Once you have decided on the appropriate candidate decisions for automation, most organizations require justification to secure funding or to be considered for prioritization. For-profit organizations do things typically for four reasons:

1. Increase revenue/profit
2. Reduce risk
3. Increase operational efficiency
4. Improve customer satisfaction

To be funded, a decision automation initiative needs to show significant improvement in at least one of these metrics. Before beginning a project, it’s worth taking 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 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. Customer satisfaction can likewise be turned into decreased cost of customer retention or increased cross-sell or up-sell revenue among other things.

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.

Consider an example: Claims Automation

Costs

• Manual assessment costs $2,000,000 a year in salaries
• It’s estimated $400,000 is lost in fraud each year
• $600,000 is lost due to customer satisfaction issues such as 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 needed before a new book of business is live. So that’s another $500,000.

A total of $3,500,000 a year in current costs.

Return

• If we were to automate 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.
• $500,000 in growth investment
• $1,000,000 in cost savings
• Savings in fraud and customer retention net another $500,000

A total of $2,000,000 per year or $6,000,000 over 3 years.

Investment

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

• Services costs $600,000
• Software $500,000
• Internal IT Costs $300,000
• Annual ongoing: $320,000

Year 1: $1,400,000 wither subsequent years $320,000/year

Return on your Investment

A 3 year investment is $2,360,000 and has a return estimated at $6,000,000

There are of course benefits outside of the above hard figures, such as better consistency, being able to scale-up or scale-down faster, freeing up valuable SME’s to focus on growth etc.