Exploring the Financial Impact of
Interaction Analytics:
A Business Case Workshop
Barry Dalton – Vice President
Consulting Services
Sharon Dowd- Manager Consulting
Services
Shlomi Ziv – Principal
Consulting Services
Session Objectives
1. Change forever the way you talk to executive management
2. Make peace with and knowledge of corporate finance as
part of your leadership toolkit
3. Define “ROI”: Kill the concept of traditional ROI
4. Outline the Business Case process
5. Provide you with tools and resources to guide your
process
3
ROI! NOT AGAIN!
 The issue of Technology ROI has been
a thirty year tree-killer
– Methodologies, Spreadsheets, formulae
– Business analytics have compounded
the issue
– Analogous to measuring the ROI of
education
4
A quick quiz
 What is your operation’s core metric of productivity?
 What percent of next year’s total budget is discretionary?
Already committed?
 What is the maximum level of funding for a proposal for a
project?
 What are the approval levels for various project
investments?
 Historically, for every $100 spent on systems development,
what is the annual follow-on expenditure for (1)
maintenance and (2) enhancements
 What is the typical ratio of technology purchase price to 5
year total cost?
5
A tougher quiz
 What is your company’s working capital per
unit of revenue?
 Its gross margin?
 SGA per unit of revenue?
 Revenues per employee?
 2006 total capital investment budget?
 What is its weighted average cost of capital?
 When did you last read your firm’s annual
report?
 What is EVA and does your company use it?
6
Why do the answers matter?
You tell me
7
Another perspective
 The answers matter because they are the
language and concerns of executive leadership
– Therefore they need to be part of your own language and
concern
 They improve your executive credibility
 They reduce the likelihood of investing in
ventures that are doomed from the very instant
the business proposal is approved
 They help you direct resources
8
Exercise #1
Define a formula/method of calculation to
show the ROI for your college education
9
A Smart Person*
 Learns Knowledge
 Determines how to use that knowledge
 Defines how he will gain from that knowledge
Yet even he of great intelligence can’t always explain how that knowledge
translates into those gains
*John Caves, Charles Schwab (a very wise man)
10
The real problem
 For business executives these types of projects are a
source of anxiety:
– High risk upfront capital investments with promised but rarely
delivered ROI
– Lack of business executive control over costs, targets and risk
exposure
– Technology led; no senior business sponsorship
– Too many (expensive) surprises
 For IT Leadership -everyone is now a technology
“expert”; IT has lost its primary controls of owning the
language of discussion
11
ROI from the Executive’s Perspective
There is none
There never will be
12
Why? – The Iceberg Effect
 Rule of thumb: 80% of project costs are hidden
below the surface – and a navigation threat
 Examples:
– Business process integration: significant % of
development – pay me now or pay me later (Note: process
integration is not training)
– Maintenance and non-discretionary enhancement:
Average 60% of development costs, per annum
– Demand driven by success: storage, support, telecom
capacity
Source: Business Value & EVA of Large IT Investments, BCG, 2005
13
The ROI fallacy
 All IT historically has been a matter of ROR –
return on risk - high upfront capital with uncertain
benefits:
– The “I” has to be committed in advance
– The “R” is far off and hypothetical
– Most large-scale technology/telecom investments fail
to deliver on their promises
 60% of large technology developments fail to
deliver value for that risk
Source: Business Value & EVA of Large IT Investments, BCG, 2005
14
So, How do we overcome the odds and justify
these projects?
 Link project to strategic business
imperatives
 60/120 day ventures and “beachheads”
 Hold the “I”, phase the ”R”
15
Beachheads:
A recommended approach to implementing Interaction Analytics
 Larger than pilots, small enough to deliver results in 60 120 days
 Focused goal of building momentum with results
 Self-explanatory, self-justifying benefits
 High centrality: visibility, political credibility, link to key
stakeholders
 Phase 1 of a multi-phase business integration
 A force for organizational mobilization that balances speed
and flexibility of a small team with scale and rollout
capacity that others in the organization can leverage
 Localized enough so that the leader/sponsor can provide
oversight and commitment
16
Beachhead planning
 For each Beachhead:
