What is the Enterprise 2.0 return on investment?

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Web 2.0 platforms that many of us use in our personal life, such as facebook or pinterest or tripadvisor, have been adopted without too much thought for the time we’ve each invested to setup our profile and start using the application. For example, I started using tripadvisor without any training or setup cost, and continue to use the platform to achieve my objective of a well-planned, enjoyable holiday.While many executives and employees have realised the benefits of web 2.0 adoption in our personal lives, we can see that there is little cost involved and so the benefit derived does not need to be quantified or justified. As discussed previously on this blog, the nature of enterprise 2.0 platforms is emergent outcomes, that is, valuable outcomes that cannot be predicted in advance. This is a challenge within enterprises that need to identify and quantify the beneficial outcomes in order to justify the initial investment in adopting new work practices and new applications.

Perhaps what makes enterprise 2.0 a different proposition to our personal use, is that it’s a significantly larger investment for an organisation to implement an application.

The cost of implementation can include:

  • infrastructure and software costs if it’s hosted internally to address risks such as security and privacy, or
  • licensing costs when it’s a software as a service application
  • organisational change program to drive better work practices

Like Cinderella finding the shoe that fits perfectly, many organisations have invested in an enterprise 2.0 platform that meets theirneeds. These are organisations that have made the decision to implement and have seen the benefits achieved commensurate with the investment. Let’s take a look at how some companies have identified and quantified the return on their initial investment.

Austin Hardware, a manufacturing and distribution company have reduced total effort across their product development lifecycle through earlier feedback on potential profitability of their projects using a project collaboration tool.

Getty Images adopted collaboration platform SocialText with the target of improving new employee onboarding. SocialText have quantified the return for effective onboarding as reduced time to effectiveness by 50%.

TELUS, a Canadian telecommunications company adopted the large-scale collaboration tool Sharepoint to save an estimated 20% of their $21 million budget for 2011.

SBAB, a government owned bank in Sweden, set out to create “their Wikipedia” where everyone can publish but also everyone can search and find. Their representative is quoted saying “We have increased our efficiency with at least 10% over these five months”

SMG, an American consulting firm implemented corproate microblogging tool Yammer. They attribute time savings through decreased miscommunication and reduced duplication as well as improved response times to customers.

Burberry’s end-to-end Enterprise 2.0 adoption – from their CRM system, to the internal collaboration tool, to their online presence – was credited with contributing to a 21% profit increase in 4th quarter 2011.

These are case studies from diverse industries adopting very different collaboration tools that prove that it is possible to quantify the return on investment for enteprise 2.0 adoption.

We know the ugly step sisters tried to cram their feet into a shoe that was never going to fit, the path to enterprise 2.0 success is littered with companies that have would like to achieve the benefits promised and yet have chosen an approach and a scale that haven’t been a good fit with the organisations capabilities and needs. Each of these case studies illustrates the many different approaches that can be taken, illustrating there is no one-size-fits-all answer the challenges of justifying the investment being made: some organisation have seen adoption spread organically through their employees resulting in successful outcomes, where as others have taken a structured approach to ensure the rollout is a success.

The different collaboration tools each have different costing models that may allow an organisation to match the benefit to the costs as few employees using the tool means low costs which then rise with increased usage and correspondingly increased benefits; other tools have a significant upfront cost with the return on investment increasing with increased usage, or the ability to drive greater benefits through integration with existing IT investments.

There are a multitude of case studies showing the return on investment of using social media and web 2.0 platforms for engaging from the business to customers or potential employees. What’s interesting is that all of the case studies above, with the exception of Burberry, have adopted enterprise 2.0 tools for specific internal benefits that match their organisation strategy.

What do you think, is there a bigger challenging quantifying the return on investment for internally looking implementations?

7 thoughts on “What is the Enterprise 2.0 return on investment?

  1. Hi Amanda,
    When you said: “we start using this easy access web2.0 tools without much though”, that’s exactly what happens. The similar scenario happens inside companies they start using without a proper business case, perhaps they are just following the trend and avoid the risk of not investing.
    When it comes to open source tools and cloud access, I believe the risk is even bigger, for example, who should I blame if the linkedin lost all my data, or who should I call for support when wordpress server has an outage?
    I guess part of the ROI calculation take account of the maintenance cost and early life support, so the open source and cloud idea makes thinks even more complicated, don’t you think?

  2. It sure is! When we start using the cheap or free web 2.0 tools within a business it makes it easy to get a return on this very small investment but then we might be exposing ourselves to some serious risks such as a lack of continuity of service for a critical function as you’ve highlighted. It’s complicated and uncertain so it’s no wonder that ROI calculation continues to be debated with so many different opinions. I found this a really challenging blog post to write for this reason, the case studies with quantified benefits quite hard to find. I like your idea to include the total cost of ownership in the cost/benefit analysis. However I believe the challenge in calculating the cost is a smaller problem than the really difficult job of calculating the benefit.

  3. Hi Amanda, I think what you touch on regarding the emergent outcomes is what is particularly key here. Traditionally when calculating the estimated ROI of a project, you need to be very specific in the goals that you expect to reach and the metrics by which you are going to measure its success or failure. So these emergent outcomes should be seen as “added bonuses” at best. Companies really should not only be doing some very in-depth analysis to see whether the shoe actually fits, but also if they can do what they need to within it. No point taking your high heels hiking, if you catch my drift? Simply relying on these emergent outcomes can be a very dangerous business indeed!

  4. There are lots of case study from many organization implementing social medias. Many have a great success while many has to deal with more problems. It is as you said, no solution will work with every companies. The organization must choose some of the web2.0 tools to use for the best ROI they can get and the most suitable for the organization. The organization need to adapt themselves for Enterprise2.0 or they won’t be able to compete with their competitors anymore.

    Cheers,

    Prapat W.

  5. I would just like to point out ROI can be realized in a very wide perspective , many organizations focus on its projection by looking at how much revenue could be achieved , it is also important as you have mentioned too , and I am putting it in my own words that , the projection could also be realized by the amount of cost saved and the derived intangible benefits .

    • That’s very true. I took a very narrow focus on case studies with quantifiable returns even though many companies find the ermergent (unplanned) benefits more than justified the initial investment. Thanks for highlighting this!

  6. Hey there Amanda, great post as usual (i envy these posts greatly). I like the point you raised about the costs of implementing wiki strategies such as cost, licensing and software/hardware packages. I think wikis are a great idea but I also think it is better to do the research and implement for a reason instead of just keeping up with trends, i mean whats the point of investing into a wiki strategy when your business really does not need one in order to compete. Thanks again Amanda

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