The VP of transformation may be excited by the prospect of increasing uptime on the line, but often this kind of benefit is framed in terms of industry benchmarks. Yes, increasing from 75 percent to 80 or 82 percent may put you ahead of competitors, but that alone doesn’t justify a budget allocation.
To get numbers that do justify that budget (and therefore highlight the practical benefits of innovation), we need to translate from the bottom of the pyramid to the top. We need to calculate how operations improvements contribute to the bottom line.
We typically start with the specific value drivers involved: i.e., what changes will a digital twin introduce that will directly benefit the organization? In this case, we might look at…
Reduced downtime for the line: Because inspections are conducted faster and at least partially via virtual means, operating lines don’t need to be shut down for as long. This leads to additional productivity (and reduced downtime).
More accurate inspections: A digital twin reduces the likelihood of human error. This means fewer hazards are missed and, ultimately, fewer negative incidents happen organization wide.
Reduced time to conduct inspections: When inspectors can “walk the line” digitally, they save time on travel and physical inspections. A digital twin can also automate certain parts of the inspection, flagging problem areas proactively. This saves a certain amount of worker time.
From here, we can estimate the exact cost savings from each value driver. This is as much an art as it is a science. You may look at industry standards or best practices or make broad assumptions. The key is to document your process so you can adjust your calculations as your data improves.
Let’s say that the creation of a digital twin means that inspection-related downtime can be reduced 20 to 40 percent. For our calculations, we’ll assume 25 percent, a reasonable but conservative estimate.
Assuming each hour of lost production costs the organization $5,000 and inspections originally required 4 hours of downtime, the digital twin would save ($5,000 x (.25*4)) or $5,000 per inspection.
If inspectors typically conduct four inspections per year, that’s $20,000 bottom-line savings from reduced downtime on that single line alone.
These calculations are pretty broad, of course. When you’re actually making a business case, it helps to break components down even further. For example, time savings might be broken into…
This also makes it easier to identify exactly where the digital twin might offer savings.
And remember: that’s just the calculation for the first value driver. To make a solid business case, be sure to take into account all benefits an innovation pilot might offer (including secondary or indirect benefits, like better documentation to reduce compliance audits, better knowledge capture to reduce onboarding time for new hires, benefits of standardizing practices across facilities, etc.).
All told, your goal is to generate a reasonable but conservative estimate of the bottom-line business value the innovation can deliver.
Broadly, this exercise positions innovation as a practical area of investment that drives real value for the organization. In the case of your specific pilot, the projected savings you identify is how you justify the upfront investment necessary to launch your innovation practice.
Educate leadership about the recurring benefits of innovation investment
The above analysis may be enough to get the budget you need to launch a specific innovation pilot. But if you go one step further, you can help pave the way for investments into future projects as well.
Here’s how.
First, remember that innovation can feel risky because what lies beyond it is the unknown.
But the reality is that innovation is itself a business process with established protocols, procedures, and de-risking mechanisms. With the right techniques and approaches, innovation as a practice is actually no riskier than, say, adopting a new software platform.
And just as adopting a new software platform can drive benefits long after the initial implementation, investing in innovation is not a one-and-done proposition. While an ROI-focused business case may capture the immediate bottom-line benefits, effective innovation positions your entire organization differently.
It helps you see the next horizon and understand how to start moving there.
For example: when inspectors don’t have to do the kind of inspection work that can be handled by a digital twin, they have more time and brain space to think about the findings of an inspection. They’ve got more capacity to consider out-of-the-box solutions—new ways to prevent common problems, say.
That’s not quantifiable. It’s not something that should go into a business case. But as those benefits show up down the road, they’re the kinds of things internal innovation champions should highlight and tie to the initial investment.
To win budget for new tech, show ROI that outshines risk
To make a business case for innovation that wins budget, it’s essential to highlight the specific bottom-line opportunity a project presents.
Innovation advocates can also highlight the reality that, for today’s manufacturers, it’s much riskier to not invest in innovation. When you’re trying to achieve new results, you can’t take the same path you’ve always followed.
And when the path ahead is unknown, innovation advocates can win investment and buy-in by emphasizing innovation’s pragmatic side: not only is it a learnable, repeatable discipline, it is the discipline that ensures an organization avoids stagnating in a fast-changing world
About the author
Patrick DiMichele is Head of Strategy & Delivery Management at TXI, where he helps industrial leaders turn complex operational challenges into solutions that scale. He specializes in translating product vision into execution, and helping organizations build the internal case for making it happen.