– What is the 60 or 120 deliverable? Warning: if it takes two years,
forget it!
– What is the “elevator” pitch about its self-explanatory, selfjustifying benefits? If you need to calculate the hypothetical ROI,
forget it!
– How does this contribute to the economics of the firm?
– How will it scale and be rolled out across the business?
– Which leader will sponsor this and put credibility on the line?
– What new roles and competencies will this help build?
– What are the incentives for others to pick up on the beachhead
and commit to moving it forward?
– What is the team needed?
17
Potential financial payoff targets
 Capital efficiency: Reduce working capital per unit of
revenues
 Revenue efficiency: Increase gross margins
 Operational efficiency: Radically cut overhead
 Organizational productivity: increase revenues per
employee
 Process effectiveness: slash cycle times, compress
business processes
 Staff effectiveness: lower cost, increase knowledge
18
Return on Investment (ROI)
Traditional Definition
 ROI = Benefits / Investment
 Benefits = Revenue or Cost Savings
 Revenue or Savings = Dollars x Volume x Success Rate
 Investment
– The expected total cost of developing the technology project
– Allocated Fixed Cost - A portion of the total fixed cost amortized for the
time period.
What does it mean?
 To you
 To your organization
19
Business Case: A Process, Not a Spreadsheet
Identify
Quantify
- Top areas of real benefit
- Impact to company/group
- Stakeholders
- Customers
- Consumers
- Producers
Assess
- Total Cost of Ownership
- Measure benefit areas
- Confirm values
- Survey
- Direct observation
- Estimate
- Get benefit buy-in
- Calculate Metrics
- Reconfirm values
- Perform sensitivity analysis
- Assess expected case/worst case
- Evaluate Monthly
Category Assessment
- Call Flow
- Quality efficiency
- Sales effectiveness
- Marketing effectiveness
-Collections
-Fraud/Security
-Compliance/Regulatory
Phase 1
Financial
Results
Phase 2
Phase 3
20
Typical Benefits Assessment
Benefit 1 Increase in Productivity
Number of Employees in the Call Center
Average Employee Salary
Employee Costs Per Year
Increase in Productivity by Implementing Interaction Analytics
Employee Costs Savings Per Year
310
$50,000
$15,500,000
5%
$775,000
Benefit 2 Service Efficiency Increase
Number of Customer Service Calls / Month
Average Cost Per Call
Total Costs Per Year
Increase in Productivity by Implementing Interaction Analytics
Service Costs Per Year
300,000
$6
$21,500,000
25%
$5,400,000
21
Build your ROI Model
Description
Year 1
Year 2
Year 3
Year 4
Year 5
Costs
Capital Investment
Expense Costs
-$500,000
-$50,000
$0
-$60,000
$0
-$60,000
$0
-$75,000
$0
-$75,000
$75,000
$50,000
$25,000
$90,000
$62,500
$37,500
$108,000
$78,125
$56,250
$129,000
$97,656
$84,375
$155,520
$122,070
$126,563
$-400,000
$130,000
$182,375
$236,631
$329,153
Benefits
Productivity Increases
Service Efficiency Gains
Avoiding penalties from Regulations
Net Cash Flow
Net Present Value
$77,957
Time Value of the Benefits Minus the Costs.
ROI
58.23%
(Benefits – Costs)/Costs
Payback Period
3.58
Assumptions: Cost of Capital: 11.5%
Years until Benefits - Costs
22
Then ……..
You hit the CFO brick wall
when he asks:
“How?”
23
Mining for these Improvement Opportunities
Precision Monitoring
Below Average
Poor
Lower Revenues
Increased Costs
Reduced Customer Sat
Above Average
Good
Increased Profits
Reduced Costs
Improved Customer Sat
24
Exercise #2 – Diversified Financial Services
 Business Challenge
1. Automate current manual process required to secure new insurance
applications
– Current Process Impacts
– Lag time between phone-based application submission to payment received
and policy underwritten
– Creates unnecessary expense to print, sort, mail and process returned
applications and payments
2. Improve and measure the effectiveness of media campaigns
1. Current Process Impacts
– Media campaigns drive call volume spikes into the contact center
– Marketing has little insight as to customer response in order to adjust
messaging, targeting
– Agents don’t always have up-to-date knowledge
25
Current New Application Sales Process
Member receives
collateral
Inbound
member
Call to The
Client
No
Received
by
Sales
IVR
Routing
Member
Inquires on
Product
Agent
Presents
Info/Qualifies
Member
Agrees to
Buy
Call
Ends
Yes
Received by
Service
Hard copy
stuffed
Hard copy
sorted
Application
Printed
Agent
Completes
Application
Agent
Confirms
rates/details
Agent
Submits
application
Application
Sent to Printer
On
line
Lost Sale
No
Hard copy
mailed
Member
receives
application
Member
reviews
application
Member
Has more
questions
No
Member
Returns
application
Yes
Member
mails
