Social Enterprise ROI: Measuring the immeasurable.

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image by Steve Harris 

Social Enterprise ROI: Measuring the immeasurable.
(The plural of anecdote is not data, or Is there a scientist in the house?)

The world has been chapping our collective hides about metrics for social business. Customers want them, and not without reason. Our typical answers (ROI is irrelevant, What’s the ROI of your mother, it depends on the business problem) have some merit, but in the end, we still need to demonstrate the efficacy of social approaches to business challenges. Probably.

In reality we have very little to prove the worth of the Social Enterprise. We have some academic studies, we have some anecdotal evidence a few (very few) published use cases where metrics are involved, and we have a whole lot of “it makes sense, we feel it working”. The reason adoption has gone as far as fast as it has, is not about ROI. Rather, its because of a) the extent to which the old models are failing and b) the extent to which many people deeply resonate with the new models.

Social ROI: We’re working on it.
Predicting the ROI of any enterprise investment can be tricky. At my company, we have a whole team of people, called “Value Engineering” that dedicate their time to calculating these things. But when the topic is social business or enterprise 2.0, the challenge is much, much bigger. The reason is that the objective is to qualitatively change how work is done – how we view challenges and how we make progress. We are rethinking how we structure organizations, projects, teams and work itself. Qualitative differences are tricky to measure. Further complicating the issue, is that the outcomes of these changes emerge over time. Since these concepts have only been adopted slowly, and over only the last 3 to 5 years, we lack experience in understanding what these emergent outcomes should be (though we have plenty of theories about it), how to detect these outcomes, what is required to achieve them (though again, lots of theory), and, most importantly, in what time frames we should expect to see these outcomes. My experience is that small changes can be seen almost immediately amongst small groups, but larger organization-wide changes can take two years or more to mature and emerge.

Social Marketing ROI is progressing
That said, we’re seeing significant progress on the marketing side. Marketing, of course, is one of the two or three oldest professions, and it has been diligently measured for decades, especially in the last two, as digital marketing became the norm. You may recall that in the first decade of digital marketing,  measurement came down to one key metric – page views. Ads were priced this way, much like magazine ads. You may also recall that this was not a great metric, and did little to predict ROI. A decade later, we are somewhat better at measuring the impact of digital marketing, and have begun to treat social marketing as a special case thereof.

Case studies and ROI calculations are now popping up regularly for Social Marketing and Social Customer Service (which are now gorgeously converging into “Customer Experience, (can I get an “Amen”)). See this list, and this one  and this. Brand value and perception are more elusive, and impact of social on same are measured by opinion surveys where cause and effect can each be quite hard to determine. And still most businesses still look at “followers” and “likes” and similar metrics. Why? First and foremost, because they can. Second, of course, is because even the unsophisticated understand what those metrics mean. They may not be good judges of their importance, but people “get” them.

Even now that we have nearly 100% adoption of digital marketing (having at least a website), we should attribute this less to our improved ability to calculate digital ROI, and more to the fact that a website is now a just defining characteristic of having a business. We may yet see this happen with social workplace. It’s likely that we will – in 5 or 10 years or so, but until that point is reached, metrics and ROI will play an important role in the adoption curve – a bridge across the chasm between the early adopting visionaries and the late-coming risk averse. And time is of the essence for many companies in these days where five years can chart both the apex and the nadir of major companies.

2. Metrics are evil but also essential.

Metrics themselves aren’t evil –  metrics abuse is. Metrics abuse is responsible for countless bad decisions and negative, unintended consequences. Metrics abuse is what happens when people replace thoughtful, meaningful goals and insights with measurable metrics. People do this because thoughtful, meaningful analysis is very hard, poorly understood, and rarely done. Metrics then amount to the drunk looking under the lamppost for the keys he dropped over yonder because there’s no light over there.

