Extracting tangible business benefits from data and analytics projects, including those involving AI, has proven challenging for most enterprises. In 2019, VentureBeat reported that 87% of data and analytics (D&A) projects failed to reach production. In 2022, Gartner found that only 20% of insights derived from analytics translated into brazil rcs data business outcomes. Despite various reasons for this low success rate, many firms struggle to build a compelling business case to secure investment in data and analytics initiatives. So, how can one effectively use the right KPIs to showcase the business benefits of these D&A projects?
While there are many finance-related KPIs and concepts, we recommend using these three foundational concepts to demonstrate the business benefits of D&A projects:
Net Present Value (NPV): A dollar today is worth more than a dollar tomorrow and this is reflected in the term NPV. NPV is the difference between the present value of the investment and the present value of cash inflows over a period generated from the investment.
Internal Rate of Return (IRR): The IRR is the discount rate that makes the NPV of a project zero. In other words, IRR is the expected compound annual rate of return that will be earned on a project or investment. (Note: Closely related to IRR is ROIC – Return on Invested Capital. IRR is for evaluating project-specific investment opportunities and ROIC is for comparing the efficiency of different companies or business units.