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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