There’s plenty written about the evils of metrics, [including my article last month], but its summed up nicely by the “McNamara Fallacy” by which many believe we (that’s the USA) lost the Vietnam war. This quote has been variously ascribed by the internet to both Charles Handy and Daniel Yankelovich and I can’t tell you which, if either, it really belongs to yet (I’ll let you know. promise to let you know when I figure it out). Its good enough to quote even with shaky provenance:

“The first step is to measure whatever can be easily measured. This is OK as far as it goes. The second step is to disregard that which can’t be easily measured or to give it an arbitrary quantitative value. This is artificial and misleading. The third step is to presume that what can’t be measured easily really isn’t important. This is blindness. The fourth step is to say that what can’t be easily measured really doesn’t exist. This is suicide.”

3. So why do we need metrics? Learning, convincing and deciding
We have a lot to learn about social business – though we in the biz are crazy saturated with it day in and day out, its really only 3, maybe 4 years old. We have yet to determine what it can do, what makes it work, how to be successful, and when to expect what kind of results. (though we have lots of excellent theory). The right metrics, properly applied can help us learn. Are we progressing? Why or why not? Are we defining progress correctly? Does action A work better than action B? When properly considered, metrics help us chart and adjust course toward meaningful goals.

Metrics represent an hypothesis – one that can be right or wrong – giving us the chance to prove it one way or another. Metrics are guideposts – your weight can be an indicator of health, but it is not in and of itself, health. In fact, cancer patients are known to be quite thin. Goldman Sachs, Enron or BP – all were doing well by many measures of corporate performance and each met with disaster that “no one” predicted.

Your CEO/CIO/CMO is unlikely to be as hip to the widely held notions of how social enterprise makes everything better as you are. He or she (but likely he) has a budget that must be allocated and every option is being presented as having nothing but marvelous potential. How is (likely) he supposed to decide? She will hear 10 maybe 20 pitches for different initiatives that someone wants her to fund, each with different upside potential. One will make the company smell better, and another will teach golden geese to fly in through the windows.

ROI helps to standardize the comparison factors for people who have to make hard decisions.  The person that says “if you invest x dollars you will realize y increase in revenue” has a business case that is hard to beat, except by others who will do the same. We counter this with narrative, and vision and storytelling. And in the end these techniques may prevail. And there’s some merit to arguments that stories (which present a more multifaceted picture) make better arguments than data. But when the decisions are hard, then cold hard data comes into play, and we just don’t have it hanging around yet.

4. Three challenges and going forward
But is is right to potentially dismiss social enterprise/enterprise 2.0/social business due to its so far so-called lackluster performance in the metrics and ROI department? Sameer Patel calls us all out on this in a recent post, We are now seeing (as referenced in this article) success metrics being measured in terms of how many people “believe” there are results. Now I get that perception of success is an important factor, but is still a poor substitute for actual cause and effect information.

But alas, we simply do not have the data yet. We are living in fast-paced times with three hard challenges between us and meaningful ROI analysis for social business.

1. We do not know what to measure.
2. We do not know how to measure it
3. We do not know when to measure it.

Fortunately we are not the first people to have such problems. We can look to other fields of knowledge and see how they’ve handled it. Epidemiology (among others) relies primarily on statistical correlations to begin to discern cause and effect, and create hypotheses to be proven or un by other methods. We will likely have to go big and look at extent of social business adoption (which assumes we can roughly define it) and corporate performance over time. We’ll have to sort out which corporate performance indicators are most often affected, after what time period. We’ll have to create cause and effect hypotheses, which we’ll then go have to prove – much like Ester Dufflo did in this TED talk on using economic theory to prove or disprove the efficacy of poverty alleviation efforts.

So in the long term, we’ve moved our challenge from figuring out how to measure how social business works, to correlating the adoption of social business to traditional corporate outcomes. Ok – now how do we start working through this correlation. Anyone? Help? We need to be scientists. We need to create controls and comparisons.

In the short term, we look for patterns – that is for clusters of activity to show up, or for an indication that when x happens, y usually also happens, or cycles – a leads to b leads to c. A person who reads x tends to also read y. A person that contributes p generally sees q changes in outcome. We may not yet know if they are sustainable, scalable, or even beneficial, but we are learning to identify patterns, we are learning what those patterns have to teach us. We are building maturity models and benchmarks that help us look at our own initiatives alongside anecdotal success stories. From here we will form our hypotheses, and learn. With the help of patterns, metrics, and a bit of faith that what our guts tell us is right, is indeed right.

And we continue to build our vision of what the ideal state looks like and our pathway from here to there.

The best is yet to come.

This post originally appeared on CMSWire


If Social Business Is the Answer, What is the Question?

This article was originally published in 2 parts at CMSWire.

What are the fundamentals of Social Business? Tough question.  Maybe even the wrong question. Maybe the question is “What is different now, and why does it matter?” In fact, I’m still trying to figure out the question, (straining not to use the “42” analogy) and would be most interested in your opinion here. So, while I’m still not sure what the ultimate question is, here are 7 themes that are critically important to understand in order to understand. Interestingly, I’ve seen startling disagreement as to which are the most profound or mundane. [I will be pursing several of these over the next year. If you’re interested in joining me in exploring, researching or writing more on these, let me know.]

The first three themes I cover here refer to the mechanics and driving forces behind social. The next four (published in part two) speak to their implications for business.

1.    Humans, institutions and revolutions.

This is the foundation of the “social business” concept and everything else derives from this. Hierarchies and command and control institutions were society’s brilliant invention to scale and focus human activity toward a goal. This model has roots that pre-date the pyramids. It solves challenges of coordinated communication and will.  (I describe this is slightly greater detail here)

But now two things are happening. First, we don’t depend on hierarchy for communications. Top-down has, in fact, its become a bottleneck rather than an asset in the comms department. Second, the world is moving too fast and competition is too fierce for rigid command structures populated by people who could hardly care less to remain successful.

As a result, people are finding their own voice, their own insight, purpose and ambition – and many businesses are too. In little ways, such as the new social intranet at work, and of course the much, much bigger ways that democracy and freedom are being reexamined, tested and pursued throughout the world. The new organization’s role is to make that a good thing by aligning all that energy and capability with a worthy purpose and a networked leadership structure that learns and enables at the pace of human capability.

Social business is not anarchic, however. Decisions still need to be made and coordination is still critically important. So while the organization as a whole moves from a mechanistic to a humanistic ideal, leadership too, is paradigm-shifting from a patriarchal, omniscient ideal, to something else that still requires a name. “Servant-Leader” has been offered up, but I’m not yet convinced. In spite of new leadership’s namelessness, we do know a few things. Modern leadership asks questions. Modern leadership recognizes that the organization as a whole knows more than he or she as an individual. Modern leadership nurtures and orchestrates the organization around a common purpose, with the confidence to constantly move forward and the humility to look for every opportunity to do better. The modern leader doesn’t hoard power, they cultivate its flow through and accrual to the organization as a whole.

2.    The opposite of social business is fear. No, I am not exaggerating.

The problems of traditional command and control structures are legion, but the most debilitating can also be the most subtle. The 20th century ideal of the organization is the well-oiled machine – one where every part and process is defined and every cog shiny and efficient. Each person within it is expected to stay in their designated box and be perfect. That is, they should never make a mistake. And in this unpredictable, ambiguous and complicated world, predicting the future, and acting perfectly is rather difficult and ‘mistake’ is often just another term for “results”. So a primary motivator at work is being right and not making mistakes. Which leads to two profound problems. The first is that people only do what they know works. That’s an innovation buster right there. The other is that when problems arise, people are incented to HIDE them, both consciously and unconsciously. So all news is good news all the time. Learning and excellence are eliminated by definition. This would be a largely unintended consequence of a system designed to create stability, reliability and scale. Oopsie.

The fear of being wrong, looking foolish, or being rejected drives far too much of human behavior, and the vast majority of business behavior, and it has long been used as the primary motivator of work. If you are afraid of being wrong, you are not likely to ask the questions that hint at uncertainty. You are not likely to listen and look out for disconfirming information. As a result, we walk into failure with arms open and eyes shut. This is normal business. It is wasteful, it is absurd, and it is very unpleasant for its anxious participants.

Incentives are really just the other side of the coin  – the carrot and stick model is a fear based model. The antidote to this is first found in small teams – duoships, even ( When a few people get together, motivated by a common cause and an intrinsic desire for autonomy, mastery and purpose, fear starts to recede and possibility opens up.

