Leveraging Data for Cost-Benefit Analysis

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Summary

Leveraging data for cost-benefit analysis means using available information to weigh the financial pros and cons of different choices, helping businesses or organizations make smarter decisions. This approach involves gathering and analyzing data to compare the costs and benefits of each option, even when perfect data isn’t available.

  • Review existing data: Before starting new data collection, take stock of what information is already available to avoid unnecessary spending and effort.
  • Use structured frameworks: Apply techniques like cost-benefit analysis or scenario planning to organize your findings and clarify decision points, even if data is incomplete.
  • Balance risk and agility: Factor in uncertainty and be ready to adjust decisions as new information comes in, ensuring that you don’t miss opportunities or incur avoidable risks.
Summarized by AI based on LinkedIn member posts
  • View profile for Ajay Nagpure, Ph.D.

    Sustainability Measurement & AI Expert | Advancing Health, Equity & Climate-Resilient Systems | Driving Measurable Impact

    10,010 followers

    Data is fundamental for decision-making, especially in sustainability, where it underpins efforts from measuring project impacts to evaluating policy effectiveness. However, in our rush to gather data, we often overlook a crucial question: is the information we need already available? Many times, organizations jump to new data collection projects without first examining existing resources, leading to unnecessary costs, wasted effort, and environmental impact. Building large analytics teams, purchasing third-party data, and conducting extensive surveys are standard practices, but failing to leverage existing datasets can contradict the core principles of sustainability. In my 15 years of experience working in the sustainability field, I have observed that many organizations don’t make the best use of available data. Too often, the first response to a data need is to collect fresh data, even when high-quality datasets already exist. This results in redundant data collection efforts, with multiple surveys and analyses producing similar findings. For example, in one project, a detailed city transportation survey conducted by another team provided data on vehicle composition and age. Through an analysis of existing data sources, we achieved nearly identical results, showing that sustainable data use is achievable. This experience inspired me to look more critically at how data can be used effectively. In my recent analysis, I estimated Vehicle Kilometers Traveled (VKT) per day by car in different Indian cities using available car sales data and existing datasets. This approach allowed me to produce results that were comparable to findings from previous primary surveys, which typically involve extensive fieldwork and resource investments. Additionally, using existing data enabled me to go further by obtaining detailed breakdowns by car type, engine type, transmission type, and providing estimates across a larger number of cities than would have been possible with a single primary survey. The chart below visualizes the VKT estimates across different cities, illustrating how leveraging existing data can yield reliable results that align closely with other studies. This example underscores that sustainable data practices aren’t just about reducing costs; they’re also about minimizing environmental impact and making efficient use of existing resources. By strategically using what is already available, we conserve time, money, and energy. Effective data use in sustainability starts with clear objectives and a careful evaluation of existing resources. Before new data collection, we should ask: Why do we need this data? What level of uncertainty is acceptable? Can available data meet our needs? Sustainable data practices help save costs, reduce environmental impact, and improve efficiency by repurposing existing datasets instead of conducting costly and redundant surveys.

  • View profile for Arek Skuza

    C-Level AI Transformation Architect | Industrial & Manufacturing | Driving enterprise-scale AI transformation

    9,109 followers

    Executives and CFOs: Understanding AI is important for budgeting your companies existence! This benchmark comparison of leading AI models highlights a critical issue for strategic budgeting and resource allocation: the rapidly evolving landscape of AI capabilities and their associated costs. The data clearly shows significant variations in performance across different benchmarks (MMLU, MATH, reasoning, etc.) and, crucially, in pricing. While the raw performance numbers are impressive, the financial implications are even more impactful. The disparity between the cost of 1M input/output tokens across these models illustrates the need for a nuanced approach to AI investment. Simply choosing the most powerful model isn't always the most efficient strategy. Business goals must drive technology choices. For example, a company focused on precise mathematical calculations might find a model like Llama 3.3 70B to be more cost-effective than GPT-40 despite the latter's higher overall scores in other areas. This necessitates a thorough cost-benefit analysis, integrating pricing data with the specific performance requirements of each project. This analysis should be a core part of your budgeting process. Understanding the relative efficiency and cost of different AI models will be crucial in allocating resources to maximize return on investment. Ignoring this aspect could lead to wasted expenditure and lost opportunities. Companies need to actively integrate this type of data analysis into our future planning to leverage AI effectively and responsibly. A dedicated discussion on this topic is recommended for your next strategy meeting.

  • View profile for Beverly Davis

    Finance Operations Consultant for Mid-Market Companies | Founder, Davis Financial Services | Helped 50+ Businesses Align Finance Strategy with Growth Goals.

    20,422 followers

    The perfect, up-to-date data isn't always available. Here's how to make confident decisions with what you have. In situations with limited data, I’d guide stakeholders through balancing urgency with available information. The goal is to make an informed choice that minimizes risk and leverages what we do know. Here’s 5 steps to approach it: 1. Clarify the Decision Context: First, make sure everyone is clear about the business objective. What’s the goal and does everyone understand the desired outcome? Determine how urgent is the decision is to help prioritize the most critical data points. 2. Identify Key Variables: Focus on What’s Known. Even with limited data, there are likely a few key metrics or insights you can rely on. Use Assumptions. Document assumptions to revisit later and adjust if more data becomes available. 3. Scenario Analysis: Build Multiple Scenarios. With limited data, create a few different scenarios to evaluate the range of possible outcomes. For each scenario identify which variables have the biggest impact on the outcome. This helps stakeholders understand where uncertainty exists and where they need to act conservatively or aggressively. 4. Risk Assessment: Beyond numbers, incorporate qualitative factors such as, how much risk is acceptable? What’s the potential impact on the company? This helps put the decision into context, even when data isn’t perfect. Build contingencies, and make decisions in phases, allowing for adjustments as more data is available. 5. Use Frameworks: Apply frameworks like the Pros-Cons Matrix, Cost-Benefit Analysis, or SWOT Analysis to help weigh options methodically. Even when data is sparse, structured approaches can identify critical elements to focus on. Use Benchmarking. Comparing performance to similar companies can offer insights. Look at industry reports, peer performance, and broader market trends. Act quickly but responsibly. At the end of the day, when you have limited data, it’s about making the best possible decision with what you have, being mindful of risk, and staying agile. Helpful tips: - Acknowledge limitations: Overconfidence can skew perception of risks and opportunities leading to substandard decisions. - Seek external perspectives: Consult with industry experts, consultants, or analysts to help gain additional insights. - Be adaptable and flexible: Remain open to adjusting decisions as new information becomes available. __________________ Please share your thoughts in the comments Follow me for more finance insights  If you need help developing and executing a financial strategy DM me or Book a 30 Min Call https://lnkd.in/eFwzRbiD #Finance #DecisionMaking #Strategy

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