In mid-2023, inflation and economic uncertainty continue to create urgency for data leaders to provide value perspectives regarding the business application of data and analytics. As rising risk and capital-market turbulence continue to force reassessment of many projects—and even the creation and prioritization of new ones—all organizations need to measure and prove that their business intelligence (BI) initiatives align to organizational priorities and deliver value.
Now data leaders need to deliver value at higher levels than before (without sacrificing quality). Many BI projects that showed low or break-even return on investment (ROI) 18-36 months ago still got funded and launched because capital costs were so low for most organizations. But many of those same funded projects would be rejected today as providing insufficient ROI relative to the current cost of capital.
Our data continue to show that only about one-third of organizations measure BI value using ROI. That is a mistake for two reasons. First, other more frequently used measures (such as customer satisfaction) do not translate readily for comparison across functional projects and cross-organizational initiatives. Second, and more importantly, data leaders not measuring and reporting BI ROI are probably selling their BI initiatives short. We captured our last data on BI ROI at the end of 2022.For that year, average BI ROI stood at 8.5 percent—a figure above the current average cost of capital in many organizations. When they calculate BI ROI, organizations prefer to use a combination of measures to determine that ROI—most commonly, increased revenue and reduced costs.
Data leaders not already doing so need to join their colleagues in other functions in using ROI as the primary benchmark against which they should measure BI investment decisions. BI teams not already doing so should collaborate with the finance function—specifically, the financial planning and analysis (FP&A) team—to learn how to calculate ROI for BI projects that aligns with and conforms to established organizational financial standards.You do not have permission to access this document. Make sure you are logged in and/or please contact Danielle with further questions.