Such a team is incredibly powerful. They can probe the world, their doubts, their aspirations without fear, and with the support of other capable people. Their talents are amplified, their weaknesses diminished. If you have ever participated in such a team (and I hope you have), you understand this. When we have a shared goal, mutual respect and trust, we can deeply engage with our work by leveraging newly critical skills that David Brooks lays out with poetic beauty:

Attunement: the ability to enter other minds and learn what they have to offer.

Equipoise: the ability to serenely monitor the movements of one’s own mind and correct for biases and shortcomings.

Metis: the ability to see patterns in the world and derive a gist from complex situations.

Sympathy: the ability to fall into a rhythm with those around you and thrive in groups.

Who wouldn’t want to be described thus?

3. Collaboration is the only way forward

That is to say, that humans working as pairs groups, teams, organizations and communities are where real value is created. The genius (or lack thereof) in an individual’s mind is an ever smaller (though still and always transcendentally important) part of the progress equation. Even Steve needed a team. This is why the advanced communication skills suggested by David Brooks matter so much. Collaboration has always existed, and we’ve always benefited from it, but now we are absolutely beholden to it. There are many reasons for this, but I think the most compelling explanation for this has two dimensions. The first is the above-mentioned renaissance of self-actualization, and the second is the exponentially-increasing complexity of the work that we do.

Economist Ricardo Hausmann describes this in terms of “Person Bytes”, which may be one of the most important business concepts to be articulated last year. . Hausmann details the phenomenon that as individuals we’re now capable of much less than our ancestors – few of us can build our own house, provide our own food, clothing, etc –  though as a society we can build much more. Toasters, for example, and computers, which are far too complex for any individual to construct entirely from scratch.

I’ve written several posts on collaboration, and there’s no reason to repeat myself here. Complexity is most effectively faced by groups with high collective intelligence. Research shows that a team’s high collective intelligence does not reflect the genius IQs of it’s members, but the excellent attunement and equipoise amongst them. Creativity, in the business realm, will turn out to be a balance between profound individual and group effort, and the possibility-opportunity expansion of multi-disciplinary, multi-perspective, “edge” exploration.

Reaping more than a trivial percentage of your team’s potential requires the kind of deep engagement that can only be derived from collaborative effort. If you’re working in any kind of complex, knowledge based industry, you are here or you are almost gone.

4.    The big ‘Why’ for business

I have recently heard people argue that the only reason for a business to participate in public social networks is to generate leads and revenue. That any “relationship” formed with any kind of businessperson in social networks is by nature manipulative and false. When it was a work colleague of mine saying this, I thought ah – this person needs a bit of re-education. When it was a friend on twitter, I nearly wept. So here is my response.

People invented business for a reason. I don’t want to spend all my time growing, harvesting and milling flour and baking bread. So I pay you to do it for me. I don’t know how to make a car, so I pay you for that too. In other words, people need business and vice versa. This is a symbiotic relation ship that became grossly distorted in the 20th century but is recovering in the 21st.

Business exists to create value efficiently enough that people can pay a fair price for the product while generating enough profit to enhance the prosperity of the people who constitute the business. That is the intention of capitalism.
One unintended consequence of the industrial era, however was that almost all the power of creation, economics and communication ended up with business. Consumers (that is, “people”) could like it or lump it. Marketing – the relationship between the business and the client – became about cold and crass manipulation of people for the purpose of maximizing shareholder value. Shareholders? Where do they fit into this balance? Ah. Well they do play an important role in society and business, but that role has had some unintended consequences as well. I don’t really want to go into it here, but Umair Haque does an eloquent job of it, and there is a cohort of other economists and philosophers who have similar views.

Back to the why. We need to restore this balance. Marketing, sales and business is not about (shouldn’t be about) manipulation or extortion. It is (and shall be) about being valuable. Social media is one of the ways this relationship is coming back into balance. The democratization of communication and the means of production are restoring individuals’ voice, (though they seem now to be most effective at bringing down bad restaurants, not so much on airlines) and enabling businesses to remember that they are, in fact, of, by and for actual people. Social business is the businesses way of participating and remaining relevant in a newly re-democratized world.

