Why ‘time saved’ and other such nebulous metrics are a cop out for Enterprise 2.0

I’ve seen lots of commentary lately from smart folks that I respect about how social software can help organizations, accompanied with varying approaches to ROI justification.  Typical stated benefits include the following:

  • Time savings or improved productivity
  • Increased connectivity amongst employees and customers
  • Improved transparency and reduced reliance on Email
  • A clearer understanding and leverage of the social graph
  • Other such soft ROI metrics

The good news is the executives that I speak with have heard the E2.0 message loud and clear. The bad news is that many are at a loss when it comes to extrapolating these into solutions that their business units are desperately seeking.

Let’s pick on my favorite: “Time Savings”. The standard justification here is:

Here’s how any smart buyer would respond: “Saving me 4.6 hours of productivity per employee per week means each employee gets to duck out of the office at noon on a Friday. Where’s the tangible benefit? Unless you show me how this leads to needing less unit resources per task and therefore a reduced headcount, I’m not going to see any real savings.” Sorry, that’s a harsh example in these economic times, but you get the point.

Take “increased connectivity” or a better understanding of the social graph of prospects or customers. So what? Unless you illustrate how the increased understanding of the social graph was put through the metrics blender to generate qualified leads based on say, “purchase intent and the ability to spend $X”, that’s just good raw material towards a ROI analysis; Not ROI.

The problem with any of these ROI examples above is that none of them are really what a smart buyer can justify to a senior executive as “return”. What’s worse, software was sold a decade ago in this fashion and the scars from unattained real dollar productivity savings from CRM, Portal and KM implementations are still very visible in the enterprise. To me, all of these ROI examples listed above are extremely important means to an end but not the end itself. We need to show how these drive revenue or save real costs and you’re going to see IT managers demand it more often than not.

Where it really hits home is when you look at the impact of this on the Enterprise 2.0 sales rep that’s out there, hustling. Putting the onus on the customer to figure out credible ROI makes the sale much much harder. You risk stretching out the sales cycle with the addition of more decision makers brought in to help justify value, or unfortunately in a few cases, to ensure adequate CYA on the buyers end.

On to a solution….

Enterprise social software needs to be sold based on one simple end goal: How the income statement will look like before and after the investment.

You might say “Well, that’s hard to do across scores of departments or business units in the typical Fortune 100 customer organization when you’re selling horizontally.” or “We sell collaboration software and the numbers vary significantly by functional group” Here’s one approach:

Don’t rely only on how you can save an average of X dollars across the enterprise. That number is almost certainly going to do grave injustice to illustrating the potential value of your product. Instead, model just 2 representative use cases at narrow functional levels even if your trying to sell an enterprise-wide deployment. Pick one that’s the most stellar and for balance, one that’s closer to the average. Saying for instance “on 5 occasions, our software enabled a sales rep to find a subject matter expert/a white paper/an up sell opportunity, resulting in total sales of $20 million” is much more tangible for an IT director to take to her CFO. Even if the opportunity is a company wide deployment, those signing the checks get a much better view into best and average case outcomes. And it gives your internal champion oodles of confidence and credibility as he socializes these benefits up and down the food chain.

Two things that struck me recently that support this line of thinking:

Last week at the Sales 2.0 conference, it first struck me as odd that Email productivity vendor Xobni was exhibiting. Xobni is a horizontal solution that can work for any employee or individual, regardless of role. I’m guessing here but I bet you Xobni sees a huge opportunity to help Sales folks find LinkedIn and Facebook connections to leads generated by CRM systems that show up in their Inbox. Using that single use case, Xobni stands a much better chance of getting the CFOs attention. Going in with a generic company wide ‘show up and throw up’ value proposition would make for a much more scattered ROI business case, relatively speaking.

