Enterprise 2.0 – An ROI paradigm shift.

I love metaphors, they single handedly enable people to view a concept from exactly the same perspective, even if only for a brief second. So allow me if you will…
Imagine that you are building a house and that you are discussing the design plans with the builder. You are both on the same page and are going over some of the detail when he asks you about the style of doors. He does not ask you if you want doors, but what style of door. You do not hesitate, you respond. You explain that you are going for an industrial feel so you want lots of metal framing and glass, and you discuss roughly the number of doors but agree that the size of the house and number of rooms really dictates what is right.

Enterprise 2.0 is like doors in a house – necessary… period, but customisable depending on what you want to achieve.

What is the ROI on a front door in a house? Well… You will be able to enter and exit for a start…  My point? To measure ROI in a traditional sense you need to have a $ value for exactly what it is you have gained from an investment.

You can tailor the size and feel around your organization, you can pick the tools you wish to utilize based on the type of interaction you want to achieve, but an ROI on enterprise 2.0? A calculation where you can plug in numbers? Hmmmm…

Blendtech made an investment in enterprise 2.0 and experienced a 700% increase in sales. This was as a direct result of a youtube video campaign that I discuss in my previous blog. How do we know this massive growth was a result of web 2.0 and only web 2.0? Because it was the only factor in the equation that changed. This situation lends itself to a traditional ROI calculation, little money out, lots of money in, clearly measurable $ value gain.

What about completely new territory?

• Knowledge Retention
• Reputation
• Trust
• Recognition
• Empowerment

The above rarely have a $ value that translates directly. What if your organisation doesn’t increase sales by 700% but the number of disgruntled customers reduces by 30%? What if revenue stays the same but your employees take less sick days? What if your customers report feeling more connected to your product?

Legitimately calculating ROI for enterprise 2.0

Establish exactly what value means, first. I like this diagram from ZDNet, it demonstrates that much of the value gained from web 2.0 is gained as a cascading and indirect effect of its introduction.

Therefore, it is extremely hard to measure, traditionally anyway. The organisations who have got it right, take for example Accenture, Coca-Cola, IBM, even blendtech, have not been afraid to think outside the square, and establish what value is to them, specifically. 

This is why you so often see enterprise 2.0 ROI loosely addressed as a list of statistics rather than the result of a calculation as per Charles’s blog, who discussed Accenture.

To effectively calculate ROI for enterprise 2.0 endeavours:

  • Decide what value is to your organisation in terms of web 2.0, what do more “likes” mean? What do more employee “profiles” say about how connected an employee feels?
  • Introduce appropriate metrics to capture this information and change of state as it occurs (you would not measure a quarter mile time in years, would you?)
  • Keep your finger on the pulse, monitor the positive changes, monitor anything that is negative also.
  • Keep in mind that cascading changes take time
  • Accept that some of the metrics you use are going to be new because enterprise 2.0 is a new technology and part of a paradigm shift.

Organisations are then able to monitor the state of their businesses taking all aspects of enterprise 2.0 into consideration. All areas  influenced by web 2.0 should be monitored. Then, and only then, after monitoring, reviewing and cultivating web 2.0 into something effective are they able to talk about the positive impact it has had.

Enterprise 2.0 is still very much in it’s infancy stage and this is largely why it is so hard to measure, what works really well for one company may totally back fire for another,and this has not traditionally been the case. I have no doubt that the future will reveal a standard ROI calculation for web 2.0, or at least for different aspects of its implementation but for now organisations need to keep their fingers on the pulse and concentrate on what works for them. 

Do you think a global enterprise 2.0 ROI calculation is possible?

References:

http://www.investopedia.com/terms/r/returnoninvestment.asp#axzz25ydgc2ml

http://www.zdnet.com/blog/hinchcliffe/determining-the-roi-of-enterprise-2-0/334

http://blog.socialcast.com/e2sday-how-to-calculate-the-roi-of-enterprise-2-0/

http://www.cloudave.com/631/maslow-s-hierarchy-of-enterprise-2-0-roi/

http://www.jmorganmarketing.com/roi-enterprise-2-0-value-intangible-assets/

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12 thoughts on “Enterprise 2.0 – An ROI paradigm shift.