The proper social relationship between business and people is one of mutual ongoing value – it is not only “transactional “ (yes, @decodingdress, I’m talking to you). And to you too @jess3/@eloqua.

If you are a business who disagrees with me on this you don’t need raise your hand. We already know.

5.    Patterns, not metrics.

If you have spent any time in the “social business” world, you have been asked the metrics question. Metrics, in short, are trouble. [see this thought-shifting lecture by John Seddon ] On the one hand, few business institutions cause more negative, unintended consequences than metrics. People act to fulfill metrics because they replace meaningful goals. On the other hand, metrics can be very useful tools for learning. Use them wisely.

The key brain buster of social business, however, and social networks in general, is that these are emergent systems, and usually complex, emergent systems, and for the most part, understanding these has not been part the standard American curriculum or career path, so they are a foreign concept to most people.

For the uninitiated, I’m going to take a risky crack at a two-sentence definition of a complex adaptive system. First, it consists of many independent agents (like people or honeybees, or people and honeybees). Second, each agent can independently change its behavior at least to some extent, and third, the system exhibits properties that cannot be predicted from its initial conditions or rules. There is vast literature about these systems in areas of math, computer science, biology, and economics. Complex systems are closely related to Wicked Problems. If you want to change a complex system, you generally have a Wicked Problem.

The thing about emergent systems, is that unlike a mechanical system – your car engine, for instance, or even your iPhone – you cannot predict what will happen or easily discern cause and effect. What you can see and understand are patterns that emerge, and some of the characteristics of those patterns with which you can then experiment.

So – we are being asked and asked again to establish metrics for evaluating our social endeavors. There are three standard responses to this, and I’m not particularly fond of any of them.

Option 1: The only relevant metrics are leads, revenue and cost reduction.  This is the hard-nosed approach. Show me the money or shut the heck [sic] up. This is not without merit, but it can stop a lot of good work and expertise development.

Option 2: What is the ROI of your mother? This is the argument that we know its valuable, so stop trying to measure it and just do it.  This is also a useful model –  at times you just have to do it. There is a downside here too. Do we really wish to be unaccountable? Do we really not want to learn what there is to learn?

Option 3 The ROI is dependent on the goal. Define the goal then you get the metrics/ROI. This seems reasonable – I’ve often said it myself – and its probably the strongest argument, but it has limitations too. One of which is that often the goal is only clear in retrospect. This should improve with our collective experience in the realm, but will always be limited (see “emergent”).

Each of these is simultaneously right and wrong. The problem is this: our traditional use of metrics depends on systems that have generally predicable, linear relationships between cause and effect. Emergent systems are highly resistant to this type of prediction and analysis. You can measure the fever, but it doesn’t necessarily tell you if the patient is sick or well. An incredibly interesting phone call with @rhappe got us to this idea that you need to have faith in emergence, and in its non-linearity and look for signs that it is working. Metrics aren’t necessarily meaningful in nascent social systems, but patterns are. [The discussion of faith in this context is a juicy one, but for later.] [Note that there is an Option 4 that purports to measure things like employee engagement and collaborative-ness. Few executives truly care about these things, however, and even if they do, these are tautologies rather than outcomes.]

Humans detect patterns very, very well. That’s why we see a man in the moon.
What do I mean by a pattern? Well a really basic pattern is one where an interaction with a person creates another interaction with that person. That would be a good pattern. That pattern can be built into something of value for both customer and business. I laid out the basics of how to create a very simple behavior pattern.

This is what Nir Eyal’s notion of habits and “virulence” is getting at. One could say that a pattern that an individual adopts is a “habit” and how compelling that pattern is to people in general could be its viral-ness.

I have a point here and it is this. If you really want to be successful at initiating and nurturing emergent social systems, you need to be both aiming to develop patterns, and then looking for early signs of patterns that emerge. Patterns, not individual metrics. You must accept that to a certain extent, your system is non-linear and unpredictable. We must learn to recognize and embrace this. If nothing emerges, you don’t have a cohesive system, so you must tinker with it. If something emerges, understand it and nurture it.  We need to transition from metrics to patterns. (I plan to do some research here in the next few months, so if you are interested, or have relevant info, please ping me.)

