geospatial data in the value chain - inspire.ec.europa.eu · analysis presentation geospatial data...

www.consultingwhere.com

Geospatial Data

in the Value ChainLes Rackham

ConsultingWhereMarine & Coastal Data Workshop

INSPIRE 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

3Geospatial data in the value chain

The value chain

4

Inbound

logisticsOperations

Outbound

logistics

Marketing &

salesServices

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

5

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:

6

– 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 Resources

Final 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 the

decision makers

Building the business case

7Geospatial data in the value chain

8

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

11

Ultimately

…money talks

12

Business case methodology

Aligning to

strategic

objectives

Cost benefit

analysisOptions

and risksNon-market

impactsBusiness

analysis

Presentatio

n

This is a simple, practical methodology – there are many more

complex approaches but with commensurate higher costs.

Geospatial data in the value chain

13

Step 1: intercept the agenda

Aligning to

strategic

objectives

Cost benefit

analysisOptions

and risksNon-market

impactsBusiness

analysis

Presentatio

n

Geospatial data in the value chain

14

Geospatial alignment

Corporate

agendaBusiness

challenges

Applicability

matrix

Candidate

geospatial

opportunities

ICT

programmes

Generic

geospatial

applications

Technology

Challenges

Internal

Business

challenges

External

influences

Organisational

Objectives

Geospatial data in the value chain

Corporate agenda

15Geospatial data in the value chain

Applicability matrix: mapping corporate objectives to applications

16

Applications

Objectives

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

Optimis

ed

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

17

Step 2: analyse business processes

Aligning to

strategic

objectives

Cost benefit

analysisOptions

and risksNon-market

impactsBusiness

analysis

Presentatio

n

Geospatial data in the value chain

Business analysis – current processes

18Geospatial data in the value chain

Business analysis – improved processes

Geospatial data in the value chain

20

Step 3: assemble the financials

Aligning to

strategic

objectives

Cost benefit

analysisOptions

and risksNon-market

impactsBusiness

analysis

Presentatio

n

Geospatial data in the value chain

21

ProcessesOutputs

FinancesBenefits categorisation

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

22Geospatial data in the value chain

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

24

Cumulative Net Present Value (NPV) = £343

Internal Rate of Return = 14% (increase discount rate until NPV = £0)

Payback

Point

Geospatial data in the value chain

25

Step 4: options and risks

Aligning to

strategic

objectives

Cost benefit

analysisOptions

and risksNon-market

impactsBusiness

analysis

Presentatio

n

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

26Geospatial data in the value chain

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

27Geospatial data in the value chain

Impact

ProbabilityLow High

Low

High

28

Step 5: and also ....

Aligning to

strategic

objectives

Cost benefit

analysisOptions

and risksNon-market

impactsBusiness

analysis

Presentatio

n

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”

29Geospatial data in the value chain

30

Step 6: presentation

Aligning to

strategic

objectives

Cost benefit

analysisOptions

and risksNon-market

impactsBusiness

analysis

Presentatio

n

Geospatial data in the value chain

The presentation of the business case

• Two key elements:

1. Pain statement – what problem are you trying to solve

2. Value proposition – how your project will solve the problem

• Four tests:

1. Succinct

2. Easy to understand

3. Show a return on investment

4. Irrefutable

Geospatial data in the value chain 31

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 people

3. Push at open doors not closed ones – work with those who want a solution, make them successful

4. Look for early wins – small successful projects that build confidence

5. Don’t reinvent the wheel - reuse existing case studies

6. Don’t accept benefits are intangible – most can be measured

7. Focus on a small number of large benefits

8. Present the financial information in the way the CFO expects

9. Assemble backup information on the social and environmental benefits but don’t lead with them

10.Spend time on the elevator pitch – presentation is key!

Geospatial data in the value chain

Thank you

33Geospatial data in the value chain