Björn is asking what the Return on Investment of Collaboration is and writes up some neat (and programmatic) questions to systematize the discussion:
1. How to conceptionalize, realize and gain collaborative performance?
→ discussing the value chain of an collaborative enterprise, the economics of sharing, processes of open innovation
2. What are the main drivers for collaborative advantage and efficiency?
→ discussing communications, processes, infrastructure as well as (self-)management
3. What are the key values of a collaborative culture?
→ discussing the key characteristics as open, transparent and decentralized as well as others – and how to realize the cultural change in a multinational environment as we have in a lot of European companies
4. How to introduce and adopt social and collaborative approaches within the company?
→ discussing the steps of adoption especially in the context of multinational companies
Like him I notice that Enterprise 2.0 discussions fall back to the topic of ROI quite often, seen this many times before and again at the Cologne Enterprise 2.0 FORUM. So trying and exploring the subline of the upcoming Enterprise 2.0 SUMMIT (“Improving Collaborative Performance”) with these questions is a good idea. I won’t dive into all of them now, let’s look at number one first and take a first stab at why it’s collaborative performance we’re after.
To me, thinking about the economic measures and dimensions of Enterprise 2.0 is important. That said, I can also say that thinking about ROIs isn’t important for the reasons one might assume at first: It’s much like with “strategic planning” where the actual plans you derive are much less important than the process of planning (and the mental exercises you get when doing it up-front …) in itself. Two points to discuss:
- Defining and measuring an ROI of collaboration is both easy and hard – getting and measuring numbers is as easy as getting relevant numbers is hard.
- Thinking about ways to conceptualize ROI holds benefit, more than having an actual ROI definition.
What does this mean? Let’s start with the definition part, Return on Investment that’s the thing. Nice and easy way to calculate a range of possible alternatives and help in deciding on what to do, huh? But that definition is utterly flawed when we’re dealing with social software in the Enterprise. What does I stand for? Investment, i.e. basically all the Euros and Dollars we’re pouring into our Enterprise 2.0 endeavours. But wait, we’re much smarter than this, aren’t we? After all, we know or sense that buying and deploying IT systems (some of those are even open-source to make things even more complicated) is the easy part, and the bigger part is the soft stuff, like e.g. enabling and supporting collaboration. So we may start to add the hours of the people involved in our projects, and continue to count in all the costs that we’re guessing (when they write blog posts or edit wiki pages they don’t do any actual work, huh?), all the time spent collaborating … Yikes, it’s almost as hard to measure the “investment” as measuring the “returns” of social software in the Enterprise is. This is flawed too as this social stuff can exhibit nice benefits in areas that don’t seem to be related, that are too far in the future or that rely on extrapolations of things – things that are moving way too fast. There’s something to learn from neighbouring areas: Measuring improved knowledge retention isn’t easy – the KM guys are pondering this space for more than 20 years – thus, measuring the effects of a more collaborative corporate environment and a knowledge sharing culture that we may get via Enterprise 2.0 can’t be much easier …
Yet there are very good reasons for discussing measures and concepts for “collaborative performance” – we need to do some planning to know what to do, to get a sense for the environment we’re in and where we stand, what to do to progress and what actions to take when we sense that we’re drifting off from our course. And we need to define and point out our successes, if only to bootstrap and fund the little experiments we started off with (did I mention that calculating ROIs is hard when the I is small? Little lightweight pilot projects make it quite hard to calculate reliable numbers …).
Now, in the past I sometimes argued along the lines of “Please forget about ROI calculations, ROC is much more important”, arguing that the “Return on Change” is what we should look for in Enterprise 2.0 (One word as a focal point for change – Collaboration and Cultural change and developing collaboration capabilities). But it doesn’t take you far in the corporate boardroom (nor do other measures like the RoNI – Risk of not Investing that is plagued by overuse – how often have CEOs heard that “now’s the time to act or else”-thing? Business decision makers are wiser than that).
