ROI is Not the Best Measure for the Social Enterprise

When I was at Lotusphere 2012 last week I heard a similar refrain from vendors, service providers, and IT professional alike--"I can't make an ROI argument for the social enterprise that sticks." There were countless discussions about the "soft ROI" of social enterprise tools. This was not something said in hushed tones in private either. It was said from the main stage at keynotes. The complaining was equally strong from the IT community trying to justify something that they already know works and has benefits. The could see the advantages of social enterprise tools in their organizations and imagine more but are hamstrung by a reliance of upper management on a particular way of evaluating IT purchases.

The problem is not with social enterprise software and tools. It's with the measuring. ROI is fine when cost is the primary driver. It's easy to say "I can buy this machine instead of hiring five people to do something manually." Or "this system will replace two that are much less efficient." Or even "This will let me process more mortgage applications in a day then I can now." Social enterprise is about much more than that. Instead of saving pennies on operations or pushing up production by 3%, social enterprise is about making better decisions faster, having happier customers, and being more innovative by leveraging skills and creativity across the enterprise in ways that were all but impossible five years ago. The social enterprise is not about cutting--costs or people--but about growing your business. This is why there is so much interest in the social enterprise as the business cycle turns positive. Companies are moving from survival mode and, instead, taking up a growth-oriented posture. We are seeing it in increased overall IT spending and the declining emphasis on cost as a driver for IT spending decisions.

Still, there needs to be a way of evaluating purchases. If the old classic ROI doesn't do the trick, what then? The answer is to focus on total value. You have to go beyond ROI and look at the total economic impact of the social enterprise on an organization. Is there a value to customer retention that goes beyond new customer acquisition costs? Of course. Happy customers tell others and generate positive word of mouth which leads to growth. Is there a value in being a creative organization not bound by geography and artificial corporate silos? Of course there is and it is reflected in better products that outsell the competition. What is the value of making better decisions? It's a more efficient operation that makes fewer mistakes. These are not usually found in the classic ROI calculation.

ESG understands the importance of value. We've skipped over the traditional ROI calculator in favor of an Economic Value Validation model. The EVV takes into account so much more than an ROI calculation. More importantly, it goes to the heart of what everyone in a business is trying to get out of their organization - real value. Whether you are trying to express why your software is the best thing for a customer or doing all you can to help your company be more successful, being able to communicate value that drives growth is imperative. ROI just doesn't cut it, especially for the social enterprise.

Topics: Enterprise Mobility