ROI: Look Beyond The Numbers
Businesses look into technology to either solve a problem or save costs.
Investing in new technology often results in a round of bouts between different roles in an organization. For example, while the operations or IT team would have a clear set of needs, the senior management or CFO may need for them to justify the technological investment that addresses these needs. And often, this justification is skewed towards return of investment (ROI), more than the problems that it solves and opportunities that it creates.
While it is best to keep the ROI in mind, how do you ensure that it does not become a barrier for you to invest in the right tools?
The answer is by looking into the solution through various lenses — financial, operational, and opportunity. While the traditional tendency is to only look at it through financial lens, this can be amiss.
“How much would I save?” In my 17 years of experience in software that caters to operational needs, this is the most frequent question that I get. I normally turn the question around and ask them to take a step back and look at operations as a whole instead of focusing in one area. The reason is that in operations, workflow inefficiencies are usually the cause of bottlenecks but are commonly overlooked. The question should be, “How can the solution help my team, improve my operations; and what opportunities can it bring?”
Take a look back at the adoption of email. In the past, common communication methods are through letters, phones, and face-to-face meetings. It did the job but was not necessarily efficient. Plus, it created hidden constraints and bottlenecks which eventually built up, until the operations could no longer keep up with the demands of the business. Email not only resolved the constraints of traditional communication. It also created many opportunities. It allowed us to reach multiple stakeholders, share documents, and automate workflows in real time. It enabled us to operate more efficiently and smarter. Email is an example of how digitization and automation allow the operations to work in a larger scale, creating endless opportunities.
Today, I am often asked about Zyllem’s planning algorithm, “How many trucks can I save?” The term “algorithm” is such a buzz that it becomes the main focus. The fact of the matter is that your upstream and downstream workflows impact the entire performance of your operations. For example, if it takes 1 day to plan 20 routes and your drivers spend 2-4 hours at the warehouse due to heavy manual processes, this leaves very little opportunity to leverage the underutilized trucks. This is because there’s a clear dependency between the planning, dispatching and all the processes in between. Imagine if you are able to plan in 20 minutes for the same number of routes and dispatch your drivers within 30 minutes. The efficiency that you gain allows you to take on that missed opportunity!
Therefore, reducing the biggest area of your spending (e.g., your fleet) may not necessarily return the most value.
To sum it all up, here are my 3 takes on evaluating technological solutions and its ROI:
Any technology that allows you to digitize, scale, and manage your business efficiently and effectively must be deemed a basic business need.
The solution should be flexible and able to evolve with you. It must enable your team, not replace it. Technology is best used as a tool for you to work smarter and compliment your day-to-day operational needs.
The solution must have innovation capabilities to support the scaling of your business and the evolving demands in your industry.