Secure Training Budgets With A Three-Step Business Case/ROI

7825070Crafting a compelling business case to accompany training technology requests is a requirement few managers look forward to. Having read our ROI post, they know the time to pursue 3D interactive training is now – and communicating this effectively to key decision-makers in their organizations is key. This post will help them (you) do just that.

Nothing drives action more than the opportunity to either save costs or increase revenue. And framing that business case from an “opportunity” rather than a limitation perspective is a shift we’ll be exploring here, by way of a pretty powerful example.

Instead of asking “How much budget do I have to solve this training problem?”- and then trying to solve it using that number, consider the following:

You could be solving a $5MM problem with a $30K budget and doing injustice to the endeavor.

In fact, it’s better not to solve a problem at all than hack at it completely under-capitalized and waste that lesser amount as well. The reverse is also true, of course, where spending gobs of money on a minuscule issue is equally inadvisable.

But how does one measure the magnitude of a training task in $?

By building a business case with a ‘Bottom up’ approach (starting from a granular level), rather than a ‘Top down’ method (“we have $XX left in the budget….”) – and it looks like this:

Operation Enduring FreedomA car company (one of the five largest makers) approached us with a very interesting dilemma: At year-end, one of their flagship models is being released with a completely redesigned dashboard and controls layout offering a brand new way of accessing all of the features needed while driving.

The Problem? By the time each dealership receives the car shipments, employees at those locations must be fully familiar with the redesigned controls, this includes technicians, sales consultants, sales and service managers, service consultants and shop foremen. And this is a TALL order when they can’t actually touch the cars before they arrive!

While it’s tempting for us to start throwing possible solutions at the problem, we first need to measure the magnitude of the task ahead.

STEP 1 – Measuring the Problem in $
Note: the numbers below have been condensed and changed to protect the customer, but the methodology remains the same.

Magnitude of Training Task

Now that the customer has quantified the training task as a $2.84 MM problem or rather an opportunity to save some of this, it makes a compelling case to approach higher management for the appropriate budget by going from:

How much budget do we have in this quarter’s/year’s budget for this?” (never the best approach)

to –

How much are we willing to spend to solve a $2.84 MM problem?

STEP 2 – Finding the Value
Fully understanding the question is the only way to come out with an answer that makes sense for the specific problem/training concern.

The solution agreed upon, a 3D Interactive Virtual Car Simulation, looks like and behaves like the real thing and is virtually practiced on any tablet or web-enabled browser. Employees interact with their fingers (or their mouse) as if they are actually in the car, with full freedom of movement and navigation (pun intended!). The solution saves 18-23% teaching and learning time for students to master the subject (vs. using e-learning and Powerpoint) – reducing the training task from $2.84MM to $2.23MM.

STEP 3 – Determining the Justified Investment
Next, we want to determine what it is worth to solve the problem. The value of a solution and appropriate investment to obtain it can be expressed with two equations:

Cost of problem (COP) – minus Return on solution (ROS) = Value
Value x Customers expected Return on Investment (ROI) = Justified Investment

$2.84MM (COP) – $2.23MM (ROS) = $610,000 (Value)
Assuming a desired ROI of 6 times the initial investment,
$610,000 x 1/6 = $101,500 as the Justified Investment.

To save $610K, the customer is more than willing to secure a training budget of $100K for this task, since they can start saving on that bigger amount right away.
And that’s the proper way to arrive at an appropriate spending amount.

Reach out here to discuss your own specific scenario, and we will help you reframe and justify the training budget. Win-win!

Update! Watch the video recording of the webinar on this topic: