Tags: ROI, Return on Investment, Jay Cross, Informal Learning, Social Media, Social Software, Social Networking, Social Computing, Web 2.0, Enterprise 2.0, Collaboration 2.0, Collaboration, Communities, Learning, Knowledge Management, KM, Knowledge Sharing, Learning and Knowledge, Personal Knowledge Management, PKM, KM, KM 1.0, KM 2.0, Remote Collaboration, Virtual Collaboration, Innovation, Knowledge Economy, Dennis Howlett, Irregular Enterprise, ROI 2.0, Business 1.0, Business 2.0, Tangibles, Intangibles
In yesterday’s blog post I mentioned how I was going to write a series of different articles around the subject of ROI and Social Computing, since there seems to be quite a buzz around it in various different places. As a follow up from that article I wrote previously, Dennis Howlett, over at Irregular Enterprise, has put together a very good, and thoughtful, post under ROI is so Business 1.0: not that I thought I would go ahead and spend a few minutes discussing some of the points Dennis makes.
In that particular article Dennis comes to point out how ROI justifies itself not just for Business 1.0, but also for Business 2.0, a.k.a. Enterprise 2.0, and comes to indicate how my conclusions may have been a bit too harsh on the topic. And he may be correct, although I still stand with that conclusion that ROI for Social Computing is a "waste of our time, energy and resources". And here is why:
"The assumption is that ROI is always about payback. While that is often true, you need a value figure with which to develop the calculation. Forrester has already tripped up over this one, concluding, as do many others, that the benefits (are these the same as value?) are ’soft’ and therefore difficult to measure. The fact something is difficult is not an excuse yet this is how ROI is positioned."
I am not sure what you would think, but Dennis has just mentioned in that particular quote one of the reasons why traditional Knowledge Management has failed to deliver throughout the course of the years. ROI has always been associated with multiple business models and disciplines that have always got to do with tangibles, i.e. what supposingly is easy to measure. But, at the same time, it has tried to prove the value of KM and during all of that time it hasn’t been able to deliver, more than anything else, because of those soft benefits, i.e. the intangibles.
Now, social computing has been associated quite a few times already with Knowledge Management (Or Knowledge Sharing, whatever term you would prefer) and as such trying to find out the ROI for social computing is like trying to repeat history and see if this time around it would prove KM’s value with a different term. So when I mentioned that trying to figure this out was going to be a waste of time, energy and efforts, I meant that we are just going to back to square one, back to trying to justify KM, something that if it has failed throughout the years, there is no reason it is going to work out this time around, because, if anything, we are still dealing with knowledge and knowledge sharing and trying to apply that to the traditional methods we have used for ROI is not going to take us anywhere.
Jay Cross, in a follow up comment in my blog post, puts it quite nicely as well, actually:
"ROI = Industrial Age, tangibles only
Value exchanges = today, intangibles rule"
So what is the solution to the equation, you may be wondering? Well, certainly not the way Dennis finishes off his blog post, because no-one over here is trying to erect walls and not pull them down, nor consider CFOs as retarded for that matter:
"Instead of panning CFOs as looking at the ‘wrong’ stuff and generally pillorying them as retarded, social computing pundits might ask how the flat world of which many profess becomes a reality. The current tone is one of erecting walls and not pulling them down. It won’t win friends and it won’t persuade those who need to review ROI that alternative if more difficult measures have equal if not better utility."
If ROI wants to make a stand in the world of Enterprise 2.0, it needs to evolve. It needs to progress further into becoming ROI 2.0 (Yes, I know, you saw that coming, didn’t you?) and stop thinking that the only thing to measure the intangibles is following the same approach as with tangibles, because that is going to fail. It has for the last few years with traditional KM and I am sure it would fail again, again and again. We now have a precious opportunity to make things different; this time around with how social software is taking by storm the corporate world, getting everyone excited, once again, around the subject of knowledge sharing and collaboration (Not sure about you, but it was about time!). So let’s try not to repeat KM history again by making the same good old mistakes we have all along.
(So, ready to put together ROI 2.0? Well, I surely hope so, because that is what I will be covering in future blog posts. Will you be ready for it?)
13 thoughts on “Making the Business Case for Social Computing – Part Deux”
If we drastically (over)simplify things we might have a place to start the conversation about ROI. Here is my shot at it…
We start off by looking at “progress”
work(now) + delta = work(later)
In certain instances of progress the delta is negative; a spam solution:
email – spam = less time managing mail
In other cases of progress the delta is positive; a new truck:
hauling stuff + new truck = hauling more stuff
(but -/+ are really just semantics…)
So the question on return is: does the ‘delta’ cost more than the ‘work(later)’ pays.
With trucks and spam its easy to envision / describe the parallel universe where the delta never existed. Thats not quite as easy with social software.
Not impossible, but not quite as easy. I had an experience recently with a person who I only know via our internal social tools. We ended up collaborating on the content for a presentation to a VERY large customer.
In the parallel universe where her and I did not have that conversation, would we have made the sale? Did we sell more because of it?
We talk about innovation – what does the state of new product development look like in a parallel universe where social tools don’t exist?
(I said I had a start to the conversation, not the answer 🙂 )
I agree with you that ROI is probably not the best way to measure, at least not the way we look at it today. This is because there are structural differences between knowledge and material things (http://atulrai1.blogspot.com/2007/09/structural-difference.html).
Having said that, we need some mechanism for measuring, because end of the day, the CFO needs to decide, and this decision would be based on how much Money this would make, or how much cost it would save.
The approach you have outlined sounds interesting … with the Delta coming in. Question is … its very difficult to figure out whether you sold more because of this (we dont know whether you would have made the sale without this!).
Two major reason why KM failed was that Knowledge managers were managing documents and not people and because software editors were selling very expensive licences with no change management.
As for the ROI specifically, I already had the opportunity to detail my approach some time ago here: http://www.headshift.com/archives/003290.cfm
The main issue at this point is that social computing has a contextual impact:
– you can do many thing with one product and one thing with many products. For instance, one company can enrich project coordination, CEO blogging, team coordination, internal communication, customer engagement with a blogging platform. Alternatively a mix of blogs, wikis and social bookmark correctly interfaced can produce a very nice knowledge sharing app.
– depending how extensively you use it, and we know that its emergent (check steward mader’s presentation on “how to grow a wiki”), the “ROI” evolves over time.
Consequence is that we simply have to be back to the fundamentals of management metrics: in situation. I see no need of inventing new ways.
I linked to parts one and two from my blog at http://h20325.www2.hp.com/blogs/garfield/archive/2007/10/02/4632.html
Thanks for this Luis. I could offer a range of other reasons why KM failed and they are tied to the command and control nature of those systems. But to the point about ROI – another thought: the *language* people apply matters. There is a genuine issue here that needs exploring because regardless of rights/wrongs, CFOs sign checks and will require some sort of validation. That world is one that is steeped in financial measures so for the time being, rather than fight it, I’d argue for augmenting it.
Thanks a lot, folks, for dropping by and for each and every comment you have been sharing above. Lots of great insights in there. Too many to let them pass just like that as comments, so I have taken the liberty of creating a follow up blog post with them and have shared some further thoughts on them over here.
Thanks again for the additional thoughts and keep the conversation going!