  1. The hardest part for most large companies when it comes to Enterprise 2.0 is they simply don’t understand it and still have the mindset that social media and the internet is of no use to them compared to the traditional forms of marketing or advertising.

    It is especially true in a lot of the large media giants which is a little ironic if you think about it.

  2. Hi Adam,

    I like the metaphor connecting Enterprise 2.0 to having windows, its impossible to generate a profit from the windows however how can you calculate the amount of money you saved by having them there? In that regard it may seem a bit like insurance, costs a little to implement but the security benefits far outweigh the cost.

    If an organization does not implement enterprise 2.0 or any kind of social media strategy then they will suffer should their be a social media crisis involving them (whether or not they believe they are on the internet). Days lost in response times while implementing social media (albeit poorly) will cause significant damage to their reputation.

    An E2.0 strategy is definitely necessary for organizations to keep abreast of whats happening in the virtual world around them.

    Thanks for the read!

  3. Hi Adam,

    that was a very informative and detailed post you have shared with your readers.

    I especially like the diagram depicting the cause and effect chain of Enterprise 2.0 Tools. It is a rather realistic diagram.

    And yes, I believe a global Enterprise 2.0 ROI is definitely possible, but that really depends on what the organisation’s objectives are, and what they are really wanting to get out of it, from there, they can decide on which metrics they think its the most effective and relevant, basing on what they are wanting to calculate or find out.

  4. Interesting perspective to take – suggesting that enterprise 2.0 is absolutely necessary.

    I probably wouldn’t agree with that – I think that it has its place in some organisations. There are some which really, really benefit from it and some just plain don’t NEED it.

    There could be arguments for the implementation of it to bring some positive influences in for these other organisations / companies but as to it being fundamentally necessary, I don’t think so.

    • Also, you should totally come back and read this post you made in 5 years from now. I think by then it will definitely be at a stage where you are like yeah, it is like doors in a house. Necessary.

  5. I think the use web 2.0 applications is a necessity for private companies because if companies don’t respond to client feedback and take it on board, these clients will take their business elsewhere. However, for government departments it doesn’t seem to serve a purpose. Imagine if the Immigration Dept posted links to Facebook and Twitter on their website, providing clients with an opportunity to provide feedback. 80% of clients complain about the processing times for visa applications. What will the Immigration Dept do with this feedback? Nothing, as they are the Dept with the sole responsibility for processing visas and their clients, whether happy of not with the service they receive, don’t have any other alternatives.

    • Hi there,

      Thanks for your comment. For the specific example you mention, the immigration department, you are talking about tools like facebook and twitter. How about tools for knowledge retention within the organisation? With these, perhaps immigration issues could be solved much faster and more effectively. Like I said in my blog, it is about establishing where the value lies for your organisation and implementing appropriate enterprise tools to return this type of value.

  6. Hi Adam,
    A great use of metaphor I must add. I would agree with you entirely that finding key values and where they fall into the overall organizational strategy, would perhaps be one of the first step towards the appropriate implementation of e-tools.

    Cheers
    Thadreina

  7. Hi Adam,

    Interesting blog. I liked the cascading cause effect diagram and the concepts there: what about the cross-pollination! Continuing with your metaphors: “pollen to fertilize ideas in other flowers!” That’s a great example of how inspiration and creativity could explode through appropriate communication and contact.

    I agree with you that some of the concepts are hard to be included in an ROI calculation, but I think we have to use some creativity to put money into the great values that Enterprise 2.0 brings, why? Because, most of the companies (which are not forward-thinking) would not understand these advantages unless we could crunch compelling amounts of money related to benefits.

    Enterprise 2.0 is a fairly new endeavour and I think that it has to be introduced to the masses by relating it with the basic and traditional ROI. Of course, some forward-thinking companies would not catch the values straightaway, but some others, that I think that are the bulk are not going to understand and adopt new technology, unless $ is attached to it.

    Great post!

  8. Pingback: Wiki wiki – The power of “super fast” information | adamhijazi

  9. Pingback: Lucky – e – e – e – e you have enterprise 2.0! | adamhijazi

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