Instrumented Interconnecteds Intelligent

Every tech company attempts to sell potential  customers on the promise that its products and services will deliver a superior return on the customer’s investment dollars. That’s not a particularly difficult task when you’re talking about traditional IT investments, which seek to improve the efficiency and productivity of the IT function itself. But it’s harder when the purpose of the investment is to boost the performance of an entire business, including placing a value on the benefits received by the customers’ customers. Such is the challenge facing IBM when it hawks its Smarter Planet solutions.

A year ago, IBM’s leaders commissioned the IBM Center for Applied Insights, an internal research group,  to come up with a way of presenting the whole array of gains from Smarter Planet projects by focusing on vertical industries. The group created a new methodology for gathering and analyzing pertinent information and placing dollar values both on the components of a project and on the entire effort. The initiative, called “ROI for Smart,” has resulted in series of reports analyzing the returns for specific projects in eight industries. Steve Rogers, the director of the Center, says that unlike other approaches in the tech industry, “this is not about measuring the ROI of IBM’s products and services; it’s measuring the ROI of pursuing a Smarter Planet path and achieving higher levels of business competency.”

As a reporter covering the enterprise technology industry for two decades, I was deeply skeptical whenever tech vendors claimed that they had come up with their own assessments of the value they could create for customers. I still am. But I’m also impressed with the results that Rogers and his team have come up with.

You can decide for yourself if their analysis is credible by reading the reports:

Healthcare: Capturing Value from Patient Centered Care.
Retail: The Value of Smarter Merchandising.
Electronics: The Road to Customer Intimacy.
Banking: The Value of Credit Risk Management.
Transportation: The Value of Customer Centric Sales & Services.
Government: The Value of Smarter Social Services.
Telecom: Smarter Communications Through Analytics.
Chemicals and Petroleum: The Value of Smarter Oil and Gas Fields.

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This is the third in a series of three essays about the potential payoff from applying Smarter Planet thinking to businesses. The first two essays can be found here and here.

roi for smart graphic

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The work on the “ROI for Smart” reports was done by a small team of quants aided by experts in each of the eight industries. They identified important activities in the industries that could gain from gathering data from many sources and analyzing it with the goal of making innovative, large-scale improvements. The teams looked deeply at the results achieved by companies that have already improved their business competencies. They tapped industry and academic literature for additional proof points. Then they modeled the business competencies and associated value-creation drivers so potential customers can use them to estimate the benefits they might receive from going the same route.

Each industry study describes a progression of improvements that can be taken step by step. In the airline industry, for example, the goal is to create customer-centric sales and services. The progression starts with consistently capturing the traveler’s travel history and profile data and offering information and services to them through a wide variety of communications channels. It concludes with the airline having the ability to deliver a stream of information to customers that enables door-to-door journeys via a variety of travel modes that are interconnected and seamlessly convenient–something IBM calls an integrated travel ecosystem.

Analyzing the real results achieved by a $12 billion airline, the study concludes that a similar airline could pocket $277 million in total economic benefits. Broken down into components, 35% of the gain comes from finding new ways of creating value for customers; 28%  from expanding the airline’s role in the travel ecosystem; 24% from increasing the loyalty of targeted customers by delivering a better traveling experience; and 13% by improving productivity. “This offers the industry the ability to increase their profit margins, get away from nuisance fees and make customers happier at the same time,” says Rogers.

A lot of organizations grok the Smarter Planet vision, but these reports tell them what the technology really means for their company in dollars and cents. It provides them with the data they need to build a strong case for these types of initiatives. At least that’s the goal. Now we’ll see if this kind of deeply researched marketing activity can stimulate demand in the marketplace.

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