Measuring the ROI for Social Networks

Business use of social networks, also referred to as social media or just plain social business, refers to the use of the Internet in myriad forms to interact with the organization’s various stakeholders. These typically are employees, suppliers, partners, or customers.

IBM describes a social business as one that “embraces networks of people to create business value.” It involves sharing, transparency, innovation, and two-way interaction. The objective is improved communications and collaboration that should lead to higher productivity, improved products and services, better decision making, and ultimately greater revenue, market share, and profits. Social business is a key component of IBM’s 2011 Tech Trends Report, here.

A recent University of Massachusetts survey, here, on Fortune 500 companies found that they already were engaged in social networking: 23% had an active public-facing corporate blog, 62% had active corporate Twitter accounts, and 58% had Facebook pages. In addition, companies have been deploying social networking tools like Yammer or IBM Connections in house. All this social networking raises the question: What’s the ROI?

The IBM Trends study suggested that the majority of organizations turned to social networking mainly to benefit from increased efficiency and to streamline collaboration. Often the companies began by deploying social networking internally (behind the corporate firewall). Even if they have outward facing Facebook, Twitter, or corporate blogs, the serious experimenting with social business was happening safely inside the company.

These initial deployments had three primary uses: 1) employee collaboration, 2) efficiency in locating people and resources, and 3) idea generation and sharing. The technologies they mainly used were file sharing, blogs, and online (intranet) forums. Nothing unusual or complicated or costly. Many of the social networking products like Yammer even are free for individuals, which is why workers may sign up on their own. (The enterprise versions entail charges but deliver more capabilities.)

Figuring out the ROI for social networking is challenging. People have always collaborated. If you collaborate a little bit faster or a little bit more easily than before what is the incremental value gained? To understand the ROI of social networking you need to look at it as a business process, not as an IT project.

Rather than try to calculate a technology ROI, you need to look at the return on collaboration and the value of knowledge access and skill sharing. If a streamlined collaboration process enables employees to work more efficiently or more productively, there is value that should be measurable. Similarly, if social media enables the organization to more efficiently find and tap the knowledge and skills of its workers and share that widely and more quickly, again there should be something that can be measured and given a value.

What is the value of a better interaction with a customer or with a valued partner or supplier?  These are areas where social networking can help. Or, what is the value of learning what people think of you or your products, good or bad? Again, this where social networking can help.

At a recent social media gathering a manager from Lowe’s, the home improvement store, described its use of IBM Connections. Mainly employees use it to locate other employees who have specific knowledge about a product or problem. The value came from the ease and speed by which an employee could find the information needed to satisfy a customer. In some cases, it might save a sale. In other cases, Lowe’s would have gotten the sale anyway. But overall, the interaction process with the customer improved.  Social media, he insisted, simply requires a different way of looking at ROI.

In an upcoming piece BottomlineIT will look at guidelines and practices for getting the most out of social media.

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