application
Application &
Payment
received
Yes
Places callback
to The Client
sales
26
Media Campaign Effectiveness
MyUniverse –Supervisors
identify agents with
development needs in
handling objections
MyUniverse –
Mktg Mgmt
measures VOC
response to
campaign
Enhanced Analysis Model & Data Flow
Marketing
Department
Better forecast
call volume,
Improve scheduling
NICE Coach –
deliver targeted
timely feedback to
CS agent on new
campaign
Insight from CRM –
sales, customer
profile, etc
Campaign
Interactions
Flag calls where
customers mention
new campaign
Identify calls where
agents aren’t successful
in closing sales; and
best practices by top
agents
Improve Campaign ROI
Improve Agent Selling
Effectiveness
Marketing Launches
New Media
Campaign
Customers call into
CC in response;
spikes
Call volume
Agent able to
Address
Campaign
questions
Yes
Agent addresses
Questions; closes
sale
Marketing Adjusts
Campaign
No
Increase Revenue from
Campaign
Customer
disconnects;
revenue lost
27
3 Key Traditional Operations & Related Impacts
1)
Coaching / Training
Best practice AVIs & Clips for new
hires
Coaching clips for skill development
Timely, specific feedback
Timely training updates
2) System Navigation
View screen activity for accuracy
and efficiency
Identify system navigation issues
impacting productivity
3) Call Flow Analysis
Identify hidden inefficiencies
Analyze long calls, wrap-up, holds,
transfers, dead air time
Identify system, skills, or procedural
issues
Call handle times by call type
INCREASE
1st Call Resolution
Quality
Customer Satisf.
Coaching Time
Supervisor & QA
Productivity
System Effectiveness
 Training Time
Call Duration
After Call Work
New Hire Learning
Curve
Complaints
DECREASE
28
Ideal Generators
 The business case needs to be based on what can be measured today
in your organization
– Can’t improve what you can’t measure
 Areas of “hidden inefficiencies” or blind spots in call center operations:
–
–
–
–
After Call Work – what is happening and why
Call Duration based on Call Types – why do certain call types take longer
1st Contact Resolution – why are some calls not resolved on 1st contact
System Navigation – what is happening on the screen during & after calls
 Areas of financial benefit outside the traditional scope
29
Exercise #3 – Hotel & Entertainment Group
 Business Challenge
1. Demonstrate value of centralized reservation center to individual
properties in the group
– Current Process Impacts
– Increase total restaurant and entertainment revenue across all properties
– Increase reservation bookings across properties regardless of source of call
or original request through effective cross selling and up selling within the
central reservation center,
– Increase efficiency and cost effectiveness of reservation bookings through
the central reservation center
2. Optimize channels and drive more interactions to self service
– Current Process Impacts
– Customers are calling agents for simple requests
– Increasing call volume
– Driving up cost per interaction
30
Reservation Call Flow Process
Guest’s request
available?
Incoming Call from
Guest
Restaurant
Reservation
Request
Offer
Alternative
No
Audio Analytics
Data Capture
Yes
•Restaurant
name (Agent)
•Affirming
statements
(guest)
Offer Accepted?
CTI
Data Capture:
DNIS
Audio Analytics
Data Capture
Book
Reservation
•Restaurant
name
(guest)
•“Sold Out”
(agent)
Offer
Entertainment
Reservation
Yes
Book
Entertainment
Reservation
No
Reservation
Location
Audio Analytics
Data Capture
•Show
name
(Agent)
Confirm
Reservation
Audio Analytics
Data Capture
•Show name
(Agent)
Conclude
Call
DNIS
Confirm
Reservation
NICE Perform
Database
Property Cross
Sell Report
Property Up
Sell Report
Reservation
Location
•Show
Location
(Agent)
Conclude
Call
31
Channel Optimization (IVR & Web)
Member receives
collateral
Inbound
member
Call to The
Client
IVR
Routing
Received
by
Sales
Member
Need
assistance
Agent
Address the
request
Call
Ends
Received by
Service
32
Gaining Buy in From Multiple Stakeholders
Understand issues at each stage of the customer life
cycle. Link to these issues. Phase in change.
Collections
Effectiveness
Reduce DSO
Customer-centric Quality
What is important to
YOUR customers
Billing Accuracy
Impacts on collections
First Call Resolution
Reduce multiple calls to
CSC
Supply Chain Issues
Flag calls that
indicate upstream
process breakdowns
New Revenue
Up sell/Cross sell
Revenue Retention
Customer ‘saves’ as warm
leads
New Business
Development
‘Perpetual Focus Group’
Campaign ROI
Monitor effectiveness &
adjust intra-campaign
33
6 Keys to Achieving Financial Return
1.
Focus on 2-3 business issue beachheads to target with Analytics

