I was chatting to someone today about return on investment and how you’d try to calculate it for social software in the enterprise. My advice was just don’t bother but they weren’t having that as an answer.
They were banging on about this and that and trying to get across to me how important it was etc etc. Well working for a large pharma company I felt confident in challenging them to get an accurate ROI figure for anything. Of course they’d never manage it. People are so detached from the finances in a company like ours. They may have a decent idea of how much they pay for it but they have no idea how to measure the profit they make following the investment that they make.
Let’s break it down to the simplest level which is about how complicated this kind of thing should get.
%ROI = (Amount of profit / Amount invested) *100
So the two values you need to figure out is the amount invested and the amount of money you make. The amount invested seems simple because you know how much you spend on particular software. Or so you would think. Most people forget about the time taken to install the software or complete the documentation, they forget about the infrastructure costs, they forget about support costs and training costs. So they never really get that simple figure right.
As for the amount of money made you can just forget it in pharma, especially in the discovery stage. The research side of things is so dissociated from the sales side of things that you haven’t got a hope. The best you can hope for is, “we spend $Xbillion on research and make $Xbillion in profit.”
But that doesn’t mean you need to chuck out the ROI calculation. It actually comes in very handy when you want to prove a point. By now most of you have probably figured out what I’m going to say.
Looking back at the equation you can see you divide whatever profit you make by whatever you invest. For those of you who have done any simple maths you’ll realise that your profit is your numerator and your investment is your denominator. In any fraction the bigger the numerator and the smaller the denominator the bigger the resulting fraction i.e. in this case, the more money you make and the less money you spend the bigger your %ROI. This trend will always be correct until you get your investment down to zero and then your ROI is infinity.
So, what I’m trying to say in a very convoluted way is forget about the profit that you might make from investing in social computing, it’s just to hard to put figures on knowledge and happiness and quality. Start trying to figure out how you can get this stuff into the workplace as cheaply as you possibly can. If you manage to get something in for free it doesn’t matter if you only make a penny, your ROI is still massive.
