Www.consultingwhere.com Geospatial Data in the Value Chain Les Rackham ConsultingWhere Marine &...

www.consultingwhere.com

Geospatial Data in the Value Chain

Les RackhamConsultingWhere

Marine & Coastal Data WorkshopINSPIRE Conference Edinburgh, June 2011

http://www.consultingwhere.com/

Value of geospatial data

According to the OED value is:

“ the regard that something is held to deserve: the importance or preciousness of something”

How do we get business, government, policy makers to regard geospatial data as important and precious?

Geospatial data in the value chain 2

Answer

Get decision makers to understand the role of geospatial data in the value chain

Express that value in terms that decision makers understand i.e. produce a business

case

3Geospatial data in the value chain

The value chain

4

Inbound logistics

Operations

Outbound logistics

Marketing & sales

Services

Procurement Human resource management

Infrastructure Technological development

Primary activities

Support activities

Value chain

After: M Porter (1985) Competitive Advantage: Creating and Sustaining Superior Performance

Geospatial data in the value chain

The information value chain

5

Information require-

ments

Information

acquisition

Information

processing

Information

distribution

Information use

Knowledge management Information governance

Human resource management IT Infrastructure

Primary activities

Support activities

Value chain

Adapted from: Schwolow and Andersen, 2009

Right information at the right time to make the

right decision


Impact of the reuse of public sector information on value

chain• Availability of public sector information brings:

– New market players – Increased innovation – More competition

• The effects on value chain are likely to be:

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– Direct prices lowered– Downstream prices lowered– Quantity data used

increased– Entry increased down chain– Diversification new

products

– Quality improved– Elimination of parts value

chain– Competition increased– Income of govt agencies

lowered– Tax revenue increased

From: Measuring European Public Sector Information ResourcesFinal Report of Study on Exploitation of public sector information – benchmarking of EU framework conditions, 2006 mepsirexecutive_summary.pdf


http://ec.europa.eu/information_society/policy/psi/docs/pdfs/mepsir/executive_summary.pdf

Getting it across to thedecision makers

Building the business case


8

What is a business case?

• A structured proposal for business improvement that provides a package of economic and related information sufficient for decision making

• A business case consists of an analysis of needs or problems, proposed alternative solutions, assumptions, constraints, and a risk-adjusted cost-benefit analysis


Building the business case 9

Competing priorities for senior managers

• Central Government agenda– Operational efficiency– Shared services– Information economy

• Organisation’s agenda• Financial imperatives• CEO’s Personal

agenda– How did he / she build

their reputation?– What are their “red

flags”?

• Timeframe– Most CEOs last <3 years– Long projects often fail

• Corporate Social Responsibility (CSR)– Moving up the priority list


11

Ultimately

…money talks

12

Business case methodology

Aligning to strategic

objectives

Cost benefitanalysis

Options and risks

Non-market impacts

Business analysis

Pre

senta

tion

This is a simple, practical methodology – there are many more complex approaches but with commensurate higher costs.


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Step 1: intercept the agenda

Aligning toAligning tostrategicstrategic

objectivesobjectives


Options and risks

Non-market impacts

Business analysis

Pre

senta

tion


14

Geospatial alignment

Corporate agenda

Business

challenges

Applicability

matrix

Candidategeospatial

opportunities

ICT programm

es

Generic geospatial application

s

Technology

Challenges

Internal Business

challenges

External influences

Organisational

Objectives


Corporate agenda


Applicability matrix: mapping corporate objectives to

applications

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ApplicationsObjectives

Decision Support

Environmental impact

assessment

Contingency

planning

Emergency response

Automated map

production

Contingency planning

Web services

Marine resources are managed effectively and regulated proportionately

People and customers of our services are engaged and understand decisions that impact on the marine area

Marine diversity is protected and maintained

Optimised

Routing

Fish and shellfish stocks are managed sustainably

Marine emergencies are responded to in a prompt and co-ordinated way

Decision making is based on the best available evidence

17

Step 2: analyse business processes

Aligning tostrategic

objectives


Optionsand risks

Non-market impacts

Business analysis

Pre

senta

tion


Business analysis – current processes


Business analysis – improved processes


20

Step 3: assemble the financials


objectives


Options and risks

Non-market impacts

Business analysis

Pre

senta

tion


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ProcessesOutputs

FinancesBenefits categorisation

Raise Revenues

MeetLegis-lation

Standards conform-

ance

Increase satisfaction

Improve Quality

Lower Costs

Increase Productivity

Increase Capacity Decrease

Risk

Increase efficiency

Financial

Production

Process improvement

Customer

Regulation

Types of benefit


Measurement principles

• Decompose - breakdown the problem into measurable components

• Plagiarise (secondary research) - has it been measured before?

