The ROI of anything

I have been involved with the field of Knowledge Management (KM) since about 2000.   In all that time nobody has worked out a great model for how to compute ROI on KM projects.  The same discussions are now taking place around social media and collaboration projects that are now possible through the fast developing web2.0/enterprise2.0 toolset.

I was recently reading the Information Week cover story, “Can Enterprise Social Networking Pay Off”  and was utterly amazed by the referenced CIO’s who had absolutely no idea how they were going to ever show an ROI.  One was contemplating doing it based on the amount of server space that would be saved for email.  Could that possibly even scratch the surface to describe the value of social networking?  I would call it statistically insignificant. 

My mind started wandered to contemplate ways of capturing ROI for investments that are in the “squishy” domain.  Any aggregate after-the-fact metrics are challenging because too many assumptions will have to be made and the “return” will often have many other claims upon it from other projects.

On the other hand, if we measure the return closer to when the value is provided, we may have a shot.  For B2B sales, more and more CRM systems are being used by companies.  At first the field was dominated by large players with large customers, but over the last few years companies like salesforce.com and even the small SaaS player Highrise have made it much easier for the SMB market to participate.  The nice thing about these systems is that they track a number of process points including when a sale is made.  As part of that data entry why don’t we ask the salesperson to explain what contributed to their success.  They are likely in a good mood and willing to “share the love”.

Imagine the value of all that bottom-up information about what information/process/people is leading to sales.  The managers and executives would have a lot better sense of where to invest in order to make MORE sales.  If you believe as I do that social networking tools are a major contributing factor, would that not prove your ROI and lead to additional investment?  Wouldn’t most salespeople often rank the following as important?

  • Finding the right people in the client organization
  • Getting the right information about each of those people
  • Learning about the company’s past successes and failures in that space and with that client
  • Finding the right information within your firm in order to put the best solution forward
  • Finding the right people in your organization in order to help support the sale
  • etc…

I would propose a step in the closing of a sale where a number of pre-selected factors (for that product or type of sale) were put in front of the salesperson and they were asked to rate one of the following

  • Essential
  • Major Factor
  • Minor Factor
  • Not a Factor
  • Negative Factor

Of course this type of measurement could also be done at other key transaction points, but a sale has a very nice neat tie to “return”.  Other measures like customer satisfaction while important can be challenging to tie back to solid undisputable items like money.  B2C sales would certainly pose more of a challenge for this technique, but customers may be willing to tell you what contributed to their purchase especially if you offer them something in return.

Please let me know what you think and share your comments on the ways you have found to measure ROI on the squishy stuff.

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