If you have a sick care AI proposal, the CFO will probably want to know, "What's the ROI?"
What problem are you trying to solve with an AI solution?
To measure AI ROI effectively, organizations should focus on key performance indicators (KPIs) that reflect the impact of AI on business operations, financial performance, experience, or clinical care quality and safety. These may include:
- Increased efficiency: Time saved through automation.
- Cost savings: Reduction in operational costs due to improved processes.
- Revenue growth: New revenue streams generated from AI-driven insights.
By integrating these metrics into the evaluation process, organizations can gain a clearer picture of how to measure AI ROI in business and make informed decisions about future AI investments.
The objectives and key results can also take into account not just measurable direct outcomes, but sometime more difficult to measure indirect or unintended benefits. These might include:
- Healthcare experience
- Improved productivity using better workflow and process mapping
- Reduced employee turnover
An approach might include:
1. Define Objectives
- Identify Goals: Determine what you aim to achieve with AI, such as increasing revenue, reducing costs, improving customer satisfaction, or enhancing operational efficiency.
- Establish Key Performance Indicators (KPIs): Define specific, measurable metrics that align with your goals, like sales growth, cost savings, processing time reductions, or customer retention rates.
2. Quantify Costs
- Initial Investment: Include costs for hardware, software, and licensing fees.
- Implementation Costs: Factor in expenses related to integration, training, and change management.
- Ongoing Maintenance: Consider costs for updates, support, and data management.
- Human Resources: Account for salaries of data scientists, AI specialists, and any additional staff needed for operation.
- Sustainability measures such as power usage resulting in carbon emissions
3. Estimate Benefits
- Increased Revenue: Project potential revenue increases resulting from improved products, services, or customer engagement.
- Cost Savings: Identify areas where AI can reduce costs, such as automation of repetitive tasks or improved operational efficiency.
- Time Savings: Calculate the time saved through automation and faster decision-making processes, which can translate into monetary value.
- Risk Reduction: Consider how AI might mitigate risks (e.g., fraud detection, malpractice exposure), which could have a financial impact.
- Eliminating waste: One commonly cited reason for the exorbitant cost of the U.S. health system is waste. Approximately 25 percent of healthcare spending in the United States is considered wasteful, and about one-fourth of that amount could be recovered through interventions that address such waste.
4. Calculate ROI
The basic formula for calculating ROI is:
ROI=Net?ProfitTotal?Investment×100\text{ROI} = \frac{\text{Net Profit}}{\text{Total Investment}} \times 100ROI=Total?InvestmentNet?Profit×100
- Net Profit = Total Benefits - Total Costs
- Total Investment = Initial Investment + Implementation Costs + Ongoing Costs
5. Monitor and Adjust
- Track Performance: Regularly monitor the KPIs established in step 1. Use data analytics tools to gather insights and measure actual performance against your projections and us AI-QI tools.
- Iterate: Adjust strategies based on performance data and feedback. This can help optimize the use of AI over time.
- Test your ideas before you deploy them
6. Consider Intangible Benefits
- Customer Satisfaction: Improved customer experience can lead to increased loyalty and repeat business, which may not be easily quantifiable.
- Brand Reputation: Enhanced decision-making and service delivery can improve brand perception in the marketplace.
- Innovation: AI can lead to new product development and market opportunities that contribute to long-term success.
7. Case Studies and Benchmarking
- Industry Benchmarks: Compare your AI initiatives with industry standards or similar organizations to gauge success.
- Case Studies: Review case studies of successful AI implementations to gather insights on potential ROI.
8. Measure the costs and benefits of scaling dissemination:
- What are the economies of scale as you implement your solution across the enterprise instead of one location?
Measuring your AI ROI has qualitative and quantitative variables, fixed and variable costs and benefits, and some outcomes that are unpredictable or that can't be precisely defined.
"It would be nice if all of the data which sociologists require could be enumerated because then we could run them through IBM machines and draw charts as the economists do. However, not everything that can be counted counts, and not everything that counts can be counted."-William Bruce Cameron
Arlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneurs on Substack
