Many people in the Enterprise 2.0 community are pondering RoI. It seems to be the Holy Grail of E2.0. This pursuit demonstrates a fundamental misunderstanding of how decisions are made.
If you are selling something that meets a need, it has to be a need that people feel. Not that they see reflected in a spreadsheet that features numbers you've either made up (sorry estimated) or taken from other situations.
Once they feel the need, then you bring out the RoI to keep the CFO happy. RoI follows need.
What does this mean?
- It helps if your E2.0 solution meets a need that the organisation and senior management feel. That problem may be around connecting my staff in multiple offices. That be around enabling my research team to share their activities & outcomes better. It may simply be about helping me turn my Sharepoint investment into something that I don't cry myself to sleep at night over.
- Finding an immediately felt need is easy. That means that lots of people will probably have done it already. Finding a need that is on the verge of being felt is a lot harder but more rewarding. Ellen di Resta writes about this well.
- Once you have identified a problem, shown you have a solution and found those people with that problem then (and only then) does the RoI come into play. The RoI should show that your solution is the best and most cost effective solution to that problem (Remember: All RoIs are always comparative - the alternative is often "do nothing"). That should keep the CFO happy.
- If the conversation starts with RoI, you are sunk. Walk away. Or find out what the conversation is really about. Conversations about "RoI" are never about RoI.
- Don't just focus on the numbers, focus on stories & status as well.
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8 comments:
Can't the "Return" in roi be something other than making money? It could be engagement or just reading a post or making comments? Isn't it important to work out what you want to achieve before you start? That way it is measurable (but not necessarily profitable per se...).
Katy - Yes it is important to work out what you want to achieve before you start - hence the focus on "problems" and "solutions". But 'engagement', 'reading' and 'commenting' are not business ends in themselves.
How would you reframe these are business issues? (you are almost there with 'engagement')
And ultimately the "Return" has to be about improved business performance (for corps) or sevice delivery (for NFPs & govt) or no one cares.
Sort of in agreement, Matt.
The question I find useful to ask when you come across "Need X" in a business is, "how does that problem, issue or need translate within, or manifest itself in the business?"
It's the next stage on from just identifying a problem. Doing so means you can indeed identify ROI opportunities. I agree it's a terrible place to start. However, and especially at the moment, you should always have it near the front of your mind.
Identifying business needs and problems and figuring out how to meet or resolve them, thus improving service, reducing costs or the inevitability of unexpected costs (the latter was the target for one client recently), should be a fluid exercise that's viewed as such from the beginning.
To be honest, I'm getting quite tired of the "throw it at the wall and see what sticks" approach with E2.0. The topic has moved on.
If you're keen on success (again, especially at the moment), sooner rather than later you will need to be very aware - and able to articulate - how much it's going to cost, and why you should spend that money.
Hello Alex - Bear in mind that I said that this is a problem that staff and senior management have to feel. This is not some hypothetical "problem" sitting a in vendor's slide deck.
And if senior management are feeling it then it should be pretty darned easy to link it to a business outcome.
Yes you have to justify costs but if you are spending all your time justifying costs then it seems to me that the problem you are trying to solve simply isn't important enough.
"Justify your costs" is the corporate equivalent of "I'm too busy". What both really mean is "That is not important enough for my attention".
The problem with Enterprise 2.0 is not that we haven't spent enough time pouring over spreadsheets, it's that we have largely failed to confront immediate core business problems.
Or rather the business problems that Enterprise 2.0 tackles are only core to a minority of businesses. There are businesses out there for whom effective collaboration is a major issue and that's where E2.0 solutions can make a lot of headway.
Saying that RoI is the issue is simply saying that the problems that we are focusing on are not sufficiently important to enough people. Playing with spreadsheets is just a distraction from that.
I agree that it's often a an easy deflection to say "justify your costs".
It feels like this could be heading down the path of people in certain positions not being good enough at selling their ideas (or just not being good salespeople)?
To flip this back to you, you say "collaboration is a major issue". What does that actually mean?
Alex - Yes I agree that some people (and even some companies that should know better) are not very good at selling.
Your previous comment about "throwing mud against a wall" could be rephrased as people with a product to push (e.g. wikis, blogs, social networks) who do not think through what it is they are trying to achieve (or more importantly what their customers are trying to achieve).
Re: "collaboration is a major issue". From what I've seen, some organisations know that their staff are failing to collaborate and that this is impacting sales, product or service delivery, etc. They aren't 100% sure what to do about it but they know they have to do something.
Where I think we agree is that the focus cannot just be on "collaboration". It has to be on improving sales or improving some other business outcome.
The other thought that comes into my head is: Know who you are selling to. Selling to an IT manager is very different to selling to a sales GM or an operations manager.
I suppose I do not have a problem with a well thought through value proposition that answers the need of an identified target and is supported with clear numerical arguments (among other levers).
My issue is with the quest for the Magic Bullet RoI that seems to be going on at the moment.
Reading and thinking about this some more (and realising again that you did indeed write about "not being ready to sell"), I think we're coming at a similar conclusion from slightly different angles.
Again, I agree ROI shouldn't be the starting point. But, I think you shouldn't leave it until you've done everything else to start thinking about ROI.
Like I said, the topic has moved on from a blind man feeling his way in the dark. There are more than enough examples of where such tools have been of some benefit, or failed, that you can now have a pretty good idea of what might work, what tools you might need, and how much it might all cost (possibly very little in the scheme of things), and whether that means new software, free software, more people to help develop it effectively, or whatever.
Taking another angle again, I think it would be a little naive to uncover problems and present ways to fix them, without thinking all the time about the cost/benefit analysis for implementation. It's intrinsic.
Alex - The point is that if people are still playing the speculative "time saved" game then they are still operating in the dark.
And pricing is an interesting point - probably a whole other post in itself.
Cost/benefit analysis should come naturally when you focus on the problem and your proposed solution (as noted in the original post). So it's bullet point 3 in the original post, not bullet point 1.
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