Becoming Strategic with RPA
As I have often commented on this blog, many critics of Robotic Process Automation (RPA) have spent years telling the world that it’s all hype. One of the actual reasons for this is that many of the benefits of automation are hard to quantify using traditional cost/benefit analysis studies. Given the amount now invested in RPA it is no longer possible to call it a hyped technology, but how are managers measuring the value of these projects?
Managers always take time before launching new projects to plan the Return On Investment (ROI) of any new investment – this is a basic requirement for any new spending – but a new book argues that most managers are not pricing the advantages of RPA correctly.
Yes, it’s a book. Leslie Willcocks, John Hindle and Mary Lacity are co–authors of ‘Becoming Strategic With Robotic Process Automation’. It is coming from the academic and business school side of this argument – that managers are introducing new technologies into the workplace, but still measuring ROI using old tools and assumptions.
More enlightened managers have started focusing on the Total Cost of Ownership (TCO) when investing in new projects or technologies. However, the authors advise that although this is a step in the right direction, it is still hard to capture the benefit of automation using this model so they have built their own and called it Total Value of Ownership (TVO).
The book argues that to date it has been hard to establish and state all the key benefits of RPA installations therefore this TVO model is required. In traditional business cases, only the hard financial costs and benefits are included, but RPA is a strategic tool and therefore the value it creates needs to also be captured. Managers need to understand that RPA is more like a platform on which other solutions can then be created – it is not a tool with a single use and single easily measurable value.
Describing the ideas around TVO, the authors say: “The idea here is to establish every major activity and monitor the five resource costs associated with each activity, across the RPA life-cycle. An understanding of full costs will guide investment strategically, and galvanize commitment to gain substantial returns from the investment. For example, if managers knew the real initial cost of getting the data into shape for use by cognitive tools, they would become much more committed to driving out value from tool adoption.”
In their paper on ”Notes From The AI Frontier” (2018), the McKinsey Global Institute (2018) supports this assumption around value. MGI suggests that by 2030 augmentation and substitution impacts of AI technologies will give a 14% boost beyond 2018 economic performance. But the boost from the impact of AI technologies on product and service innovation and extension will be 24%. Three examples they give are expanding the firm portfolio, increasing channels, and developing new business models. In terms of global GDP. McKinsey estimates the innovation impact of AI technologies as potentially a 7% increase, representing $US six trillion, between 2018 and 2030.
I have yet to read the complete book, but the approach sounds fascinating. What the authors are really suggesting is that we should forget about RPA as an individual tool and stop trying to measure hard and direct benefits – the real value will be in how it completely changes what your company can do a decade from now. It seems to me that a similar argument about productivity could have been made thirty years ago when companies started using email. If managers were doing a cost benefit analysis comparing the cost of sending a letter and sending an email they really were missing the point. That’s where we are with RPA today.
Leslie Willcocks, John Hindle and Mary Lacity are co–authors of ‘Becoming Strategic With Robotic Process Automation, published in October 2019 and available at www.sbpublishing.org. For supporting new videos and papers go to www.roboticandcognitiveautomation.com