I had a meeting with a potential client this morning. After spending some time discussing where they are as a company and the specific project they had in mind, they ended with, “And we have to show the executive team some ROI to get this thing approved.” Stop me if you’ve heard this one before. They had partially defined the problem they were trying to solve, and were anxious and willing to move forward with the project, but they had to show a clear and measurable financial return on this project, as it was being prioritized against 40 other projects. Yes, you heard me right, 40. Still with me?
It’s tough to sell to or get buy-in from executives - I get it – and we witness this struggle all the time. I meet with a lot of executives, and the term return-on-investment (ROI) is still very much a part of the business lexicon, and rightfully so. The truth is, a lot of very important business decisions are still made based on this thing we call ROI. So what’s the big deal? If we’ve been using ROI for so long and it’s been doing ok, why change now? Let me ask you a question: The wheel has been around for thousands of years; does that mean it can never be improved-upon? No, in fact the uses for the wheel have grown in ways we can only imagine. The fact is, in collaboration and relationship management projects, over 60% of these are still struggling or flat-out failing. And if we’re honest, this is probably a good average across most projects, with some failing as much as 80% of the time. So, after seeing many clients continue to struggle, even when they had “good ROI”, I asked myself this question: Could such an early and heavy focus on ROI actually be contributing to this project failure? Let’s come back to this later…
Warren Buffet once said that “Price is what you pay. Value is what you get.” In our daily work, we talk a lot about value. In fact, it is one of the guiding principles at C5 Insight. However, the truth is, a lot of organizations spend a lot of time, effort, and money trying to measure ROI – the precise financial impact of an initiative - without first understanding the value to the business. And if I may share a confession with you - we used to think this way too. But in our obsession with continuous understanding, learning, and improving what makes collaboration and relationship management projects successful, we have discovered an element - a genetic marker if you will - that is present in every successful project’s DNA, and that is clearly defined value. Let me stop here for a moment. Please don’t miss what I’m saying. Measuring the real financial impact of a project can be an important tool, and we still measure this for most of our clients, but it should not be the primary measure used when analyzing a project’s worthiness, and I’ll just come right out and say it - ROI is worthless without business value.
The simple truth we’ve learned is this - all ROI starts with real business value (RBV). As we strived to understand this more, we started to see how RBV and ROI were interrelated. The ah-ha moment for us was when we realized that projects that had real and lasting ROI never started by picking some new social collaboration, CRM, ERP, HRIS, or other tool. It never starts with the technology. The greatest ROI we’ve seen came only after focusing first on the business problem and the tangible value that the tool(s) provided to the organization.
It really is that simple. You see, when we spend time on creating real value versus simply trying to calculate ROI, we are focusing on the very things that the people in our organization believe will help them do their job better. An easy way to remember this is that creating real value always involves serving someone else. If I’m serving someone in a way that is meaningful to them, then I’m creating real value for that person. And in the end, when you focus on the true needs of the people in your organization, then people will always use what you give them, and this results in true, measurable and lasting ROI.
Only the use of this technology, system, process, or solution will result in measurable ROI. If you spend $1 million on a project, with loads of functionality that is set to make your team 25% more productive, and reduce paper by 75%, but no one finds value in it and they don’t use it, I can already tell you your ROI - $0.00. Once organizations begin to understand this, and take a value-first mindset, success and real ROI will happen naturally (and your people will actually get what they need).
How is your company doing when it comes to being a value-first organization? If the answer is something like most organizations - “A what organization?” – then stick with me a few more minutes, because I want to challenge you to go back and answer a few more questions:
- Are you getting your people involved in the process (and this doesn’t meant just IT)?
- Have you formed a formal leadership team for this project?
- Do you understand the company financials?
- Do you know how your company makes money?
- What would cause your company to be profitable vs. unprofitable?
- Is what you are implementing/building/integrating serving someone in a positive way?
Now that you know this, what will you do with it? I’ll leave you with this...
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