Whatever, the leading question “How to conceptionalize, realize and gain collaborative performance?” is giving us lots of things to discuss. We’ve not even scratched the surface (yes, it may lead us to discuss the value chain of an collaborative enterprise, the economics of sharing, processes of open innovation, …), use cases and “arenas for social software in the enterprise” and different takes on systematization. In the end it’s necessary to do the deep thinking to be prepared when trying to convince people about the benefits of Enterprise 2.0.
(Now onto posting Euan Semple’s expert profile over at the Enterprise2Open blog, later on I will dig into the new McKinsey Quarterly article “Six ways to make Web 2.0 work”. Both deserve a long post too.)
Excellent Post Martin,
coincidentially I’m working on my presentation for the Intranet Management Semianars today where Intranet ROI will be covered as well. My 5 cent:
I absolutely agree with you. Negative Business Cases are bad arguments – It doesn’t even work with kids to argue like “do this else no TV”. Maybe Management can be convinced to spend some money to develop a case and then we can say: Look, what happened – is that something? To find a 100%-bullet-proof case that show success within a reasonable short time is as well a challenge as a risk.
I guess, we have to take a close look at processes and the resources needed to produce deliverables. That gives us numbers with measures of time, quality, Euro or some other quantities. Reads like bean-counting. It is bean-counting. How can this be shortened up?
Recently, I re-read “The goal- A Process of Ongoing Improvement” by Eliyahu M. Goldratt, Jeff Cox, David Whitford – a novel on process management. A plant manager needs to boost productivity else the plant will be closed. They focus on bottlenecks, inventories and throughputs. Quite a bit theory of production. Now, I wonder if these concepts can help us to express utility of collaboration? Does it help us to manage bottlenecks? Where do we get more performance?
Is that complicated, too easy, too far away?
BTW, “The goal” is a really good read. Not a new book, though.
Hi Martin –
nice introduction to our “problem” … yesterday I found the video of a recent talk of Umair Haque (via BWL ZWEI NULL: http://www.bwlzweinull.de/index.php/2009/02/16/umair-haque-krise/ – the post is German, but the video not!) that led me to the thought that we have to take in account that the economic value system has changed.
@Jürgen hmm, one of the adoption paths I like most is to start with a pilot project to proove some of the benefits, and to learn at the same time. One may say that it’s too dangerous to start at a “bottleneck”, while we sense that this is a good place to start. When doing something that counts, demonstrating benefits mustn’t turn out ot bean counting, some value may well be self-evident (like when adoption rates are better than expected, just because the solution is filling this pressing need that wasn’t catered for yet), others can be evaluated in a more qualitative style (like e.g. flat-out asking employees if they are satisified with this approach to the bottleneck).
After all, some decision makers will be convinced by those successful pilot projects, others may yet need to see more general acceptance in their industry. I guess that when it’s becoming fashionable, we’ll see that the questions for ROIs and clear-cut use cases suddenly become much less important. This may happen quite soon, i.e. when the big consulting companies enter the field (I want to pen down some notes on the latest McKinsey Quarterly article on Web 2.0 in the Enterprise) or when major technology suppliers are bringing shiny Enterprise 2.0 goods to the table.
@Björn I’ve seen this video too, and I definitely think that social software in the enterprise has a big place in organizational renewal.
On my other blog I am dealing with this stuff since long, see e.g. http://is.gd/kgTF and some thoughts on what we need to become an “innovation powerhouse”:
– adaptivity (“play, experiment, and create”)
– connectivity (“space”) are essential ingredients for a (business model) innovation powerhouse
[…] Repeat with me: the main change effect is not acceleration – but we may be tempted to measure this first in our efforts to calculate ROIs. […]
Referring to your critic of a Risk of Not Investing approach I would like to turn you’re attention to the paper “The Risk of Not Investing in a Recession” from Harvard Professor Pankaj Ghemawat. He distinguishes two very different ways of thinking about investment and risk:
1. the financial risk of investing and
2. the competitive risk of not investing.
