Strategies LLC Taxonomy September 27, 2005Copyright 2005 Taxonomy Strategies LLC. All rights...

Strategies LLCTaxonomy

September 27, 2005 Copyright 2005 Taxonomy Strategies LLC. All rights reserved.

Making the Business Case for Taxonomy

Joseph A. Busch

2Taxonomy Strategies LLC The business of organized information

Agenda

Taxonomy value propositions What the research says Example ROI


Taxonomy issues, problems, and concerns

Enormous volumes of information within organizations Diversity of assets

Content and technology

Complex and IT-oriented standards .NET, SOAP, WSDL, etc.

Limited (if any) integration with applications: Search engines Information management applications Back office transaction-based systems Analytical systems …


Fundamentals of taxonomy ROI

Tagging content using a taxonomy is a cost, not a benefit. There is no benefit without exposing the tagged content

to users in some way that cuts costs or improves revenues.

Putting taxonomy into operation requires UI changes and/or backend system changes, as well as data changes.

You need to determine those changes, and their costs, as part of the ROI.


Finding information should not be about “Feeling Lucky”


Finding information requires multiple approaches


about 3,890,000 results


2,199 results


Agenda



Usability research— Taxonomy compared to search results lists

“We found that users preferred a browsing oriented interface for a browsing task, and a direct search interface when they knew precisely what they wanted.”

Marti Hearst (and others)

“The category interface is superior to the list interface in both subjective and objective measures.”

Hao Chen & Susan Dumais


Taxonomy compared to search result lists

0

20

40

60

80

100

120

140

Category List

Me

dia

n S

earc

h T

ime

in

Se

con

ds

In top 20 results

Not in top 20 results

Category is 36% faster

Category is 48% faster

Source: Chen & Dumais


Time saved—Taxonomy compared to search result lists

1 hour per day searching x 36% faster = 22 minutes each day

22 minutes x 250 working days per year = 5500 minutes or 92 hours per year


Time saved—Taxonomy compared to search result lists

Benefit: Service efficiency increase

Number of customer service calls/month 50,000

Average cost per call $ 6

Total call costs per year $ 3,600,000

Increase in productivity by browsing information 36%

Service costs savings per year $1,296,000


Trusted advisers—Taxonomy avoids costs

“The amount of time wasted in futile searching for vital information is enormous, leading to staggering costs …”

Sue Feldman,

Poor classification costs a 10,000 user organization $10M each year—about $1,000 per employee.

Jakob Nielsen, useit.com


Searching

Creating

Commun-icating

Knowledge workers spend up to 2.5 hours each day looking for information …

… But find what they are looking for only 40% of the time.

Source: Kit Sims Taylor


Creating new

content

Recreating existing content

SearchingCommun-icating

25%8%

Knowledge workers spend more time re-creating existing content than creating new content

Source: Kit Sims Taylor (cited by Sue Feldman in her original article)


Cost saved by not recreating content

Benefit: Increase in productivity

Number of employees 100

Average employee salary $ 50,000

Employee costs per year $5,000,000

Increase in productivity from not re-creating content 25%

Employee cost savings per year $1,250,000


Agenda



Key Factors in ROI

Breadth “How many people will metadata affect?”

Repeatability “How many times a day will they use it?

Cost/Benefit “Is this a costly effort with little or no benefits?”

Source: Todd Stephens, Dublin Core Global Corporate Circle


Some common taxonomy ROI scenarios

Customer support Cutting costs Increased sales

Knowledge worker productivity Less time searching, more time working Avoiding re-creating information that already exists

Catalog site Increased sales Increased productivity

Compliance Avoiding penalties

R&D productivity Faster time to market


How to estimate costs—Tagging

Taxonomy Facet Hier?TypicalCV Size

Time/ Value (min)

Avg # values /

Item $ / MinCost/

Element

Audience N 10 0.25 2 $ 0.42 $ 0.21

Content Type N 20 0.25 1 $ 0.42 $ 0.11

Organizational Unit Y 50 0.5 2 $ 0.42 $ 0.42

Products & Services Y 500 1.5 4 $ 0.42 $ 2.52

Geographic Region Y 100 0.5 2 $ 0.42 $ 0.42

Broad Topics Y 400 2 4 $ 0.42 $ 3.36

TOTALS 1080 5 15 $ 7.04

Inspired by: Ray Luoma, BAU Solutions


How to estimate costs—Assumptions

ASSUMPTIONS

Enterprise SW License $ 100,000

Maintenance/Support 15%

SW Implementation 200%

Legacy Content Items 100,000

Content Growth Rate 15%

Tagging/Item $ 7.04

Enterprise Taxonomy $ 100,000


How to estimate costs—Total cost of ownership (TCO)

Description Year 1 Year 2 Year 3 Year 4 Year 5

SW

Licenses $ 100,000

Maintenance $ 15,000 $ 15,000 $ 15,000 $ 15,000

Implementation $ 200,000

App Tech Support $ 30,000 $ 30,000 $ 30,000 $ 30,000

Tagging

Legacy Content $ 703,500

Ongoing $ 105,525 $ 105,525 $ 105,525 $ 105,525

Taxonomy

Creation $ 100,000

Maintenance $ 15,000 $ 15,000 $ 15,000 $ 15,000

TOTAL $ 1,103,500 $ 165,525 $ 165,525 $ 165,525 $ 165,525


Sample ROI Calculations

Description Year 1 Year 2 Year 3 Year 4 Year 5

Costs

Software Licenses/ Maintenance $ 100,000 $ 15,000

$ 15,000

$ 15,000

$ 15,000

Implementation/Support $ 200,000 $ 30,000 $ 30,000

$ 30,000

$ 30,000

Taxonomy Creation/ Maintenance $ 100,000 $ 15,000

$ 15,000

$ 15,000

$ 15,000

Legacy/Ongoing Tagging $ 703,500 $ 105,525 $ 105,525

$ 105,525

$ 105,525

Benefits

Productivity increases $ - $ 125,000 $ 1,250,000 $ 1,250,000 $ 1,250,000

Service efficiency gains $ - $ 129,600 $ 1,296,000 $ 1,296,000 $ 1,296,000

Yearly Net Benefits $(1,103,500) $ 89,075 $ 2,380,475 $ 2,380,475 $ 2,380,475

Payback period 1.4 Years until Benefits = Costs

Inspired by: Todd Stephens, Dublin Core Global Corporate Circle


Summary

Taxonomy Value Propositions Find information faster Avoid recreating information that already exists Increase sales Avoid compliance penalties Improve R&D effectiveness

Don’t sell “taxonomy”, sell the vision of what you want to be able to do.

Do the calculus (costs and benefits) Quantify the tangible & intangible benefits Quantify the total cost of ownership including maintenance & tagging

Support your calculations with research


Bibliography

M. Hearst, A. Elliott, J. English, R. Sinha, K. Swearingen & K. Yee. “Finding the Flow in Website Search.” 45 Communications of the ACM (Sept 2002) http://bailando.sims.berkeley.edu/papers/cacm02.pdf

Sue Feldman. "The high cost of not finding information." 13:3 KM World (March 2004) http://www.kmworld.com/publications/magazine/index.cfm?action=readarticle&Article_ID=1725&Publication_ID=108

K.S. Taylor. "The brief reign of the knowledge worker," 1998. http://online.bcc.ctc.edu/econ/kst/BriefReign/BRwebversion.htm.

Strategies LLC Taxonomy September 27, 2005Copyright 2005 Taxonomy Strategies LLC. All rights...

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