Implementing Master Data Management (MDM) helps to fuel your processes and channels with quality master data. Your supply chain, retail channels, e-commerce, marketing and operations will all benefit from MDM. But you will need to prove it in numbers and with arguments, and that requires critical thinking. Your story needs to be clear, objective and accurate.
Gartner’s Model to Business Case Developing
While your written business case does not need to be hundreds of pages long, it should cover all the angles that may have a bearing on the feasibility and profitability of the project. An effective MDM business case communicates the problem of poor quality master data and puts this into business value perspective. The following model is based on Gartner research and proven to be time-saving and effective.
1. Identify business vision, strategy and stakeholders
Start by defining which pains the organization hopes to address and remove. These can correspond with typical industry challenges or be more specific to your divisions, domains, locations, systems or processes. Connect with the stakeholders, which will include business processes owners, as well as IT, marketing and finance executives.
Stakeholders are a crucial part of business case development, the implementation and the success of MDM in practice. For delivering the promised ROI, holding on to stakeholder management is essential.
2. Select the KPIs that Support Your MDM Strategy
In the second step, you put the pains and gains of your stakeholders into numbers. This is essential to ensure your MDM project isn’t seen as an IT project, but as a business project that drives and improves the business. A successful MDM business case translates data into value. To do so, you need to determine the KPIs that spell out the costs of bad data and explain the benefits of accurate and accessible quality data. To measure the effectiveness of the MDM project, KPIs need to be measured before and after implementation.
3. Establish a Baseline for the Selected KPIs
The third step is very straightforward: determine your current performance using the predetermined metrics. Make sure that your data is supported by an explanation that details the calculation, time frame and assumptions used. This creates the baseline for not executing the MDM project. Don’t forget to address the Hawthorne Effect: just by studying the metrics, the people involved tend to change or improve their behavior. This means there can be improvements even before the solution is implemented. When available, you can also compare against industry benchmarks.
4. Describe the Capabilities of the MDM Solution
Now comes the fit between your current situation as established with one or several possible MDM solutions you have in mind. You need to describe the potential applications and their implications from the business process perspective, as measured by the chosen KPIs. You will want to create a shortlist and may need to set up a request for proposal (RFP). With this, you ask the potential suppliers how their MDM solution meets your requirements and expectations.
5. Negotiate Targeted Improvements to the Baseline Performance
The fifth step calls for tuning and discussion among the stakeholders. You need to determine which improvements are possible, measured by the chosen KPIs. The reasons for any improvements need to be detailed and confirmed by the management. This is where the whole organization needs to come together to say: these are the improvements we expect from the MDM project.
6. Convert the Targeted Improvements to Baseline Performance Levels into Financial Results
The sixth step is typically led by someone from finance since you’ll need to put down hard financial results of disappearing pains and new gains. This is where you determine how your data can be monetized and generate measurable economic benefits. There are three financial outcomes to consider: opportunity, cost and risk. MDM offers many opportunities: it enables growth, increases revenues and margins, improves customer experiences, reduces product returns and speeds up innovation cycles. Costs are lowered through improving data quality and end-to-end processes, increasing efficiency and reducing manual work. And finally, MDM helps manage financial, legal and reputational risks that come with regulations such as the GDPR and the FMSA.
7. Model the Total Cost of Ownership
To estimate the return on investment you need to know the total cost of your MDM solution. The total cost of ownership (TCO) model is split into three different categories: setup costs, operational costs and costs of delay. Setup costs include direct costs such as licensing, hardware, implementation and integration, and additional indirect costs such as user training, failure, risk protection and possible customization. Operational costs relate to data governance and maintenance, such as entry time. You’ll need to consider both the time saved due to the optimized process and the time needed by data governance teams and end-users. Other recurring costs can come from personnel changes, upgrades and services. Because of the strong IT background of most of these costs, it’s essential to get your IT department involved in modeling the TCO.
8. Calculate the ROI
This is the final step that you’ve been working to get to. While it may seem straightforward to deduct the total cost of ownership from the expected financial results, there are various applicable methods to calculate the return on investment. Your business case should be in the language of your organization’s business and finance leaders, so it’s recommendable to ask your finance department to lead here. Due diligence into the preferred means of measuring value will help to make your business case relevant and clear.
Finalizing the Business Case
Following these eight steps, you’ve taken the most effective approach for developing a value-focused business case. You started by defining and involving the stakeholders and finished by mapping the ROI in relevant terms. With the right approach, you’ve focused on your stakeholders’ pains and business goals from the start. The next step, is to present your business case in a structured manner.
In our white paper The Choice for MDM: Building the Business Case you will find the ten essential elements for writing a successful business case. It also gives you the best practices for involving stakeholders, determining KPIs and presenting your business case. If you need any help in developing your MDM business case, be sure to contact us.
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