As Enterprise 2.0 continues to evolve, the one question that continues to go unanswered is how to measure ROI.
The question came up again today at an E2.0 “town hall” at the Enterprise 2.0 conference.
My response wasn’t popular, but I think it’s worth repeating:
If you can’t sell more, buy less, or fire somebody, you’re not getting real ROI.
In private, a number of folks complained to me that Enterprise 2.0 has been too ethereal in the past. Perhaps this is why there seems to be a grassroots movement to rebrand the topic as “Social Business.” Yet simply saying that something (a technology? a movement?) addresses real business problems doesn’t make it so.
Dig underneath the surface, and “Social Business” still seems to be about things like discovering expertise inside the company, or boosting employee engagement.
One argument that came up at the town hall (and was more popular than mine) was that deploying Enterprise 2.0 technology should be thought of as a cost of doing business, much like email or telephones.
Much as I wish this were a commonly accepted fact, I suspect that this is a) wishful thinking, and b) not likely to go over well with your 2011 Budget Committee.
I keep coming back to a simple principle articulated by the pragmatic philosopher William James: “A difference that makes no difference is no difference.”
If Enterprise 2.0 has a business impact, it will show up in business results, e.g. net income. The impact might not show up immediately, but if it’s there, it will show up eventually.
Enterprise 2.0 has been around long enough that we should be able to detect its impact, much like astronomers can detect the presence of extrasolar planets by observing their gravitational effects.
Nor are the necessary experiments and observations hard to find. We have numerous case studies of large enterprises that have adopted E2.0 products broadly across the enterprise. Alcatel-Lucent’s E2.0 platform reaches 45% of all employees. 80% of Booz employees logged into their internal social platform last quarter. The list goes on.
We can examine the financial results for these companies, and compare before and after. If the recent economic crisis makes such temporal comparisons difficult, we can compare E2.0 adopters with comparable companies that didn’t try the tools.
And that doesn’t even count the thousands and thousands of departmental pilots that could be used as experimental data.
This analysis won’t be easy. It’s easy for me to make my arguments, but you don’t see me rushing out to perform the painstaking research that would be required to reach a provable conclusion. That’s hard work!
But that hard work might be the very thing that helps make Enterprise 2.0 a mission-critical part of every enterprises’ IT portfolio.
P.S. @RonTeitelbaum pointed out on Twitter that I’m leaving out improvements in employee retention and improved efficiency. I disagree–if those improvements occur, they should have a bottom line impact. Improved retention should reduce recruiting and training costs. Improved efficiency should allow you to reduce staff, or generate more business by diverting resource savings to selling and serving new customers.
(Cross-posted @ Adventures in Capitalism)
Mr. Yeh,
Let me try one more time but since I have a few more characters I can be a bit more clear. I’m not arguing that the ultimate goal is not to increase ROI. My argument is that when a major disruptive innovation comes only the people that adapt survive. In that environment any business advantage, efficiency to provide headroom to grow without significant marginal cost, or customer retention (which doesn’t increase sales but stops you from bleeding to death) can help to put you on the list of survivors. In my opinion, adoption of new social tools for business will lead to that business advantage and even though it may not directly result in immediate ROI it may it may keep you from losing market and becoming extinct.
You could argue the disruptive force, and you are, but I wouldn’t begin to count things at this stage. We are seeing a shift but that shift is still being studied within some huge corporations. These tools are just starting to get rolled out. They have been in Technology labs, and innovation centers within companies. They are proving their worth. I would argue not that there is no ROI but that there is and nobody wants to talk about it. We are moving though a huge downturn and companies are holding tightly to their cash. This excess of caution is causing some longer term experiments. Had they seen no ROI these projects would be getting canceled. I just don’t see that happening.
This leads me to two possible conclusions. You are right, there is no ROI to these tools and the innovation groups at these billion dollar companies are just drinking the e2.0 Koolaid, or it is a lot more difficult to tell right now with the economic downturn just who currently has an advantage. I’m betting that ROI comes later when companies begin to press their advantage and take more risks.
Ron Teitelbaum
Teleplace
Mr. Yeh,
One more comment. It appears that I miss read your post because it was referenced along with other skeptics of e2.0. I apologize for my mistake. I read your article carefully again and noticed that you are making a claim for the “benefits” of ROI study not complaining about the lack of evidence for e2.0.
It would seem we are much closer to the same opinion that the evidence is not easy to gather but that it does exist. I believe that much of the evidence that would help make a stronger ROI case is currently hidden (on purpose) by innovation groups, and it is masked somewhat by the economic downturn.
Just saw your video with the facial expressions and they were not that bad!
Ron Teitelbaum