ROI stands for Return on Investment, which mathematically calculated is:
In some business ROI is relatively easily calculated. Simplyfying, let’s say that a shopkeeper who buys merchandise for $ 1000 to selling it later at $ 1300 would have the following ROI:
ROI = ($1300-$1000)/$1000 * 100% = 30%
That was easy!
But there are some arenas where the calculation is not easy and in some aspects in Enterprise 2.0 we have to be creative to crunch the numbers!
Following the Joction case study in the book Enterprise 2.0 Implementation by Newman and Thomas (pages 22-38) we could find interesting ways to find a tricky ROI. Joction is a fictional networking company that offer their services to a significant number of companies in Fortune 500 across the US. It have 20 branches spreaded in the country. It had grew really fast in past years and now an overload of information and pressure is straining the company’s employees. A big load of email sent to the managerial staff cause mental fatigue and lost of precious time. Other problem is that creative employees from different offices don’t know each other, so that makes hard for them to collaborate in innovation ventures.
Photo credits by The MatriXFiles
To solve all of that, the company bought and implemented an Enterprise 2.0 system that would strive to alleviate the situation and harness on the creativity of the network of savvy employees to develop innovation projects that would increase the proceeds of the company.
The case study is comprehensive and shows several methods to calculate the ROI of the implementation, I’ll show you some of the ones that were more interesting for me:
- How they measure innovation caused by better connectivity: The Enterprise 2.0 platform has profiles for each of the employees, where they can enter their background, interests and aims. So any one in the company is able to look for people that has similar interest to theirs and connections could be created to innovate. In the case study, 20 groups were created after the implementation of the software and 16 of them attributed their formation to the Enterprise 2.0 platform. It was supposed than 10% of these groups would come up with projects that would produce significant revenue and it was assumed also that each of them would produce $ 500,000. So from the 16 groups, let’s say that two groups would come up with something profitable and that means that $ 1,000,000 would be the proceeds from that aspect of the benefit of the implementation.
Photo credits by The Creative Problem Solving Group, Inc.
- Increased communications with customers: Facebook has 955 million of users and if compared with countries’ populations, it would be the third in the scale. That means that definitely attracted to social networking and that companies would have to create platforms that could accomodate these needs of their niche market. With the Joction’s Enterprise 2.0 plataform relations between staff and customers grew stronger and even between customers significant amount of connections were made. Wikis were created for communication and solving of issues between customers and staff, causing satisfaction for a good aftersale service. From the number of customers that use an account in Jonction social network, 70% renewed their contracts, in proportion to 45% which was the average renewal. This fact, relieved important time from sales representatives to look for new customers.
- Better recruitment for Joction: The advent of Social Network in Joction have created an opportunity for new potential hires to join the network, so they are more aware of the culture of the company and chances of development. Employees are encouraged to reach out to the network to show them the conditions of work at Joction. Due to that, a 15% more resumes have been received for job openings posted and 60% of them are joined to the social network.
All of these methods of quantifying benefits would produce more accurate calculations of ROIs which can then be used to offer a Value Proposition for a company to implement social web technologies. That’s how you can introduce a new technology, just Showing the Money as Jerry Maguire.