Second, noted ZDnet blogger and eternal pragmatist, Dennis Howlett says:

In my argument, breakthrough ROI comes from seeing these technology through the lens of collaboration, which in turn implies process and context. I am mindful that huge amounts of value continue to be locked up in supply chains. AMR quoted a number of $3 trillion in 2005. Has that materially changed? Simply being able to communicate across supply chains in a meaningful manner could do wonders to lubricate those rusty wheels.

The money phrase for me is “…seeing these technology through the lens of collaboration, which in turn implies process and context.” When you can articulate how participatory media supports a specific context (Sales, Pre-Sales Engineering, Supply Chain insight, etc.), you have a much better shot at illustrating and delivering hard savings or increased revenue potential.

Striving for a business case that can affect line items on the income statement is undoubtedly a tall order for Enterprise 2.0 marketeers. But if you aim for the sky, you’ll hit the mountain top.

As Enterprise 2.0 vendors and customers, what other credible justification methodologies are you seeing or employing?

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Matt Moore
Matt Moore

I would go further and say that the "spray & pray" ROI case has no place in selling E2.0 solutions. Do not give me a spurious spreadsheet with unjustifiable assumptions. Help me fix a specific business problem. 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 I don't cry myself to sleep at night over.Suggested process:- Start with a business problem that you solve.- Find people with that problems and show them you can solve it.- When they wheel out the CFO, show him that you solve this problem better and more cost effectively than the competition (remember: all ROIs are comparative).If you have to start with the ROI (& the CFO) my advice would be to find a more promising potential customer because this one isn't ready to buy - and frankly you're not ready to sell.

John Tropea
John Tropea

It's more about "effectiveness" rather than "efficiency", but existing businesses run on an efficiency ethos, which means often we join their game to play the game...but instead you're saying be more pure and sell the effectiveness method...am I right in your understanding. It's all about connecting to what you need when you need it (better than email)...but also the knowledge transfer (which goes beyond knowledge sharing), in that using social tools we can probe, clarify, re-frame and re-contextualise someone else's know-how.

mopsos
mopsos

I agree with you. The fundamental flaw with the ROI approach is that you are NOT using collaboration tools to reduce costs or to increase productivity, but to learn. And learning is like an insurance policy: you learn to kill bad ideas before they kill you. What's the ROI of going to Boston College?

Atul Rai
Atul Rai

Sameer, i agree ... its easier to show benefit when taken in a specific context, rather than trying to arrive at a generic savings or return formula.

Axel Schultze
Axel Schultze

Good stuff - I did analysis based on that silly idea to install laptops on rest rooms - and could justify the ROI in under 3 month. Does it make sense? Not at all.In major economic shifts, major $ amounts are thrown around- 80's Personal Computers cost businesses Billions as people can install games and play FFW 5 years businesses spend millions to motivate employees to use PCs- Mid 90's Internet cost businesses Billions as people wast their time and play online FFW 5 years, businesses spend hundreds of millions in websites and education- 10' Social Media cost business billions as people play around and just don;t work FFW 5 years businesses spend may reach billions to educate and build a strong social presence.So the "time saver" comes after the "time consumer" and is a silly cycle of financial control freaks - even if you know it will take some more generations to stop it.

Sameer
Sameer

Hi MattAbsolutely - all good goals to aspire to.Just so we don't throw the baby out with the bathwater, to their credit, some solution providers are in fact doing what you describe, above. The discussion has started to move from "use a Wiki, its just better" to more defined business and industry solutions. But you're right, there's lots of opportunity to really bring in domain expertise, build credible solutions that plague specific industries and frankly, charge a premium for deeper impact.

Sameer
Sameer

"Whats the ROI of going to Boston College"From where I sit it has to be low - I went to BU for grad school :)

Matt Moore
Matt Moore

Sameer - I think should "name & praise" and then "name & shame". Who does this well? And who isn't doing this enough?

Sameer
Sameer

Hi MattI think its way too premature to do that, but that's just me. Regardless of the fact that some of these offerings are in 2nd and 3rd versions, I think there's going to be plenty of re-casting over the next 12 months as customers start demanding deeper relevance. And that's very normal for such a new space.

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