March 27, 2010 2 Comments
From the home office in CTU, where I’m taking control of ’24’, not going to let it be canceled…
Observations on technology and business from someone who should know better
March 27, 2010 2 Comments
From the home office in CTU, where I’m taking control of ’24’, not going to let it be canceled…
December 6, 2009 Leave a comment
From the home office in the middle of the road by my smashed up SUV with a nine-iron imprint on my face…
April 13, 2009 14 Comments
There is currently a business and marketing fashion wave for collaboration as the miracle cure for all that ails business which isn’t helpful in differentiating good from bad ideas.
Oliver Marks, ZDNet, When Internal Collaboration Is Bad for Your Company…
It feels like I’m seeing more posts describing the challenges that Enterprise 2.0 faces. I’m not alone, Dion Hinchcliffe noted a similar trend yesterday as well on ZDNet. Of course, these concerns have always been there, as they are for any technology innovations (just look Twitter coverage in 2007). But I’ve been impressed with the frequency of critiques recently.
All of which is right on schedule.
Are you familiar with something called the “hype cycle”? It’s a fascinating framework used by the analyst firm Gartner. It describes five phases that technologies go through on their to becoming mainstream and beneficial to companies:
1. “Technology Trigger”
The first phase of a Hype Cycle is the “technology trigger” or breakthrough, product launch or other event that generates significant press and interest.
2. “Peak of Inflated Expectations”
In the next phase, a frenzy of publicity typically generates over-enthusiasm and unrealistic expectations. There may be some successful applications of a technology, but there are typically more failures.
3. “Trough of Disillusionment”
Technologies enter the “trough of disillusionment” because they fail to meet expectations and quickly become unfashionable. Consequently, the press usually abandons the topic and the technology.
4. “Slope of Enlightenment”
Although the press may have stopped covering the technology, some businesses continue through the “slope of enlightenment” and experiment to understand the benefits and practical application of the technology.
5. “Plateau of Productivity”
A technology reaches the “plateau of productivity” as the benefits of it become widely demonstrated and accepted. The technology becomes increasingly stable and evolves in second and third generations. The final height of the plateau varies according to whether the technology is broadly applicable or benefits only a niche market.
The hype cycle is a useful framework, providing a reasonable explanation of the business phases of technology. Let’s look at how Gartner specifically characterized Enterprise 2.0 in its recent hype cycle report.
In August 2008, Gartner released Hype Cycle for Emerging Technologies, 2008. The report analyzed the different stages of 27 different emerging technologies. Included in the report were technologies related to Enterprise 2.0:
See Social Computing Platforms in the chart above, of which Gartner notes the following: “Following the phenomenal success of consumer-oriented social networking sites, such as MySpace and Facebook, companies are examining the role that these sites, or their enterprise-grade equivalents, will play in future collaboration environments.”
Future collaboration environments. What did Oliver Marks say? That Enterprise 2.0 has experienced a “fashion wave for collaboration as the miracle cure for all that ails business”.
So in his statement, Marks both describes unrealistic expectations of Enterprise 2.0, and his view that the hype about its potential needs to be taken down several notches. Last August, Gartner had put social computing platforms right at the cusp of falling into the Trough of Disillusionment. Eight months later, we’re seeing the first signs that Enterprise 2.0 may be falling into that trough.
To which I say…good. Let’s get on with it.
One thing I find odd is that collaboration is touted as a benefit of social software. Collaboration is an activity. There is no ROI in collaboration itself. What enhanced collaboration produces is the benefit.
And that’s where it’s been tough in the enterprise 2.0 world. A lot of vendors offer tools with wide open use cases. They can be used for any purpose inside an organization, with an eye toward better collaboration. It makes sense, and yet it is challenging to identify specific ROI-grounded use cases.
Here’s what I mean. Say you offer an application that let’s people easily share what they’re working on. They can send public messages to one another. They have spaces where you can upload, share and work together on docs. Free form spaces where employees share their thoughts. RSS feeds of activities.