6.  Let me be the first to say it in print (or printish-ness): the sales funnel is over.

The sales funnel was a brilliant framework coeval with knowledge management, cross-functional teams and other “modern” business concepts from the 1990s. It is a framework for understanding that a customer begins as a stranger, that there is a progression of steps to get them from there to purchase, and allows a methodical approach to optimizing this transition.

The profound problem with the Funnel is that not only does it treat good people like so much meat and statistics, but that its object is to filter out those that don’t make it to the next step. In other words, you start with 1000 “leads” (otherwise known as people who might be somewhat interested in what you do) and you instantly lop off 90% of them as you get to suspects, and repeat for prospects, and opportunities. The very language here is predatory, no? Not to mention the fact that you are “wasting” over 99% of the audience who has some interest in you. One thing I’ve learned in my years of marketing: never waste an audience.

What we want is to morph the “funnel” into more of a concentric circle or orbital model. Where you have the tightest, most active relationships with your customers who are in a tight orbit around you, and a few successively looser relationships with broader sets of people in wider orbits to whom you provide value in the form of info, connections, expertise, entertainment, etc, and who may someday become customers, or influence others who may, or give you continued insight into your key markets. The orbital model is a more human model that creates intimacy, insight, and an exchange of ideas and value. It is also a more efficient business model. It retains more audience and preserves and enhances its potential to generate more customers, build brand equity and expand your circle of influence. This is, in a sense, the goal of “content marketing” (which may be my least favorite term since “content”, which was last well used in a sentence by Martin Luther King, Jr when he dreamed of a man being judged only “by the content of his character”). I have much more work to do on this, so please stay tuned.


7.    It’s not about understanding social, it’s about understanding you.

So here it is. Why is social business hard? People will tell you its because of culture, habits, technology, blah, blah, blah. And all of that is true. But the biggest challenge in going social is not that its social, its that it is business. A more social approach to business quickly reveals business problems that have been rumbling under the surface. Gaps or deficiencies in your mission, goals, strategy, internal coordination, organization, processes and responsibilities start popping right out. Its disconcerting, and it can be discouraging. (Unless you have an organizational equipoise). Its also quite hard to push the cork back into the bottle, though some do try. In the current model, we’re accustomed to just live with things that aren’t well thought through, aren’t well understood, or perhaps well communicated – see “fear” above. Its not that big a deal that the left and right hands don’t know what one another is doing. Well, it is a big deal, but its easier to ignore what we can’t put our finger on. Social business engagement both inside and outside the organizational boundary forces us to face of all those dust-bunnies and piles that have been hanging around under our metaphorical desks for years. You have to suit up for some spring cleaning.

Take a simple example. A number of companies, from Cox, to United to Best Buy have seen their service organizations get pro-active in social media, and benefited enormously from it. Others have their service people, if they are on twitter at all, say “please open a ticket” to anyone who asks for help. Why? Because they are not allowed to answer a customer without a ticket, and cannot open one themselves. This is because on the one hand, they only get evaluated by management on number of tickets closed (stupid metrics) and on the other, they can only ensure that issues are resolved if they are ticketed. And in many cases, changing this is, for some inexplicable reason (that probably turns out to be a recursive example of the same phenomenon), something that cannot be accomplished in under six months.

The number one thing that keeps people back from participating in social, both inside and outside the company is that they don’t feel they know what is going on, they don’t understand the message or the mission, or don’t believe in it. They are not equipped to represent. This may be the reason behind the surprising and surprisingly rapid shift in analyst-predicted total social technology industry revenue from the marketing use case to the internal use case. The rank and file are clamoring for internal social because they want to do better, and want to be part of the solution.
It is a rare organization that is Purpose-Driven, clear and confident in its value, strategy and path. It is an even rarer organization where that insight and confidence is evenly distributed throughout the organization. And rarer still, one that understands how to transform decision-making into a real-time learning orchestration exercise.

So the key question isn’t “what is social business”, it is “what is your business?” Answer that, and social is a relative piece of cake.

The best is yet to come.