$$$$ Show Me the Money $$$$$

It all comes down to money, dollars and cents. Money makes the world go around. If companies are to stay in business - debit/credit, balance sheet, profit and loss, cash flow, expenses and revenues are their concerns, to create that profit which will decide whether they can keep their business afloat. So why then are companies spending their money on social technologies? It has to be more than a fad or a whim for both large and small enterprises to be making these investments. Are the benefits tangible or are they intangible? And can these intangibles be measured? What is the return of investment (ROI) for the social technologies that they are implementing?  

Case Study Overview

In this blog, a case study will be examined to understand how to analyse the ROI in social technologies for an Enterprise 2.0 project. Newman, Thomas & Ebrary (2009, p. 22) discuss how this ROI can be measured through opportunity costs by looking at existing processes; analysing time spend by employees communicating through emails, phones, and meetings; improving customer interactions and creating better customer service to see how Enterprise 2.0 can improve the processes and bring change to the business operational model, all to improve their bottom line financially.

The case used is Forrester’s Total Economic Impact of IBM Social Collaboration Tools.  IBM commissioned Forrester, an independent company which provides advice on technology research and analysis, “to examine the total economic impact enterprises may realize by deploying IBM Social Collaboration tools”. The organisation used for this analysis is a manufacturing company.

Social technologies have begun to be recognised for more than business-to-consumer interactions for marketing and communications.  This social business is in fact related to their business profits. As maturity grows in this area, as shown by Deloitte & MIT Sloan Management Review. (2014). Moving Beyond Marketing: Generating Social Business Value Across the Enterprise, social business can bring value to organisations. The below graph shows how value can be realised by companies with the maturity of social technologies:

Source: Deloitte & MIT Sloan Management Review. (2014)

The Company

The case study describes the unnamed company as a “large, global manufacturing company which employs 50,000 employees with a complex product set consisting of tens of thousands of product families”. McKinsey Global Institute 2012 shows how social technologies can add value to this industry -

Source: McKinsey Global Institute 2012

The manufacturing company hopes to address issues by implementing IBM’s Social Collaboration tools.  Some key decisions and points which will support this project are:

• The company needs to modernise the way they collaborate and the latest Web 2.0 social technologies are required
• Support has been gained from senior management 
• A vendor has been selected for what the company feels will offer them a better integration solution with less administration overhead
• With the company’s recent growth in emerging markets, better global collaboration is required and an associated global rollout
• Two specific business areas, Product Research & Development (R&D) and Sales, are selected for initial implementation as quick wins would be realised from these areas.  A collaborative platform will assist both these distributed areas.  

The Enterprise 2.0 Project

IBM’s Social Collaboration tools are a range of collaborative enterprise solutions such as “blogs, wikis, bookmarking, communities, team spaces, content management tools, enterprise IM, online meetings, audio and video chat, email, calendaring, and other collaborative applications”. These are provided through their products IBM Connections, IBM Connections Suite, IBM Notes and Domino and IBM Sametime.

The Benefits

The company’s potential benefits with implementing IBM’s Social Collaboration tools are:

• Increased revenues from new product ideas facilitated by collaboration tools that result in more new products brought to market
• Faster time-to-market of products, resulting in faster accrual of revenue
• Staff productivity gains through faster access to expertise and information regardless of location (Source: Forrester (2010)).

The initial implementation and analysis is based on two of the company’s major areas and are used to uncover how this Enterprise 2.0 project can impact these areas:

New Product Development Process

• Increase the number of ideas generated
• Increase in collaboration across the distributed areas of the company and in a more efficient manner with the ‘wisdom of the crowd'
• Increase in innovation
• Increase marketable products and time to market
• Increase in sharing of information and best practices
• Increase in revenue

The expected benefits from this are

o  Incremental revenue for new products

o   Improved time-to-market

Sales Process New Opportunities

• Sales community collaboration within sales teams and across the company
• Increase in competency and capability of the product lines which facilitates an increase in sales
• Greater and easier technical assistance available to the sales teams from a larger pool of intellect to draw on
• Increase in revenue

The expected benefits from this are

o   Incremental revenue in sales

o   Staff productivity savings

With each of these identified benefits, the report shows the figures as to how these benefits can be calculated for revenues - new products $8,400,000, improved time-to-market $672,000, incremental sales $600,000 and productivity savings of $884,813.

The Costs

Costs are tangible and can be easily calculated. The costs for the project have been broken down and show both the capital (hardware and software licenses) and the operational (ongoing maintenance and support) costs with the internal (project implementation, communication plan) and external (professional services) resources required to implement the project.  A total cost figure is not calculated.

The Outcomes

The benefits realised for this company are:

• As Aral, Brynjolfsson, & Van Alstyne (2012) discuss the ability of a network to grow by its own accord which is not possible without social networking tools, as the information tends to be siloed and relationships are harder to build. This project proves this point as the adoption of tools grew virally rather than through a management directive which created a better uptake and collaboration
• The company’s business processes have started to change and improve as the collaboration tools become embedded. No restrictions are being placed on the collaboration and it is growing organically and achieving positive results
• Monitoring of the site provided statistics such as “viewed by 7,500 unique visitors with 14,000 visits per day and 75,000 page views per day. More than 12,000 photos have been uploaded”
• Aral, Brynjolfsson, & Van Alstyne (2012) discuss about employees connecting, their network diversity and how this returns payback through the top performers work being through shared workspaces which are searchable and readily available to all staff. This promotes increased productivity, value creation and innovation. The above statistics prove that this has started to happen
• Creation and searching of blogs and communities for information was improved with expertise knowledge and findability
• With the beginnings of a rich data repository, it now allows for the sharing of information within teams and across the company globally
• Training impact and costs were low as the tools are intuitive. Little impact on helpdesk resources noticed

The ROI Approach

The ROI approach used and explained the benefits and associated costs for the implementation of this project. The intangible benefits were translated to dollars and cents.  Timeframes on the goals were not given and weakened the business case.  The principal problem with the ROI approach is that does not actually calculate the ROI. Why is it unclear? A total cost figure is not calculated nor are the benefits fully fleshed out so that an ROI can be simply calculated. “The return on investment will only grow in the years to come” Forrester (2010, p.9) is a disappointing statement as the report done by Forrester fails to provide the ROI number for this business case and weakens the belief that social technologies are indeed valuable and are worth companies’ investment and time into it.

Is the simple formula for ROI that hard to calculate?

ROI = (Gain from Investment – Cost of Investment) X 100

                    Cost of Investment

References

Aral, S., Brynjolfsson, E., & Van Alstyne, M. (2012). Information, technology, and information  

     worker productivity. Information Systems Research, 23(3-part-2), 849     

     -867. doi:10.1287/isre.1110.0408

Deloitte & MIT Sloan Management Review. (2014). Moving Beyond Marketing: Generating Social
     Business Value Across the Enterprise.

Forrester (2010). Total Economic Impact of IBM Social Collaboration Tools

McKinsey (2013). The social economy: Unlocking value and productivity through social
     technologies.

Newman, A., Thomas, J., & Ebrary. (2009). Enterprise 2.0 implementation. New York: McGraw-

     Hill.