Now I’m a believer in these tools, and I personally benefit from their utility every single day. But the challenge is specify what those tools will deliver to organizations’ bottom lines. Is it…
I could go on, but you see the point. What pain point inside companies does an enterprise app, social or otherwise, address? An answer of “any pain point” is unfortunately too broad, and makes it tough for executives to visualize exactly how the software helps. As Dion Hinchcliffe writes in Determining the ROI of Enterprise 2.0:
However, a key aspect of the ROI issue is that the strategic capabilities represented by Enterprise 2.0 are primarily emergent in nature, instead of carefully aimed at and unleashed at specific problems.
This isn’t to say that companies aren’t buying social software. Apparently, roughly a third of companies have some form of Enterprise 2.0 tools. But the actual usage and impact doesn’t match that adoption statistic.
So what happens to an industry when it enters the Trough of Disillusionment?
Keep in mind what the overall Hype Cycle measures – level of attention on an industry. It doesn’t say the fundamental value of the technology changed.
It’s more like a hangover after the inflated expectations.
But of course, the hangover and reduced attention does have some effects. More skeptical articles appear. VCs rationalize the field. Enterprises no longer feel rushed to adopt the technology.
Sounds pretty rough, eh?
So what comes out of the Trough is a gritty determination to see it through. Companies persist in developing their products and marketing to customers. Indeed, a focus on what works becomes more important than ever.
For the Enterprise 2.0 industry, the Trough means this: focus on solving specific problems with social software. If you can talk pain points of enterprises, you will win. They’re not talking about failures to collaborate enough. Here are some examples of what I mean.
My own company Spigit is seeing some strong enterprise sales. Strongest I’ve seen in my 14 months of being the sector. I attribute much of that success to its singular focus on using social software to better collect, assess and select employees’ ideas. Product functionality goes toward helping companies build their innovation pipeline.
Helpstream is another Enterprise 2.0 company with a specific focus. It combines a well-covered field – customer service – with a unique integration of customer communities. Helpstream isn’t about better search, or replacing companies’ intranets. The company’s philosophy is nicely summed up in a blog post:
You have to deliver specific product functionality to specific business functions in order to extract all the value from Social Media in business. Most Social Software for Business makes claims of value for specific business functions, but nowhere can you find actual software modules targeted at those functions.
Even Jive Software, which recently released its wide-ranging Social Business Software 3.0, has started talking about specific solutions: Employee Engagement, Marketing & Sales, Innovation, Customer Support.
Fewer, leaner companies with products targeting specific problems. That’s what the Trough looks like.
Keep in mind that the Hype Cycle is just that…a cycle. The rush of jubilation followed by the disappointment that a technology cannot, in fact, change all that needs improvement. But that doesn’t mean the technology doesn’t have value. It just means the hard work of addressing more specific tangible problems becomes the focus.
What gives me comfort is that the Hype Cycle provides a fairly well-known model for how technology ultimately becomes core to the way businesses do work. So let the analysis show that Enterprise 2.0 cannot, in fact, solve every problem that companies have.
That’s just a sign that things are progressing nicely.
March 9, 2009 25 Comments
Establishing a solid ROI for enterprise social software is an ongoing discussion for the sector. It is generally a requirement for most technology decisions made by companies. At a high level, there are two sides to this argument:
Martin Koser has a really thoughtful piece along these lines. It is something that I’ve met head-on in my work at Connectbeam. We have several large, blue chip enterprises with whom we’re engaging. And the need for some sort of ROI justification is a recurring request.
I want to share how I’m approaching this request. Before that, I want to describe my experience in providing ROI for enterprise software, of the non-social kind. It’s useful as a point of comparison.
I worked for a company named eFinance from 2000 – 2005. eFinance provided a hosted application that let enterprises run automatic credit evaluations on their commercial customers. This is an activity in most large corporations badly in need of improvement. I had the privilege of designing the scorecards for Hertz Equipment Rental Corp., using basic statistical analysis of actual customer payments and defaults.