• Compile - you probably have more measurement data than you think

• Minimise - how much more measurement do you really need to reduce the uncertainty to an acceptable level?

• Standardise - use a repeatable measurement process


Discounted Cash Flow

Presenting it in financial terms


Simple Discounted Cash Flow (DCF)

Year 0 Year 1 Year 2 Year 3 Year 4 TotalProject Cost -£900 -£700 £0 £0 £0 -£1,600

Contingency(10% )

-£90 -£70 £0 £0 £0 -£160

Support Costs £0 -£110 -£110 -£110 -£110 -£440

Total Benefits £0 £400 £800 £800 £800 £2,800

Net Cost -£990 -£480 £690 £690 £690 £600

Discount Rate (5%)

1.000 0.952 0.907 0.864 0.823

NPV -£990 -£457 £626 £596 £568 £343

Cumulative NPV -£990 -£1,447 -£821 -£225 £343

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Cumulative Net Present Value (NPV) = £343Internal Rate of Return = 14% (increase discount rate until NPV = £0)

PaybackPoint


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Step 4: options and risks


objectives


Optionsand risks

Non-market impacts

Business analysis

Pre

senta

tion


Options? What options?

• Points to consider in framing options:– Varying time and scale– Staging development v “big bang”– Out-source or contract-in– Developing in partnership with others– Co-locating, or sharing facilities with others– Varying IT solutions – Use of Open Source software– Varying quality targets– Improving existing processes

• Be objective not biased in presenting options• List the evaluation criteria used in your analysis


Risk and uncertainty

• For each option:– Calculate an expected value for all risks – Consider exposure to future uncertainty

• Optimism bias - adjust for over-optimism• For valuing risks can:

– Add a risk premium as an uplift to discount rate – Can derive an ‘expected value’ (EV) as a single cost for

the expected impact of all risks. • Calculated by multiplying the likelihood of a risk occurring by

the size of the outcome (as monetised), and summing the results for all the risks and outcomes


Impact

ProbabilityLow High

Low

High

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Step 5: and also ....


objectives


Optionsand risks

Non-market impacts

Business analysis

Pre

senta

tion


Non-market impacts

• “Non-market” - cannot be bought and sold in the market

• Examples– Social impacts - equality: ethnicity, disablement, ageism– Personal impacts – injury, loss of life– Environmental impacts – pollution, loss of amenity

• Impacts can be positive or negative– In monetary terms, a cost or a benefit

• Quantification of non-market impacts requires an alternative approach to valuation– Establishing money values involves the inference of a price– Revealed preferences – inferring an implicit price– Stated preferences – “Willingness to Pay”


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Step 6: presentation


objectives


Options

and risksNon-market

impactsBusiness analysis

Pre

senta

tion


The presentation of the business case

• Two key elements:1. Pain statement – what problem are you trying to solve2. Value proposition – how your project will solve the

problem

• Four tests:1. Succinct2. Easy to understand3. Show a return on investment 4. Irrefutable


Summary: 10 top tips

1. Address the corporate agenda – where geospatial can make the biggest difference may not be where you think it does

2. Understand the human factors – it’s all about people3. Push at open doors not closed ones – work with those who

want a solution, make them successful4. Look for early wins – small successful projects that build

confidence5. Don’t reinvent the wheel - reuse existing case studies 6. Don’t accept benefits are intangible – most can be measured7. Focus on a small number of large benefits 8. Present the financial information in the way the CFO expects9. Assemble backup information on the social and

environmental benefits but don’t lead with them10.Spend time on the elevator pitch – presentation is key!


Thank you


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