Finding the ROI in process management

Past performance is no guarantee of future results, as they say in investment circles. The same holds true for any business.

In a number of industries, market conditions and rules of the game are changing fundamentally and fast, and many companies are experiencing that just because they had success in the past, it does not automatically guarantee success in the years to come.

Thanks to competitive pressure, you must answer some fundamental questions:

• How can you differentiate yourself from the competition in the market?
• How can you achieve a high level of customer satisfaction and loyalty?
• How can you make your processes as efficient as possible?

If your answers keep bringing you back to operational excellence and process optimization you then have to ask another question: How can you evaluate and quantify your investments in process management?

Evaluating ROI

Return on investment (ROI) can be used to quantitatively evaluate the profitability of investments; it is expressed as a percentage of profit in relation to the investment amount.

Example: A company makes an investment of 100,000 euros in the expansion of process management, e.g. to make the process of acquiring new customers (contact-to-order) more successful. With this measure, the company achieves an increase in sales of 120,000 euros. The direct profit (sales increase – costs) is therefore 20,000 euros.

Return on Investment (ROI)    =  profit / invested capital
=  20,000 Euro / 100,000 Euro
=  20%

This means that with each invested euro 0.20€ profit (and 1.20€ additional turnover) was generated.

Categorizing benefits

In practice, the benefits of process management can be divided into three categories:

1. Efficiency gains that relate to process management itself.
   Examples:

• Reduction of efforts and costs for process analysis and optimization (e.g., by using a uniform methodology, a central repository, by reusing processes / assets, etc.).
• Efficient transformation processes, i.e., fast operational implementation of strategic decisions (e.g., through a clear methodology for business model mapping, linking strategy with operations, etc.)
• Efficient rollout of process knowledge to employees (reducing costs and increasing timeliness, e.g., through the use of a digital organization manual)

2. Meeting compliance requirements.

Especially for companies operating in highly regulated markets, it is not nice-to-have but a mandatory requirement to meet the relevant standards and regulations. Often the regulations can create binding obligations and have the force of law.
Examples:

• Quality (ISO 13485, ISO 9001, GxP)
• Information Security (GDPR, ISO 27000, FISMA, PCI-DSS, HIPAA, GLBA)
• Business Continuity (ISO 22301)
• Environmental Management (ISO 14001)
  
  

3. Improvements resulting from the optimization of the (core) processes.
   Examples:

• Reduction of lead times and costs for the most important core processes of the company (contact-to-order, order-to-cash, issue-to-resolution, etc.).
• Increase in customer satisfaction (measured via NPS) with products and service quality
• Reduction of risks (e.g., optimization of global logistics processes and reduction of the probability of supplier failure) along the supply chains

These three benefit categories are associated with various capabilities of a process management platform: The direct cost and effort optimizations of the first category are often based on the use of a central repository with the possibilities to distribute process knowledge to all employees. 

The second category requires that the process management platform also covers the risk and compliance subarea: You need to know the relevant legal requirements and align your processes accordingly. On the other hand, process mining can be used here to automatically analyze the fulfillment of these standards and deviations from the to-be processes – and this for each individual process execution.

In the third category, process mining plays a key role: it can be used to identify weak points in actual processes and to identify improvement measures.

Driving ROI upwards

So where is the most potential for catapulting ROI and convincing management to invest? This answer may delight or disappoint you, but all three categories together add up to a great value proposition.

Compliance requirements are non-negotiable, they must be met and are expected by your customers – this is your license-to-operate. Efficient implementation of process management itself ensures that strategic decisions are implemented quickly and provides employees with the necessary role-specific know-how. The optimization of the core processes guarantees the satisfaction of your customers and a cost-efficient handling of the relevant end-to-end scenarios.

Find out more in a brand new Total Economic Impact™ (TEI) study, where Forrester Consulting analyzes the return on investment (ROI) that can be achieved by using the process management platform ARIS. Based on customer interviews, the study shows how to quantify the potential financial impact of ARIS on an organization.

Read the study by clicking below to see how to realize an ROI of more than 300%.

*The Total Economic Impact™ of Software AG’s ARIS is a commissioned study conducted by Forrester Consulting on behalf of Software AG.