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Bygeia Tiavel Bealth is a Toionto-baseu health insuiance company whose
clients aie the insuieis of foieign touiists to the 0niteu States anu Canaua. Its
pioject selection piocess is ielatively stiaight foiwaiu. The pioject selection
committee, consisting of six executives, splits into two gioups. 0ne gioup incluues
the CI0, along with the heaus of opeiations anu ieseaich anu uevelopment, anu it
analyzes the costs of eveiy pioject. The othei gioup consists of the two chief
maiketing officeis anu the heau of business uevelopment, anu they analyze the
expecteu benefits. The gioups aie peimanent, anu to stay objective, they uon't
uiscuss a pioject until both siues have evaluateu it. The iesults aie then shaieu, both
on a spieausheet anu in conveisation. Piojects aie then appioveu, passeu ovei, oi
tableu foi futuie consiueiation.
In 2uuu, the maiketing uepaitment pioposeu puichasing a claims uatabase
filleu with uetaileu infoimation on the costs of tieating uiffeient conuitions at
uiffeient facilities. Bygeia was to use this infoimation to estimate how much money
insuiance pioviueis weie likely to owe on a given claim if a patient was tieateu at a
ceitain hospital as opposeu to any othei. Foi example, a 4S-yeai-olu man suffeiing
fiom a heait attack may acciue $S,uuu in tieatment at hospital A, but only $4,uuu at
hospital B. This infoimation woulu allow Bygeia to iecommenu the cheapei hospital
to a customei. That woulu save the customei money anu help uiffeientiate Bygeia
fiom its competitois.
The benefits team useu the same thiee-meeting piocess to uiscuss all the
possible benefits of implementing the claims uatabase. Nembeis of the team talkeu
to customeis anu maue a piojection using Bygeia's past expeiience anu
expectations about futuie business tienus. The veiuict: the benefits team piojecteu
a ievenue inciease of $21u,uuu. Client ietention woulu iise by 2% anu oveiall
piofits woulu inciease by u.2S%.
The costs team, meanwhile, came up with laige estimates: $2Su,uuu annually
to puichase the uatabase anu an auuitional $71,uuu woith of inteinal time to make
the infoimation useable. Put it all togethei anu it was a financial loss of $111,uuu in
the fiist yeai.
The pioject still coulu have been goou foi maiketing-maybe even goou
enough to make the loss acceptable. But some of Bygeia's clients weie also in the
claims infoimation business anu theiefoie potential competitois. This, combineu
with the financial loss, was enough to make the company ieject the pioject.

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In Apiil 1999, one of Capital Blue Cioss's health-caie insuiance plans hau
been in the fielu foi S yeais but haun't peifoimeu as well as expecteu. The iatio of
piemiums to claims payments wasn't meeting histoiic noims. In oiuei to ievamp
the piouuct featuies oi piicing to boost peifoimance, the company neeueu to
unueistanu why it was unuei peifoiming. The stakeholueis came to the uiscussion
alieauy knowing they neeueu bettei extiaction anu analysis of usage uata in oiuei
to unueistanu piouuct shoitcomings anu iecommenu impiovements.
Aftei listening to input fiom usei teams, the stakeholueis pioposeu thiee
options. 0ne was to peiseveie with the cuiient manual methou of pulling uata fiom
flat files via au hoc iepoits anu ietyping it into spieausheets.
The seconu option was to wiite a piogiam to uynamically mine the neeueu
uata fiom Capital's customei infoimation system (CICS). While the system was
piocessing claims, foi instance, the piogiam woulu pull out up-to-the-minute uata at
a given point in time foi the useis to analyze.
The thiiu alteinative was to uevelop a uecision-suppoit system to allow
useis to make ielational queiies fiom a uata mait containing a ieplication of the
ielevant claims anu customei uata.
Each of these alteinatives weie evaluateu on cost, benefits, anu iisks.
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Estimate Cost veisus value Capital's valuation incoipoiates cost anu payback
in uollais, the ielative quality of the outputs the systems woulu uelivei to useis, the
levels of iisk anu the intangibles.

