Building a business case

Once you have decided on the most appropriate candidate decision for automation, most organizations require justification to secure funding or be considered for prioritization for funding. For-profit organizations do things typically for three reasons; Increase revenue/profit, reduce risk, and increase operational efficiency. You would want to show enough movement on at least one of these three metrics. Take the time to identify which of these metrics would be improved by automating the decision in question and determine the best way to quantify the dollar value the improvement would bring. Risk can be converted into a dollar value by looking at putative penalties or losses incurred based on the adverse outcomes. Whether you hire an external consulting company or if you have an internal capability already, project costs should then be calculated and contrasted against the expected gains as your return on investment or ROI

E.g. Claims automation

Costs: Manual assessment is costing a company 2 million a year in salaries and it’s estimated 400k in fraud and 600k in customers lost due to satisfaction issues (slow or inconsistent payments). The company would also like to expand its offerings, but it’s expensive to scale up because all the hiring and training would need to be done before a new book of business is live. So that’s another $500k. A total of 3.5 million a year in current costs.

Return:

If we were to automated 70% of the system's simpler claims and left 30% to the current assessors, it’s estimated that it will free up 50% of their time. Some of that can be put toward growth initiatives. 500k reduction in growth investment + 1m in cost savings + estimated 500k in fraud and customer retention for a total of 2m per year. That’s 6m over 3 years.

Investment:

Let’s assume you don’t have a decision automation capability yet and you are going to bring in a external consultancy for the first few projects.

Services costs $600k

Software $500k

Internal IT Costs $300k

Annual ongoing: $320k

Year 1: $1.4m

Year 2,3,n: $320k

ROI: 3 year investment is $2.36m return estimated at $6m

Subjective: there are of course benefits outside of the above hard figures, such as better consistency, being able to scale up or down faster. Freeing up valuable SME’s to focus on growth.