“The financial risk of investing is the failure to achieve satisfactory financial returns from an investment. And the competitive risk of not investing is the failure to retain a satisfactory competitive position for lack of investment.”
The challenge and art of strategic management is to understand and balance both types of risks. The rationale behind a RONI approach is therefore that “wise” business decision makers will not just rely on the financial (ROI) perspective but will call for a complete picture. If we try to convince people about the benefits of Enterprise 2.0 we should be able to provide the whole picture at the boardroom. This is especially true as neither the ROI (“We’ve not even scratched the surface…”) nor ideas for a RONI appear currently in a great position to do the job alone. This job is especially challenging at the current economic situation and its worth to look at Ghemawat reflections on the impact of an economic downturn to the described balance between financial and competitive risk:
“Specifically, at the bottom of the business cycle, companies seem to overemphasize the financial risk of investing at the expense of the competitive risk of not investing. Once-in-a-cycle errors of this sort can create a lasting competitive disadvantage, which is reason enough to write (and read) an article on the risk of not investing while the economy is still weak.”
Best Regards, Frank
thank you for your comment – but I think you missed my real points a little bit: Starting a discussion on various types of metrics for getting a grip on “improved collaborative performance” – and I hold that some of them are flawed but still useful when discussing things or when talking to certain people (adapt your language to the people you’re talking to, that is).
It wasn’t my intention to rule out the RoNI idea for once and ever, it’s probably a good idea to also add this line of reasoning to the “toolset of the Enterprise 2.0 consultant”. And be assured that throughout my work in the E 2.0 field I am constantly arguing that Enterprise 2.0 is a big opportunity for gaining competitive advantage (overall, as in many functional areas and on many accounts). I’ve always said that this is not an IT topic but an area where having a solid understanding of strategic management is helpful (see e.g. http://is.gd/koyz), combined with a background in organizational management and more …
See, I am interested in all possible ways to achieve acceptance in the boardroom. If that can be done by focussing on the Returns on Investment, fine, if it’s possible by pointing out the competitive risks of not doing so, equally fine.
But while I find Pankaj Ghemawat general diagnosis fitting and am utterly sympathetic to his ideas on a macroeconomic scale, I am not sure if this has proven to be a good model for understanding (and influencing) C-level type of people, especially in times of crisis. For one, I am feeling an undertone of “marketing with fear” in those discussions that seem to focus on the (dreadful) things that are going on, the things that will happen in no time, the dangers that arise when making this “once-in-a-cycle error” etc. And I know that C-level type of people don’t want to be put under pressure. Thus, showing and demonstrating benefits works better than talking of the bad things that might happen … yes, people are strange.
Taking the chances that arise in downturns (you get room and time to re-think and rewire the business and through this you can ideally lay the foundation for future growth and well-being …) isn’t easy. Doing “something new” when everybody in your industry is busy cost-cutting and downsizing needs visonary leadership and strong implementation capabilities. It’s so easy to say that we can adopt the learnings more cheaply later on, being a “fast adopter” is smart. Add to this an uncertainty as to which systems and systems integrator to choose and you see that the (well-meant) idea of arguing with an RoNI will have a hard time.
So I am remaining hesitant to argue with the RoNI (or the economic cycle as a whole) when arguing for Enterprise 2.0.
Probably I am naive, but I hold that seeing the benefits of improved collaboration shouldn’t be a question of crisis or boom, but should be clear just because of the plain necessity for connected knowledge-workers and their work processes …
Martin _ frogpond
ps. dropping out for the carnival week-end, see you all on the other side
Interesting discussion gentleman, I have been reading a lot about ROI on Collaboration software and I have been of the opinion that presenting numerical values for the Return is quite difficult and the return can be valued in terms of perceived value.
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[…] Measuring improved knowledge retention isn’t easy – the KM guys are pondering this space for more than 20 years – thus, measuring the effects of a more collaborative corporate environment and a knowledge sharing culture that we may get via Enterprise 2.0 can’t be much easier (see this article from http://www.frogpond.de) […]
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