How do we justify spending money on an internal Community & Collaboration platform like JiveSBS? As we have been working with the Wellington City Council on their Jive implementation, I have been thinking more about Social Business (aka Enterprise 2.0) ROI, and how to measure it effectively.
Luckily, I am not the only one thinking about these sorts of things. Establishing a solid ROI for enterprise social business software is an ongoing discussion.
One big issue concerns secondary and tertiary effects – how do we measure the underlying cause when it is two or three times removed from the outcome? As Dion Hinchcliffe says, “Many IT solutions create value only after travelling through an indirect chain of cause and effect.” Then there is the issue of how to measure activities that are themselves unpredictable (such as understanding, communication, collaboration, etc). We can measure such things as efficiency in finding information, but that efficiency ends up being much less useful to the organisation than less measurable outcomes.
There has actually been some pretty heavy science applied to this problem (see attached) that show empirical evidence on the relationship between information worker productivity and social networks, but the real point here is that there are real limits on the ability to direct emergent systems towards focused outcomes. In the end, all one we actually do predictably is enable possibilities and not prevent them.
Innovation often comes from where you least expect it and harnessing collective intelligence, the core principle of Social Business, is the very art of eliciting value from emergent systems such as the Web. That this value is forming the bulk of the networked economy (open source software, social networks, social media sharing, etc.) is one of the signature lessons of the era.
There are some great posts online around this subject. For example, Penny Edwards from Headshift writes about “the shortcomings of ROI and reductionist models for illustrating ‘success’ in terms of bottom-line profitability”. Because traditional financial accounting measures like ROI give misleading signals about continuous improvement and innovation, more integrated approaches to performance measurement are needed. She suggests usage of Kaplan & Norton’s Balanced Scorecard (BSC), which assess performance from the perspectives of (i) staff development/learning (ii) internal processes (iii) customer service and satisfaction and (iv) financial effectiveness, efficiency and cash flow.
The different perspectives of the BSC can be linked by outlining a ‘story’ of the social software implementation. That story also helps test the thinking/assumptions behind a project’s goals and what exactly should be measured or evaluated. The underlying logic of the story would be along the following lines:
- If we increase the capability of our staff to connect with information, expertise and colleagues and/or clients …
- then they will be able to improve and innovate our products, services and processes …
- the customer will be delighted and customer loyalty will improve, and …
- we will keep/get more business, which has a positive impact on our finances.
The beauty of the model is that it provides a more visual flexible approach to project evaluation, and moves away from a restrictive quantitative approach. It allows the focus to shift from time to time depending on the business strategy, and for the nature of measures to change overtime, depending on people’s information/social networking needs and the (adoption) phase of the implementation. There is some more great discussion on this theme at Veni Vidi Luxi.
For a rough, quantitative approach based on eliminating waste and increasing efficiency, we can easily come up with a model. For example, out of a typical large organisation, let’s just concentrate on a core group of say 1,000 staff that we could label knowledge-workers. Although a solution would benefit the entire work-force, this group would probably use it more because of their job function.
In addition, there would be more efficiencies due to having more informed workers, a reduced need for training in classes/groups, less confusion and errors in working with different document versions, etc.
If a rough back of the envelope calculation such as the above shows a potential for saving a large organisation over $4.5 million dollars a year in wasted time, whilst a solution such as Jive may only cost a fraction of this – how can we justify NOT doing something?
Good Post and thanks for the mention!