www.consultingwhere.com
Geospatial Data in the Value Chain
Les RackhamConsultingWhere
Marine & Coastal Data WorkshopINSPIRE Conference Edinburgh, June 2011
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
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The value chain
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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
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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
Geospatial data in the value chain
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
Geospatial data in the value chain
Getting it across to thedecision makers
Building the business case
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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
Geospatial data in the value chain
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
Geospatial data in the value chain 10
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Ultimately
…money talks
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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.
Geospatial data in the value chain
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Step 1: intercept the agenda
Aligning toAligning tostrategicstrategic
objectivesobjectives
Cost benefitanalysis
Options and risks
Non-market impacts
Business analysis
Pre
senta
tion
Geospatial data in the value chain
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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
Geospatial data in the value chain
Corporate agenda
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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
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Step 2: analyse business processes
Aligning tostrategic
objectives
Cost benefitanalysis
Optionsand risks
Non-market impacts
Business analysis
Pre
senta
tion
Geospatial data in the value chain
Business analysis – current processes
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Business analysis – improved processes
Geospatial data in the value chain
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Step 3: assemble the financials
Aligning tostrategic
objectives
Cost benefitanalysis
Options and risks
Non-market impacts
Business analysis
Pre
senta
tion
Geospatial data in the value chain
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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
Geospatial data in the value chain
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
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Discounted Cash Flow
Presenting it in financial terms
Geospatial data in the value chain
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
Aligning tostrategic
objectives
Cost benefitanalysis
Optionsand risks
Non-market impacts
Business analysis
Pre
senta
tion
Geospatial data in the value chain
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
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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
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Impact
ProbabilityLow High
Low
High
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Step 5: and also ....
Aligning tostrategic
objectives
Cost benefitanalysis
Optionsand risks
Non-market impacts
Business analysis
Pre
senta
tion
Geospatial data in the value chain
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
Aligning tostrategic
objectives
Cost benefitanalysis
Options
and risksNon-market
impactsBusiness analysis
Pre
senta
tion
Geospatial data in the value chain
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
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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!
Geospatial data in the value chain
Thank you
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