Design thinking has helped my team reframe problem-solving to innovate for customers - but it hasn’t always been smooth sailing. Consider these five lessons learned.
How to map IT ROI: New era, new variables
With many digital projects, achieving a strong ROI means establishing a range to shoot for — while watching the intangibles. Focus on engagement and experience
The meaning of the term “ROI,” or return on investment, has changed over the years. Formerly referring to hardware and software costs, it now focuses on measuring user experience. Rather than referring solely to cost savings, it’s now more about measuring experiences and making it easier to accomplish tasks.
The term came from a simpler time, when ROI could be calculated by multiplying hours saved based on a fixed cost per employee. This was a bit of a smoke-and-mirrors calculation, but at the time it made perfect sense. Today’s gig economy, in which short-term employees use a platform-based mentality and leverage applications to solve a diverse mix of problems, makes it challenging to establish a traditional ROI figure.
[ Culture change is the hardest part of digital transformation. Get the digital transformation eBook: Teaching an elephant to dance. ]
The value of an ROI calculation will always be far greater than the cost to create it. Often, an ROI’s end result is not the intended or initial target. Like a detective solving a crime on a corkboard with pictures connected by strings, the common ROI denominators will always involve mapping what’s related to the technology, how the technology relates to employees, and how employees operate within the business processes.
Why the IT ROI denominator is always changing
The ROI’s denominator is always changing. Sometimes it refers to the actual dollars saved from connecting front-end systems into a more ubiquitous cloud environment. Other times it is all about employee engagement and satisfaction with a new application or process. However, the net result of an ROI can typically be found within employee satisfaction: Greater engagement due to a simplified or joyful experience elevates productivity.
Let’s break it down by looking at the example of implementing a new suite of business tools. Before ROI is even spelled out, the company needs to think about the entire process holistically and ask the question: Why should we migrate and what is the value of this migration?
Often, the answer can be found in categorizing this project into either a “need-to-win” or a “need-to-play” scenario. The need-to-win scenario is simple: The company implements a new suite of business tools because they feel it will make money for the business.
For the need-to-play example, the company implements the suite with the main goal of establishing greater employee collaboration, but additional benefits such as machine learning and cloud service could also enhance the business’s competitive stance.
In either scenario, if the company enters the implementation thinking only in terms of ROI cost savings, it will miss a tremendous amount of value by overlooking some of the most important variables.
Human vs. non-human interaction types of ROI
Regardless of the many ROI variables, calculating increased employee engagement with the new system or application is always paramount — if nobody can understand or use the new process, no amount of prognostication will yield the desired results.
Non-human interaction types of ROI are often easier to calculate. For example, changing all the edge routers, implementing a configuration management database (CMDB), or even swapping rack-mounted power distribution units (PDUs) for more efficient power devices would provide a linear ROI.
Human interactions involve employees engaging with new applications or processes. The human element always introduces uncertainty into ROI calculations because even the most carefully thought-out ROI predictions will fail if employees don’t adopt the technology. To help avoid this situation, it is always wise to engage employee feedback prior to the implementation. This will foster a sense of personal value and ownership in the project, which in turn will help drive adoption and usage upon rollout.
Measuring the intangibles of IT ROI
Slide-ruler ROI calculations often fall short due to the vast number of variables in the equation. These variables have dependencies and co-dependencies throughout the entire organization. These dependencies are often overlooked because the right questions are not asked prior to the project’s rollout. Before attempting any ROI prediction, consider all tangibles, intangibles, and especially the human interaction element.
Swapping hardware to save energy and reduce a carbon footprint is a more simplistic ROI realization.
Business today is conducted in an application-infused gig economy where all intangible and tangible elements must be carefully mapped in order to predict near-term and long-term benefits. As a result, ROI realization is not a linear progression; it’s an ever-changing set of values that offer varying amounts of engagement and satisfaction levels. The business tool implementation example shows how a project needs constant nurturing and training by management/IT staff to ensure a rising comfort level and continued progression of added value.
Sampling a predetermined ROI target at any point in the progression cycle will yield different results. Within many digital enhancement projects, achieving an acceptable ROI means establishing a zone or range to shoot for — with a keen sense for the intangible variables.
[ Read also: How to measure IT ROI in the digital era. ]