How to make a business case for a new AI Automation Project?

June 30, 2023

Creating a persuasive business case is critical in advocating for a new AI Automation project. This blog post will delve into the importance of a business case to help demonstrate the potential Return on Investment (ROI) and mitigate risks when making the case to stakeholders.

We’ll outline the steps to build a successful business case, beginning with assessing the current situation, analysing the need for a new system, calculating the ROI and addressing potential risks. 

Executive Summary

The executive summary should outline the need to implement AI Automation in the business, addressing current issues and outlining potential benefits. It should provide an overview of the proposed project, including recommended actions and anticipated return on investment. In summary, the executive summary should summarise the business case’s key points and recommend using AI Automation to address existing issues and provide expected benefits.

AI Automation

Issues with your current processes

Identifying the issue the AI Automation project is intended to address is the initial step in creating a business case. To effectively do this, it is necessary to evaluate the current situation to identify areas in which the existing system and processes are inadequate. One way to do this is to evaluate the current system’s performance, productivity, and cost-effectiveness. Common problems organisations try to resolve are:

  • High cost of administration
  • Inaccurate data
  • Inaccurate forecasting
  • Poor decision making
  • Sub-optimal resource allocation
  • Inefficient use of manager’s time

The identified list of issues is similar to a new system’s potential benefits. You should ideally select an AI Automation solution that fixes all the issues identified.

Costs and impact of not making a decision

Documenting the implications of not making changes to the process regarding the organisation’s strategic goals is essential. For example, if the goal is to attain a 4% growth in revenue annually, not optimising the shop opening hours to maximise revenue generation may prevent the organisation from reaching its aims.

Objectives for the proposed solution

Ideally, you want your objectives to be Specific, Measurable, Achievable, Relevant, and Time-Bound – known as SMART objectives. They are likely to relate to the key issues that you have uncovered. For instance:

  • Increase sales by 4% Year on Year.
  • Reduce the cost of data administration by 75% in 2023
  • Improve the accuracy of Sales forecasting from 89% MAPE to 96% MAPE.
  • Reduce stock holdings through optimisation by 6% 

The proposed solution

Documenting the proposed solution and the details of the company providing it is a vital component of any business case. It should include the following:

  • What will be proven in a POC
  • Key functionality
  • Data engineering and Robotic Process Engineering approaches to manage the data required
  • Any integrations
  • The key outputs
  • What reporting and BI will be available
  • The success criteria agreed upon with the supplier

Commercial summary for the proposed workforce management solution

Summarise key commercial arrangements requested for approval, including:

  • Proof of concept cost
  • Bespoke development costs
  • Implementation costs
  • Integration costs
  • Software rental costs
  • AI training and cloud hosting costs
  • Automatic price increases
  • Length of contract
  • Automatic contract renewals and termination provisions
  • Limits on liabilities for both parties
  • Insurance cover especially for Cyber.
  • Additional fees such as support and maintenance.

Alternatives considered

Document all other alternatives to the proposed solution, such as doing nothing or improving the current system, and explain why these were not pursued.

Proof of Concept and ROI from this phase

What is the cost associated with doing a Proof of Concept (POC)? What are the objectives of the POC, and what is the minimum cost your organisation is willing to commit to the POC? This amount represents the minimum risk to your organisation, and if the POC fails, you will need to write this cost off.

Establishing the overall project Return on Investment (ROI)

Calculating your Return on Investment (ROI) is a matter of understanding the ratio of benefits to costs. Shopworks have written a separate article that provides a detailed guide on how to do this for workforce management solutions, available here. To compute your ROI, you’ll need to estimate the value of the benefits your new system will bring and calculate the associated costs.

AI Automation and ROI

Mitigating Potential Risks

Considering the potential risks associated with the AI Automation project is essential. These could include failing to achieve the anticipated ROI, inadequate implementation and other risks that must be addressed. The business case should include a plan to mitigate these risks to guarantee a successful implementation. Additionally, it is wise to conduct ROI sensitivity tests to ascertain if a positive ROI is still possible if a 10% decrease in benefits or a 20% increase in implementation expenses occurs. Your CFO or FD can help you with the correct levels of sensitivity.

Conclusion

Creating a business case requires collecting actual data and carefully assessing existing problems, setting goals, and evaluating potential solutions. By undertaking this process, you will be more equipped to ensure the success of your AI Automation initiative.

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