For purposes of understanding what’s important in the world of back-office credit, here’s all you need to know:
Turns out, there are some inefficiencies in the process. Inefficiencies which enterprise credit software can solve. The table below shows them.
For the “R” part of ROI, the benefits are clear. The data costs were reduced with our credit system. Easy to apply the cost differential against the number of credit reports to arrive at a dollar savings. The credit reviews were another easy area for which to calculate the benefits. Each Further Review takes an average amount of time, which for a given volume means you needed N people. Reduce the percentage of Further Reviews, and fewer people are needed for a given volume of credit applications. Meaning headcount reductions.
The third benefit was faster response time to contractors seeking to rent equipment. While they didn’t have stats for lost business due to delays in responding to customers, feedback from the field was that this was an issue.Indeed, this third benefit was considered the most valuable.
From the eFinance work with Hertz, what characteristics are of relevance in considering Enterprise 2.0 ROI?
With that in mind, let’s turn to the question of ROI for social software.
The challenge with social software is that it addresses unpredictable, unmeasurable activities. And Enterprise 2.0 addresses a range of activities, not just a single process inside companies.
The graphic below is part of my ROI presentation for Connectbeam:
My X axis measures the predictability of the benefit. “Predictability” in this instance referring to the ability to know ahead of time how the benefits will manifest themselves. Reflect on this measure for the eFinance work for Hertz. Predictability was high for:
My Y axis measures the amount of value for the different benefits. “Value” defined in terms of revenue impact and dollar savings. In the eFinance example, the benefit of faster response time to customers, while not readily calculable based on existing data, was perceived to be a strong value proposition.
For Connectbeam, I put the benefits into three buckets:
I plotted them as having increasing value, but decreasing predictability. I won’t go into detail on how I describe these buckets, but the links above touch on it.
Essentially, the time savings are real, but are the lowest return to the enterprise. I look at those as the easiest to predict, with defined dollar benefits. In the ROI presentation, I can show how these alone offer payback on Connectbeam.
It’s the higher-value benefits where the ROI story is harder to present. After considering my previous success in identifying and articulating an ROI story for non-social enterprise software,
The ability to have predictable ROI for software is directly correlated to the predictability of the underlying activity that uses the software
Think about that. With the credit software, there was a standard process with known unit volumes. Each step in the process could be measured in time. Frederick Winslow Taylor would have loved it for its predictability, standardization and amenity to quantification.
What underlying activities does social software address?
All of those activities include elements of being unplanned, ad hoc, and creative. In short, they’re unpredictable and unmeasurable. The benefits also apply across a wide range of activities within the organization. Maybe Finance as a better handle on a new accounting issue that’s cropping up. Sales is up-to-speed on a customer’s hot buttons faster. R&D connects with the right field person to talk through a new innovation.
Like the feeling that faster response time to customers will result in higher sales and more satisfied customers in the eFinance example, the activities and problems addressed by Enterprise 2.0 are known to anyone inside a company. But no existing measures for the problems associated to these activities exist. Nor is there a good way to systematically measure their improvement.
That’s why anecdotes from the front line are so important. They show that improvements are happening with social software, even though you couldn’t pinpoint where at the start of the project.
Dennis Howlett is one my personal favorites out there in the world of enterprise software. He has an accounting background, so he’s pretty hard on soft, fuzzy feelings about the value of Enterprise 2.0. I did find it interesting that this was his perspective on where ROI comes from:
In my argument, breakthrough ROI comes from seeing these technology through the lens of collaboration, which in turn implies process and context. I am mindful that huge amounts of value continue to be locked up in supply chains. AMR quoted a number of $3 trillion in 2005. Has that materially changed? Simply being able to communicate across supply chains in a meaningful manner could do wonders to lubricate those rusty wheels.
Note what he’s saying there:
To wrap it up, my approach is to push forward with the ways in which Enterprise 2.0 delivers ROI. We cannot escape this duty in the industry. But I also am working to set expectations for how predictable this ROI will be going in to a project. After all…
Software ROI is only as predictable as the activity for which it is used
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