When corporations consider adding intelligence analysis programs as part of their security efforts, it’s only natural to pose hard questions about return on investment (ROI). It’s easy to put a figure on what the intelligence program costs, as this is essentially the analyst’s salary and related expenses, but how to calculate program benefits? Can we put numbers on the savings good intelligence analysis generates? Could security intelligence analysts go beyond reducing costs to actually increasing corporate revenues?
Based on our experience setting up intel programs for some major clients, we believe it is indeed possible to demonstrate positive ROI for intelligence analysis programs that are rooted in corporate security. This blog will provide some rough guidelines to do this below.
But security should not be the only focus of intelligence analysts: their value-add deserves a wider audience. Limiting what analysts do to the confines of corporate security departments reduces the organization’s potential to leverage the benefits of good intel across a much wider spectrum of corporate interests – and to spread their costs across a range of benefits that accrue to a far broader range of budget owners. We’ll explain why below. First, let’s take a brief look at what intelligence analysts do for corporate security – and how to calculate their ROI.
A simple ROI formula for intelligence analysis in the context of corporate security
As we’ve pointed out in a previous blog, How intelligence analysis is impacting corporate security now – and why it will be even more important in the future, intelligence analysis is all about transforming data into information, information into intelligence, and intelligence into actionable insights that help managers make better decisions. Intelligence analysts deliver these transformations to decision makers in the form of written assessments and reports. Within the context of corporate security, intelligence analysts enable better decisions concerning everything from executive protection and travel intelligence to facility and supply chain security, and brand and reputation management.
But how to calculate the ROI of what intelligence analysts do? First, let’s agree on what ROI stands for. ROI is a measurement of investment efficiency that compares the effect of the investment relative to the investment’s cost. Expressed in simple math,
Minus the cost of the investment
Divided by the cost of the investment
For example, if sales grew by $10,000 due to a specific activity, and the investment (cost) of this activity was $1,000, then the ROI would be 900%. That would be pretty fantastic ROI, and the decision to invest the $1,000 would be a no-brainer. But life’s not that simple, as our calculation assumes that the sales growth is directly and solely attributable to the activity, which is rarely the case in the real world.
When it comes to risk management and corporate security, calculations of investment efficiency are even less simple. For one thing, we need to think primarily about money saved, not money earned. For another, we need to think about the inherent difficulties of quantifying risk. Finally, we need to consider that some risks are relevant companywide and that their costs might be distributed many places throughout the corporation – from supply chain, to finance, to sales and marketing, to reputation – and, potentially, to some individuals.
We know the investment, but what’s the return?
To make things simple, let’s say the average annual cost of one intelligence analyst is a ballpark figure of $100,000, a fair if somewhat low-ball number based on Glassdoor’s national average for the U.S. ($78,358) plus benefits and other employee costs. What does an intelligence analyst do to justify the 100k investment and demonstrate good ROI? That depends very much on how he or she is managed, but let’s give just a few security-relevant examples from the real world in order to get a sense of potential returns.
Executive protection and travel intelligence:
- Research on CEO travel itinerary locations enables decisions to reschedule trips in order to reduce exposure to threats, lower travel and executive protection costs, and enhance CEO productivity
- Assessment of venue security for shareholder and board meeting results in decisions to move venues, save event security costs, and reduce opportunities for demonstrations and disruptions that could harm corporate and brand reputations
- Analysis of increased break-ins to retail outlets results in segmentation of outlets into high, medium and low-risk, so a decision to install roll-up security bars in all stores is modified to install in only 15% of outlets
- Research regarding crime rates and police availability for a corporation’s hundreds of facilities worldwide informs decisions regarding access control procedures and technology, resulting in a 20% reduction of incidents
Supply chain security:
- Intelligence analysts review the transportation security of high-value assets nationwide and determine that 20% of routes account for 80% of risk, enabling decisions to re-route and add additional security measures selectively rather than comprehensively
- Regular reports that monitor global logistics trends and events to identify potential and emerging issues that could impact transportation of parts and finished goods, follow pricing developments, and identify cost saving opportunities
The six anonymized examples above are based on tasks that our own intelligence analysts have completed for a variety of clients. All six of these analyses could realistically be completed by a good analyst within 8 weeks or less. Each of the six resulted in six-to-seven figure savings for a Fortune 100 company. If we calculate this fictive but realistic example using the formula described above, we get something like this:
The ROI of one intelligence analyst that costs $100k per year =
The cost savings attributable to decisions enabled by the analyst’s reports (based on the six examples above, let’s conservatively estimate $1m on an annualized basis)
Minus the cost of the investment in the analyst ($100k)
Divided by the cost of the investment ($100k) =
This calculation is, admittedly, based on a fictive set of assumptions and can in no way be used to demonstrate the actual ROI of a particular intelligence analysis program. Although we low-balled the savings that occurred, the percentage of savings that can be directly attributed to the work of the intelligence analyst is not specified. The fiction is realistic, however, and we hope that it will at least illustrate the potential ROI of adding an intelligence analysis program to the corporate security effort. And, as we’ll see below, if we extrapolate the savings potential beyond the security context to support decisions made for other business reasons, the ROI of intelligence analysis gets even more interesting.
Start with strong research and writing skills. Add creativity, solid business acumen, and good management. Then apply liberally throughout the organization.
At its core, intelligence analysis is good research and writing. We want analysts who can dig into a lot of information, quickly pull out what is essential for their purposes, then compile and communicate their findings clearly. It really is that simple.
But excellent research and writing skills are not enough to ensure good intelligence analysis. When creativity is added to the mix, the potential benefits increase exponentially. As Steve Jobs famously put it,
“Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things.”
This is exactly what separates great intelligence analysts from the less great. They see connections where others don’t. They apply lessons learned in one domain to another. They arrive at new insights using old experience. Creative intelligence analysts allow decision makers to see relationships, alternatives, and solutions that are not discernable to the casual observer. When they are empowered by a sound understanding of what makes the company tick, how its products and services create value for its customers, and where its competitive advantages lie, then intelligence analysts can truly shine across the organization, supporting not only decisions relevant to corporate security but also to finance, regulatory and compliance, HR, sales and marketing, and more.
Of course, good management is also important. Managers who set up clear expectations, recruit and nurture analytical and creative talent, and ensure tight alignment between corporate and intelligence analysis program objectives are key to success. Such managers promote the intelligence analysis program within the organization whenever they can. Creativity helps here too. Instead of mechanically asking “how can we help?”, for example, they are sure to proactively check in with business unit and departmental managers on a regular basis in order to learn more about the kinds of problems they are currently facing. As these good managers seek and find opportunities to add value to the company as a whole, they cultivate advocates across the company for when it is time to plan activities, adjust headcount, and finalize budgets.
Companies that pull together all of the above are not in doubt about the ROI of their intelligence analysis program. Though they may have been originally rooted in security, they leverage the benefits of actionable insight across other business priorities, too, and share their costs transparently.