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GIS Justification – Forget the Intangibles

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Customers ask me, “What is the return on investment for GIS?” They ask because their company requires a financial justification for spending. This spending might be for upgrading, adding new features or improving the GIS data. That justification must include things like the payback period - the balance sheet and income impact - the cash flow. Sure, the implementation of GIS lowers the cost of operations by improving worker productivity. It shortens travel time. It lowers supply chain costs. It increases revenue by organizing billing for joint use poles and streetlights. It increases revenue and lowers costs in hundreds of large and small ways at utilities. These hard dollar savings can be documented.

What about other non-financial benefits - these intangibles benefits?

Focusing only on the financials clouds other mission critical strategies. A company does not thrive by financials alone. This is particularly true of utility companies. Nearly every utility company has a mission that includes at least four major stakeholders:

  1. Owners – the investors
  2. Customers
  3. Employees
  4. Communities – represented by regulators

The financial returns deal with the owners. Yet, utilities are critically aware of customer care. They worry about employee development and safety. They fret about their reputation. Poor customer service, unhappy employees, fines, law suits and bad press can get executives fired just as quickly as poor earnings.

The key for a solid justification is to hone in on the key performance indices (KPI) for each of the four stakeholders. Not just the owners. A justification can’t just say that adding a new street light app in their GIS will make customers like us better. That’s an intangible. Or adding a new GIS based process for self-servicing for new customer connections is more convenient for customers. Again, that’s intangible. Rather the justification needs to be quantifiable. But not just in financial terms. If reliability is a concern, then the upgrade or data improvement project must state explicitly a reduction in total outage time. A GIS based public facing outage map must show a reduction in outage calls. It might even show a specific improvement in their customer service ratings. A GIS based customer connection app needs to reduce the time for a customer to connect. These metrics are tracked. Employee accidents, complaints to the PUC, fines and the time to clean up spills are all part of a utility’s scorecard. Executive bonuses are based on these and sure, on financial performance as well.

When utilities form their annual spending plan, they look at each metrics that support their mission. They document where they are today. For example, today the company has an average of 95 minutes of outage time per customer. They look at where they want to be. For example, they want to reduce their outage time to 80 minutes. They calculate the gap. In this example, 15 minutes. Then, they will allocate spending to close the gap. A GIS upgrade, a data correction project or a new reliability app can contribute to closing the gap. A justification for that project must articulate how it will contribute to closing that gap. It’s not financial. But is certainly not intangible.

Most utilities will have less than a dozen critical KPI’s, each organized around the four stakeholders. Not surprisingly, the KPI’s tend to align with what annoys customers the most. Rate increases. Annoying power failures. Lack of communication during power failures. Taking a long time to deliver service. Getting answers to when their power comes back.

GIS has a positive impact on what ails customers. It gives utilities better access to data. It gives them situational awareness for faster decision making. It provides the spatial analysis that homes in on where problems are the worse. They can quicken damage assessment, sharpen situational awareness and shorten vulnerability analysis. These all impact one or more of the mission critical KPI’s. For example, the key for the justification is to quantify how much contribution a GIS app (a new GIS situational awareness dashboard or damage assessment app) will have annually to the reduction in annual outage time. Sure, this will take some study. Justifiers will certainly have to make some assumptions. That’s no different from the financial ROI studies.

Another KPI is OSHA reportable employee accidents. Every electric company posts these metrics on every bulletin board on every floor of every building they own. Justifying a GIS app will include a solid study of how that app can reduce employee accidents. GIS enhances collaboration, helps accident assessment, analysis and reporting. GIS provides unambiguous location data for critical dangerous assets.

Community KPI’s are complaints to the regulator or consumer rankings or environment fines. These often end up being reported in the news and worse on social media. These events are measurable and thus manageable. GIS can identity where customers are complaining. It can show the relationship of complaints to company actions. It can even show where bad customer tweets are clustered. If the company wants to improve its community image, it will set specific targets around complaints, overall satisfaction indices and even the number of negative social media posts.

Sure, one could translate bad tweets, employee accidents, outage time or customer satisfaction results into financial proxy, but that would miss the point. The point is that utilities like most companies have to concern themselves with more than just financial metrics. These metrics are measurable and manageable. The key to justification of a non-financial based application is to quantify how much the GIS project will close the gap in one or more of the KPI’s. It should be based as best as possible on solid research and benchmarking. In effect, the GIS ought to be able to improve those things that are most important to the utility. And to their customers, employees and the community

Intangible? Soft dollar savings? Hardly.

For more information on how GIS can positively impact the electric utility mission, click Esri Electric and Gas Utilities.

Bill Meehan's picture

Thank Bill for the Post!

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