Defining ROI of Automation in Real Terms. Part 1
Author: Sergei Zhmako
Every business leader is familiar with the promises of automation. Automating processes and procedures in your business will make it faster, leaner, and more efficient.
In practice, automation can accomplish all of that and more, but the key is to approach it with intention and strategic planning. There is a significant lasting value to automation when it’s employed successfully, but that requires a clear definition of success from the get-go.
Moving Past the Hype
When it comes to automation, return on investment (ROI) isn’t just a financial calculation, at least not in the short term. Exploring the ROI of automation is a framework to understand how new technology reshapes workflows, redeploys talent, and transforms the economics of running your business.
To turn automation from just another tech upgrade to a competitive advantage in the market requires clear metrics and communication. It also requires big-picture thinking, when it’s easy to be myopic, measuring the ‘payoff’ dollar-for-dollar.
For many years, automation has come hand-in-hand with lofty promises, and those promises are only getting bigger. With the prevalence of AI and automation technology comes visions of robots replacing human labor, autonomous systems that ‘run themselves’, and cost reductions that come to fruition overnight.
However, as any business leader knows, reality within most organizations is far more complex.
Automation doesn’t operate in isolation. Automation is a tool used to streamline processes, upskill employees, and enhance data and transparency across departments. The journey towards automation typically starts with a few quick-win pilot projects, but true, meaningful business transformation requires time, discipline, and alignment.
Without a clear ROI model, it’s difficult to determine what success truly looks like. The view may be too narrow, or worse, completely nonexistent.
Clear ROI must be defined early, clearly, and correctly. Automation shouldn’t be judged solely on the money you save versus the cost of implementation. You should also consider the indirect benefits, such as faster cycle times, increased accuracy, greater scalability, and the ability to redeploy one of your strongest assets, that is human intelligence, toward innovation and creative strategy.
Determining Automation ROI Starts With the ‘Why’
Before you put any numbers and calculations on paper, your adoption of any automation technology should begin with the purpose. The mistake many business leaders make is viewing automation as an end in itself, rather than what it truly is: a means to an improved outcome.
Often, this miscalculation begins when business leaders focus on the technologies they want to implement rather than the actual problems they aim to solve. In those cases, ‘success’ becomes simply adopting the new technology, whether it’s AI, RPA systems, or robotics and CNC machinery, instead of achieving a meaningful (and measurable) business outcome.
Therefore, a clear ROI framework begins with a clearly defined objective. What is the problem your organization wants to solve? What is it that you hope to achieve through automation?
Some examples might be:
- Shortening response times to customer inquiries
- Eliminating manual data entry from supply chain systems
- Increasing production throughput without increasing headcount
- Reducing error rates in billing or order fulfillment
- Improving visibility into real-time performance metrics
- Automating repetitive assembly tasks using collaborative robots (cobots)
- Using robotic palletizers to speed up packaging and shipping operations
Once you’ve defined the purpose, the ROI model becomes clear. You’re no longer chasing abstract efficiency or buying into the latest trend; instead, you’re quantifying progress toward a measurable business outcome. The key is to align your endeavor so that technology serves strategy, not the other way around.
To be continued.