2.
Think out of the box – beyond traditional QA
Make Strategic Decision to Expand Your CC Mission


3.
Represent the Customer to the Business
Identifying Process Breakdowns impacting customers and business success
Apply the Resources

4.
Dedicate a “Business Analyst” position for Analytics projects
Redefine the Mission of QA



5.
Monitor the Customer Experience
Exception Analysis: Emotion, “Dead Air”, Holds, Transfers, Abandons
Precision Monitoring: New Procedures, Specific Call Types and Skills
Get Buy-in from Key Stakeholders


Show them what you can offer and the ideas will begin to flow
Collect input from other departments
Engage Vendor Partner’s expertise
6.


Identify the most valuable business issues to target
Develop the configuration to achieve greatest business impact
34
Additional Takeaways
 Learn to write brilliant business proposals
– Triple the fraction of pages devoted to financial payoff
metrics
– Highlight, not hide, risks
– Give clients a real decision to make: let them choose
the trade-offs
 Build a dialog with your executives on managing
strategic value not managing technology
35
Resources
 Reading recommendations:
– Subscribe to Forbes
– Read first 120 pages of Bennett Stewart, The Quest For
Value (EVA)
 Other resources:
–
–
–
–
–
–
–
www.solutionmatrix.com/business-case-studies.html
www.solutionmatrix.com
www.knowledgeadvisors.com
Philips ROI
ROI Institute
www.roi-calc.com
www.businesscase.com
36
Where is the ROI?
Improvement
Traditional Metrics
Automated
Random QM
Precision
Monitoring
 Agent Productivity
3-10%
8-20%
 Customer Satisfaction/Loyalty
5-12%
10-23%
 Quality Scores
5-15%
7-20%
 Agent Turnover
2-4%
5-8%
 First Contact Resolution
1-7%
6-20%
 Sales Conversion
8-15%
10-25%
 Reduced Training Time
5-10%
10-20%
 Reduced Call Volume
1-5%
 Improve Systems/Self-Service
1-7%
 Reduced Risk / Liability
.5-5%
37
Average Performance Improvement from NICE
Customers
 Increased Agent Productivity by 15%

By coaching agents on system use and navigation using screen capture

By modeling the workflow of most productive agents using recordings
 Improved System Navigation & Accuracy by 30%


By recording agent screens as part of the quality evaluation
By coaching agents on data entry accuracy and speed
 Increased First Contact Resolution by 5%

By recording agent screens as part of the quality evaluation

By coaching agents on data entry accuracy and speed
 Increased Supervisor / QA Monitoring Productivity by 50%

By quickly locating specific calls for QA thru automatic schedules and call classification

Manual reports and distribution are eliminated with all reports on line
 Accelerated New Hire Proficiency & Reduced Training Time by 10%


By using voice and screen recordings as “how to” examples in the classroom
By using recorded examples of successful agents to coach other agents
on specific skills
38
The Financial Impact of Business Analytics
An IDC ROI Study, 2002
ROI
Distribution of Return by Benefit Category
Average overall ROI = 431%
Technology related benefits = 4%
Productivity related benefits = 42%
Business Process enhancements = 54%
Median overall ROI = 112%
Observations
Operations/ Production Analytics
Shortest time from analysis to decision to action
Most benefits relate to business process enhancement
Financial/ Business Performance Management
Analytics
Most closely related to labor productivity savings
Cycles are longer than operations/ production
Customer Relationship Management Analytics
Most benefits relate to business process
enhancement
Marketing campaigns, then call centers are targets of
analysis
Approach
Median
Total
Investment
Average Total
Investment
Build
$2.1M
$5.2M
Buy
$1.8M
$3.6M
Avg. Total
Investment
$2.1M
$4.5M
39
ROI Analysis
List of Terms
 Return on Investment (ROI) = Benefits/Investment
 Weighted Average Cost of Capital (WACC)
 Discount Rate
 EVA: Economic Value Add
 Net Present Value (NPV)
 Internal Rate of Return (IRR)
 Payback Period
 Discounted Payback
40
Q &
A
41