- Employees’ time (at all levels) spent interacting with the product system (including feeding data to the system, querying the system, applying system output)
- Cost of those employees’ time
- Cost of using our product system (subscription charge)
- Specific type and volume of data used in the planning process (more diverse data types, larger volumes)
- Cost of those data
- Ancillary costs
There is no point in calculating the ROI for the mechanics of the planning process alone. The purpose of our products is not to use AI technologies solely to make that process run more smoothly and efficiently. The goal is to produce superior competitive outcomes. But the calculation can be made if the organization so desires.
ROI for the Results/Outcomes of Our Products
- Identify the organization’s key performance indicators (KPIs) These will be unique to each organization, it may not have thought consciously about them, it may not have measured them carefully, it may not have gathered data on them, but they are the criteria that the organization has paid attention to when it thinks about strategy.
- Collect data on these indicators (which it may have already been doing; if it has not, that is a criticism of its current planning practices)
- Some of these indicators may be subjective and difficult to quantify; make a best effort to measure
- Typical KPIs and other outcomes that might be the goals of strategic planning: revenue growth, profit margins, earnings per share, share of market, manufacturing productivity, cost savings, operating efficiencies, risk management, breaking into new markets, new product development, and improving product/service quality.
- Plot the changes in these KPIs over time.
Calculating the ROI for the Mechanics and Outcomes of the Current Planning Process.
It is possible for an organization to calculate the ROI that it is earning on the resources it has invested in its current strategic planning process. That could be a worthwhile exercise, comparing that rate of return to the organization’s average cost of capital. If this analysis can be done with some precision and validity, it should be performed by many businesses to better understand the value of their strategic planning. Such a calculation would provide a long-overdue assessment of the real worth of the basic strategic planning function. It also would serve as a baseline for promoting the advantages of our products.
This calculation involves balancing the resources expended in carrying out the organization’s existing strategic planning process against the outcomes that it has achieved. The comparison can be made for the current year or for several years in order to notice the trends.
- Identify the organization’s key performance indicators (KPIs) (access to our AI-driven products may inspire our customers to employ a more ambitious set of KPIs)
- Open up channels for collecting data on these KPIs from appropriate sources. This may include additional new data from additional new sources.
- Run the processes in our product to generate strategic plans that are then implemented.
- Record the outcomes achieved.
- Using the designated KPIs, evaluate the levels of success represented by those outcomes.
ROI for the Mechanics and the Results/Outcomes of Our Products
Ascertain the time, money, and other resources consumed in operating the organization’s planning process using our products. Compare those factors to the outcomes achieved in order to determine the return that the organization is earning on its investment in our products. The organization then must decide if:
- the return equals or exceeds its average cost of capital
- the return meets its initial expectations, regardless of the cost of capital
- the return is an acceptable price to pay for the outcomes it has achieved.
As in the case of traditional strategic planning, the organization will want to begin measuring the ROI on its AI-driven planning system over a period of years. (In fact, it is a good idea to persistently calculate this ROI figure to keep track of any changes.) The features and configuration of our products that it will be using will be evolving and improving. We will encourage our customers to track their ROI.
Many of the factors that go into this ROI calculation will be subjective and hard to define or quantify. This includes both inputs and outputs for the system. The calculations must still be made. We will steadily improve the ability to perform them and they will become more accurate.
Progress Updates
This is a section of the website where we post news and updates about the progress regarding the project. You can find them sorted by date.
Reach Us
Are you interested to hear more about the project? Do you have an idea how to improve and/or participate in the development? Is this something that could help your business or organization? Something else?
We encourage you to send us a message.