Enterprise 2.0 ROI? Wrong question. I am hearing ROI debated here at Enterprise 2.0, and it’s not particularly useful. Shouldn’t all software be subjected to this rigor? Well, no actually.
At dinner last night with the Enterprise Irregulars, Andrew McAfee said he asked fellow Harvard professor Robert Kaplan, an innovative researcher on linking cost and performance, and recently elected to the Accounting Hall of Fame [yes, there is one!], can we measure ROI with these new social tools. Kaplan said it cannot be done.
Why?
- The productivity and improvements are micro-tasks. It’s akin to doing operations research studies with a stop watch on the benefits to using email. Did anyone get fired because Microsoft Office was released? I highly doubt it. Wikis shift work from email and documents to wiki pages and a more facile method of collaboration. Measure it? Spend your time in more fruitful endeavors.
- Management consultants who are actually trained to do these types of studies generally avoid micro operations improvements because they walk in the Land of Serious Business Cases. They have to; their fees are so high. They know that if you cannot measure productivity with a yard stick, then forget it.
- If you’re spending $4,000 on a wiki, how much time should you spend on an intense ROI analysis? You are much better served experimenting with these tools, finding out how others are making them work, giving them to the pioneers in your organization, and learning.
- When software companies give you ROI analyses, leave the room. As fast as you can. This is true for any type of software. The fixation on ROI during the economic downturn — which was because salesforces were shrinking and they desperately needed something to justify themselves — was largely patent BS. I have not seen an Enterprise 2.0 ROI study, but I will be as excited to see one as to stick needles in my eyes. Beware.
Of course we want to derive benefits and understand them. ROI studies are not the way.
Radiowalker: Tech Business Beat 
I agree with your assessment (I write as a private citizen and academic, not an employee of the big Redmond-based software company I work for). But I still think Productivity is incredibly important and very under emphasized in corporations today. And yes, Technology is the primary driver of productivity. Like you, a lot of what I sell is ultimatley a Productivity tool. So when I get told bya customer that I have to prove an ROI, I get up and leave the room. But not without putting forth this argument first: 1) Do you believe that better Productivity is the only was to grow revenue faster than cost? (yes) 2) Do you believe technology drives productivity? (sure there are other things, but tech takes the cake, so yes) 3) Does your company have a growth or innovation agenda? (of course!) then 4) What is your Productivity Agenda?
Sometimes I even get to stay in the room.
I agree completely, Jeff. Demanding ROI from innovative ideas is the express train to killing them. We may have to rely on creative execs for a while longer until these paradigm-busting behaviors and technologies are accepted. Fortunately, there are plenty of them.
Nice blog.
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I disagree with your analysis. ROI analyses is one step to analyze the impact of social software within the enterprise.
For example if you establish a plethora of tools e.g. Blogs, Wikis, Microblogging Services, Team Rooms and plenty more… What’s going on with the productivity of you knowledge workers? Its possibly going down due to distraction about reading interesting but not work related informations. Of course such behavior leads to creative ideas due to the wide audience you reached, but if not its only a new way to distract your knowledge capital.
Another topic are the switching times between the tools. Isn’t it truth that you loss many minutes a day in accessing the right workspaces and tools to access or deliver the needed information?!
Furthermore social software is strongly connected with communication and collaboration costs! The employee has to find the right community, think about how he/she can participate and to create the information as well. This is a highly important part of the considerations. It’s not only about buying Hardware and implementing a Wiki. Its about communication that it is possible now to use it, you should establish a strong social media guide how to use and also monitor if it used to strike a new path… In the starting time your workforce will decrease their productivity because they have to learn how to use it and maybe teached as well!
I hope I could show a small view on what is also related with Social Software and why it is increasingly important to show the ROI. Especially surveys have shown that managers want to see the output in numbers. (saved time, reduced costs, increased sales, etc.).
Not the direct costs are important, the indirect costs which are occuring after the rollout.
IT management is struggling with whether social media is productive or obstructive for companies and their employees. Software is being developed and policy and restrictions are being decided everyday by IT managers. The security of company networks are at stake but the potential for innovation using social media is a large enough carrot for the discussion of how to properly utilize the medium continues. Palo Alto networks came up with an interesting white paper, http://bit.ly/d2NZRp, exploring the issues surrounding social media and ROI. It is important to not only understand the immediate benefits of doing business how one lives, but the threat it presents to a company’s greater ROI and productivity when it comes to the server’s safety and security.
The risks are a big point in the considerations about Social Software ROI. The TEI methodology from Forrester is a good point to start. It considers opportunities, costs and flexibility which is rising with the investment. All three points are overlayed with the risks.
But in my opinion no further risks will be generated via Enterprise 2.0 or is it a difference if you send a faulty blogpost around the world or if you complain loudly and bitterly about your company or send email with crucial financial performance indicators to your competitors?