Measuring ROI in Business Automation
Change is hard. Change can also be time consuming and expensive, in all walks of life, and the business world is no exception.
While many businesses around the world realise the benefits of streamlining existing processes with automation technology – only those who pay precise attention to ROI are truly flourishing financially and productively as a result of automation.
Business owners and technology leaders must understand how to properly measure the ROI on automation projects to not only justify their implementation but also prove their effectiveness at critical pit stops on the road to automation success.
Consideration in calculating ROI for business automation
Calculating ROI on business automation is challenging. It is not as easy as measuring the investment of implementation against the cost in wages to perform the process in question. An accurate calculation of ROI should consider many other significant benefits (which will differ for each business type) such as:
- The improvements in quality caused by automation, and a decrease in human errors that incur additional time or money to correct.
- Potential improvements in the efficiency of surrounding processes which may benefit from automating one particular system. For example, automating time-consuming purchase order approval may free up managerial staff to focus on more critical areas of the business.
- Improvements to both internal and external user experience, which may enhance both the reputation and satisfaction levels of the people connected with the business.
- Gaining a unique advantage or selling point over competitors.
As you can see, not all ROI measurements can be measured in money. To this distinction, ROI is often divided into two categories – ‘hard’ and ‘soft’.
Hard ROI – refers to measurements relating to cost or time savings (time = money), such as time savings per task, process cost savings, labour cost, productivity gains, etc. Hard ROI can be quantified with simple calculations like: (Gains – Investment) / Investment = ROI.
Soft ROI – refers to general efficiency or satisfaction improvements, such as increased productivity, improved morale, benefits to reputation and satisfaction levels, improvements in collaboration, etc. These can often be more difficult to measure but are equally as important to consider.
Despite the complexity, gauging and measuring ROI is essential. You need to know whether or not your chosen automation strategy will impact your organisation in tangle ways, but where do you begin?
We’ve outlined four critical steps in measuring ROI to ensure the success of your business automation efforts.
1. Know your processes
Before you get started with business automation, you have to know the processes in question back-to-front and inside-out. Mapping out your current businesses processes and understanding the role of every personal interaction along the way is the only way to identify the areas to focus automation efforts, to achieve the greatest ROI.
It is important for decision-makers at a business to work with process operators before deciding to when and where to implement automation. For example, mapping out key business processes that span across marketing, communications, operations, sales and finance departments can help identify bottlenecks where automation software could have the maximum benefit and impact on your bottom line.
2. Establish a measurable baseline
Once you have a thorough understanding of your business processes and have identified potential areas to focus automation efforts, you will be able to establish a measurable baseline to analyse automation improvements that determine the impact of growth or success of the project.
Deciding exactly what to measure is critically important to gaining an accurate understanding of impact. For example, in testing a sales process automation, the total number of connections, phone calls or client interactions may not give an accurate depiction of success as the quality of contact, length of a phone call or satisfaction of the customer.
3. Set appropriate KPIs
It is critical to establish key performance indicators (KPIs) before you start with business automation so that you can ensure your business automation efforts are on track, on budget and have a positive impact projection on your business. Your KPIs need to be specific and realistic with a focus on long-term results.
4. Measure at key marks on your automation timeline
What you don’t measure, you cannot improve. All the work done in the previous steps to establishing a measurable baseline and set your KPIs is only valuable if you regularly and consistently measure the success of your business automation systems both during and post implementation. This is the only way to know how your automation efforts are going and if, when and where to make appropriate adjustments to achieve the optimal ROI.
These timelines will look different for every business, but it is generally important to think long-term. Automation implementation can require significant investment (audit, software, training, etc.). As such, measuring in monthly or quarterly increments is still critically important in ensuring you are on the path of positive projection, but ultimate profitability could realistically be a 2-year or more plan.
At Karroo, we take a highly consultative approach to genuinely understand the unique processes, requirements and potential areas of improvement within your business. We create individually tailored plans for business automation based on this consultation, and work with our clients to set KPIs and provide ongoing analysis and support on the road to automation success.