How to communicate your digital investment using Value-at-Stake (VAS) analysis

Technology advancement-such as Internet of Things (IoT), cloud, and big data analytics drive digital transformation in redefining industry 4.0. This transformation makes new business model possible and more importantly, provides business with unparalleled opportunity to create new business values. Increasingly, decision makers in industry are being faced with diverse stakeholder expectations and complex digital investment decisions. It’s fair to say that business has always considered numerous factors in their decision making process, thus business leaders need to consider the value-at-stake (VAS) analysis as a helpful approach for measuring, creating, optimizing, and communicating the impact of their investments.

VAS analysis is an approach to understand how digital transformation creates value by analyzing its impact on business and its ecosystem. This analysis covers holistic view of interconnected technology, financial, and operational impacts of digital investments. Interestingly, the approach is specifically crafted to each industry and there are no guarantees that digitalization values can be fully captured. These values may vary for each case because of differing levels of industry adoption, which are influenced by multiple factors such as technology maturity, regulatory influence, digital infrastructures and proper incentives to drive such transformation.

For example, as part of our research to drive industry 4.0 deployment in mining industry, we are addressing VAS analysis as an effective approach to communicate its transformation value in following steps:

1. Analyzing the implication of digital transformation initiative
   This digital transformation initiative was set to occur across the value chain; thus,
   organization should first understand the cause of this transformation, the importance to
   their main stakeholder, and which value chain segments are impacted significantly.
2. Defining and analyzing the metrics baseline
   Organization should consider relevant metrics baseline that impacting their business and its
   ecosystem, such as productivity (e.g. equipment availability, production cycle time,
   throughput, reworks) or operating cost (e.g. labor, administration, and support services).
3. Creating issue tree addressing imperative improvement areas
   Issue trees helps to find the root-cause of an issues, break its complexity into smaller
   manageable one, and gives an insight of possible improvement areas across value chain.
4. Validating assumptions and results with continuously reiterate the approach
   Validating and testing assumption in logical order gives the best chance to make early course
   corrections and preventing waste resource in executing business strategy.

Figure 1 Issue tree addressing imperative improvement areas. Note : this root-cause-analysis may vary for each industry and specific for each case.

Figure 2 VAS analysis to map imperative improvement areas across mine value chain.

In this case, our VAS analysis suggests that providing digital technology to end-to-end mine value chain could worth up to US$ 900.000.- in value. The approach uses quantitative model to asses cumulative value of digital transformation initiatives over the years. Notably in IoT and advance analytics technology deployment across mine value chain. This analysis also helps companies account potential impact by incorporating appropriate OKR, encourage data-driven decision making, and communicate digital investment with better approach.

References:
Unlocking digital value society: a new framework for growth. World Economic Forum. 2017
Earl, Graham. And Clift,Roland. Stakeholder value analysis: a methodology for integrating stakeholder values into corporate environmental investment decisions. Business Strategy and Environtment. Vol 8, 1999: 149-162