Location Intelligence Perspective: More than ROI

By Bill Huber

Location Intelligence Perspective: More than ROI

ROI, or "return on investment," is on everybody's mind these days, but I'm not sure it means exactly the same thing to everybody. Ed Clary, CIO of Haverty's Furniture, Dallas, Texas, presented a case study at the recent Location Technology and Business Intelligence Symposium that clearly documented what ROI means to his company. "Inventory is huge to us," he said, so steps taken to reduce inventory while delivering equal or better customer service was his goal.

Using commercial routing software from Appian Logistics, Haverty's is now driving 15% less, using fewer trucks that are packed more fully. More importantly, added Clary, Haverty's is "giving service levels we've never given before," including tighter delivery windows (down from four to three hours and aiming for 90 minutes).

As a result of this success, Clary claims "ROI will be permeated into our culture." In his case, he claims the "lessons are so compelling that it's easier to get the CEO to buy in" to using the technology.

This is the classic, common-sense picture of ROI: you invest in a technology, you implement it, you observe its effect on your practices, and you measure its results, both in currency and in "softer" terms such as customer satisfaction.

It is therefore frustrating to many people that they can demonstrate an ROI but they cannot sell the technology to a business. Why would that happen when the case can be so strongly made? I don't know, but I suspect it's because in many circumstances the case for a good ROI is not so airtight.

But maybe ROI in this classic sense is not the right thing to focus on.George Moon, Chief Technology Officer of MapInfo points out that to prove an ROI you have to "look at whom you're serving." Moon's remark reminds me of the development of ATM (automated teller machine) technology a quarter century ago. That technology had a miserable ROI: the ATMs cost banks far more than they got in return. The return on an investment in an ATM went entirely to the customer and, at least initially, very little accrued to the bank itself. Why, then, did banks continue to adopt this technology? James Stevenson of Appian Logistics put it bluntly: "There are competitors and they are starting to leverage these technologies." In the bank's case, they knew that failing to implement ATMs would cause them to lose customers. Their ROI needed to be measured in terms of survival, not an immediate return to the bottom line, at least in the short-term, but certainly one in the long run.

Thus, although Shaun McMullin of DHL/Airborne Express was able to offer another case study showing how a GIS application "helped produce highest quarterly and yearly numbers to date," and although Jack Dangermond could flatly claim that "textbooks have documented [the business value of GIS]: it's in the literature," I think Robert Denaro, Vice President of NAVTEQ, was getting closer to the heart of the matter when he remarked that "it's not just ROI, it's some of the anecdotal things," such as the number of missed appointments and customer satisfaction, that really prove the value of many technological solutions.

Dangermond picked up on this theme in a later discussion. Communication, decisions, and efficiency are three reasons for using GIS, he said. Then, making some of his more poetic remarks of the conference, he added rhetorically, "What's the value of music?" Answering this ineffable question, and translating it to GIS, he offered, "a map is an abstraction we use to communicate human experiences." Try selling that to a CEO!

Published Friday, December 24th, 2004

Written by Bill Huber

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