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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