Dion Hinchcliffe had a superb post on Determining the ROI of Enterprise 2.0. The post cites several authoritative and useful sources on the subject. It also hypothesizes several reasons for the mostly “wait and see” attitude currently taken by most IT leaders and business managers.
But I mainly want to focus on the business case for Enterprise 2.0 – specifically, the pursuit of Return on Investment – ROI.
The Problem with ROI
Much has been said in the past about the limitations and challenges with ROI as a tool to evaluate many types of IT investments. Dion’s post links back to an old post, The Case Against the Business Case by the father of the term Enterprise 2.0, Andrew McAfee. McAfee in turn references the work of Kaplan and Norton and their Strategy Mapping book which points out that the value of intangible assets (human, organizational, and information capital such as databases, information systems, networks, and technology infrastructure):
…derives from their ability to help the organization implement its strategy… Intangible assets such as knowledge and technology seldom have a direct impact on financial outcomes such as increased revenues, lowered costs, and higher profits. Improvements in intangible assets affect financial outcomes through chains of cause-and-effect relationships.”
This is a really important point, but it sets up a very slippery slope. “We can’t attribute any direct financial impact to our Enterprise 2.0 investments… so we won’t try.” It’s the “not trying” here that drives me nuts! It leads to:
- Lazy thinking… which leads to…
- Lack of clarity about what outcomes we are trying to drive to with our Enterprise 2.0 initiative… which leads to…
- Lack of rigor in thinking through what behaviors we are hoping will change in order to realize the targeted outcomes… which leads to…
- A “if we build it, they will come” approach to Enterprise 2.0… which leads to…
- Failure of the Enterprise 2.0 initiative, “proving” there is no business case!
Value from Enterprise 2.0 can be a Self-Fulfilling Prophecy
Last August I wrote a post titled Measuring the Business Value of IT – Where You Can Win By Simply Trying! My point here was that the discipline of thinking through what we’d like to achieve, and how we might achieve it, dramatically increases our probability of achieving it. As a trivial case, imagine the following conversation:
Let’s invest $1 Million to increase collaboration across our company.”
“Because we’ll be more innovative and productive.”
“Hmmm – good question! Well, we’ll tap into people’s ideas about how to improve our products and services. And even how to improve our processes. We could even tap our customers’ ideas!”
“How will we do that? What will we need to enable that? What will we need to shift to those kinds of behaviors? Are there any aspects of our culture that might inhibit those things happening?”
“Hmmm! More good questions. Perhaps we need a bit more definition around what we are trying to do? Perhaps we need to drive to some clarity on the outcomes we hope to achieve? Perhaps we need to assess our ability to achieve those outcomes and clarify what will need to change for them to materialize?”
And so on. Note, we aren’t building a business case in the financial sense. This is not an ROI exercise – its a business value and outcomes exercise. And this is the type of analysis that needs to be done to shift from the laissez faire “if we build it” to a more thoughtful, targeted approach.
(Image courtesy of SponsorMap)