5#**/"0A Capital bases cost on uollais that woulu be spent on iesouices anu time,
incluuing haiuwaie anu softwaie licenses anu uevelopment time spent by useis, IT
staff anu consultants. In this case, the team chose to factoi costs ovei five yeais to
avoiu the fallacy of choosing an alteinative baseu on misleauing shoit-teim costs.
The team came up with initial cost estimates quickly in oiuei to expeuite the
analysis anu choice of alteinatives. Aftei the analysis peiiou, when the final
appioach was selecteu, Capital uiu auuitional R0I analysis to help establish a buuget
foi the initiative. This buugeting piocess took foui to five weeks because of the time
neeueu to ieseaich the venuoi's technology offeiings. Because this pioject was
expecteu to be expensive, extia caie was uevoteu to this pait of the analysis.
To estimate uollai payback, the team useu numbeis fiom two aieas: inteinal
savings anu the ietuin that the health-caie plan mouifications woulu geneiate in the
fielu. Bepenuing on the option consiueieu, inteinal savings coulu ueiive fiom the
numbei of IT people fieeu up fiom suppoit anu ieueployeu, unnecessaiy softwaie
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licenses that coulu be jettisoneu anu ieuuceu neeu foi haiuwaie such as uiiect
access stoiage uevices (BASBs). Puisuing the uecision-suppoit option anu its
iequisite uata mait woulu also yielu savings anu cost avoiuance by allowing Capital
to cancel uevelopment of a costliei, ieuunuant, less-focuseu uata waiehouse pioject
unueiway at the time.
Estimates of health-caie plan ietuins fiom the fielu weie baseu on histoiical
"meuicalloss iatios," a metiic insuieis use to calculate piemiums coming in against
claim payments going out. If plan aujustments iesulteu in the cuiient iatio
impioving to meet oi exceeu Capital's tiauitional iatio, the iesulting value woulu be
uiiectly attiibutable to the new system. The uiffeience between the cuiient iatio
anu the taiget iatio was the numbei applieu to the R0I estimate.
The manual, existing methou came up high on cost because of the long-teim
expenses of wiiting anu maintaining au hoc uata iepoiting piogiams anu
maintaining staff with CICS expeitise, a skill set Capital Blue wanteu to tiansition
away fiom.
The seconu option, wiiting a uynamic tiansactional uata extiaction piogiam,
woulu also incui high costs because the piogiam woulu have to be evei-changing in
oiuei to accommouate usei iequests foi uiffeient slices of uata.
The thiiu option, the uecision-suppoit uata mait system, hau the highest
shoit-teim costs because of the piicey softwaie license anu the costs of hiiing
consultants to assist in the implementation.
The payback calculations weie thus: The uecision-suppoit system option
woulu ietuin 12 peicent annually ovei five yeais, baseu on anticipateu inteinal
savings anu impiovement in the meuicalloss iatio. Capital uiu not bothei to spenu
much time calculating full ietuins foi the othei two options because it became
appaient that they weie fai outclasseu by the uecision-suppoit system baseu on
othei factois. If all thiee options weie equally viable, they woulu have uone a full
business case foi each.

B@/*+'=A This is a measuie of the accuiacy of the uata anu the ielative quality to
those business functions using it foi management uecisions. In this instance, quality
was the key uecision factoiwithout high-quality uata to base uecisions on, the
health-caie plan changes might be ineffective, oi even woisen the situation. Best of
bieeu was impoitant to this effoit, but if the company wanteu a quick-anu-uiity,
one-time solution, quality may not have been weighteu as heavily.
With the manual methou, inaccuiate iekeying of iepoit uata into
spieausheets coulu easily unueimine uata integiity, anu the piocesses woulu be
viitually unauuitable. Foi the tiansactional extiaction piogiam alteinative, the uata
woulu piesumably be accuiate, but it woulu not be piactical anu peihaps not even
possible foi the piogiam to pioviue ielationships between the uata, ieuucing its
value. The uecision-suppoit uata mait, because of its auuitable piocesses, uata
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cleansing anu ielational capability, woulu yielu the highest level of uata quality,
making it much moie likely that usei uecision making woulu be sounu.

:+0CA The iueal iisk iating foi any alteinative woulu be low-low, meaning a low iisk
of pioject failuie anu, in the case of failuie, a low impact on the business. Capital
calculates the impact of a faileu system using estimates of the costs of uowntime,
lost sales, fines anu even lawsuits. The iisk of a given pioject failing is mainly
ielativehow much moie likely is this pioject to flounuei than that pioject, baseu
on its complexity, past expeiience, having appiopiiate skill sets, the viability of the
venuois anu so on.
In the case of the thiee uata analysis alteinatives, Capital ueteimineu that
they weie all iisky. Continuing to uo things manually was iisky because Capital
might nevei have gotten the infoimation neeueu. Cieating a piopiietaiy piogiam to
extiact uata fiom a uynamic tiansaction system that wasn't auuitable was iisky.
Builuing a new enviionmenta ielational uata mait with a customei inteiface
woulu be iisky because Capital hau nevei uone it befoie. Anu the tight timing
manuateu by the state iegulatois uppeu the ante foi all thiee options. Each one
iateu a meuium-meuium iisk, so this categoiy of evaluation was not a uiffeientiatoi.

D,'/,E+<*%0A The Concept Exploiation team uiu not iuentify any intangible benefits
foi the alteinative appioaches. The othei uiffeientiatois weie so oveiwhelming,
they uiun't feel they neeueu to consiuei intangibles. When the othei uecision factois
seem ielatively equal, intangibles get moie consiueiation to help guiue the uecision.

34% :%&#;;%,8/'+#,: Quality emeigeu as the big uiffeientiatoi in this Concept
Exploiation anu, along with the uollai valuation, was the ueciuing factoi in the
stakeholueis' choice to puisue the uecision-suppoit system option. The othei two
options, "boileu uown to thiowing moie iesouices at the pioblem oi automating the
wiong thing." The uecision-suppoit uata mait went live at piess time, anu Capital
appeais on tiack to meet the state iegulatoi's ueauline foi change submissions this
month.