ROI

IT ROI - The Broader Strategic View

There's an interesting article in Forbes about figuring out IT ROI.

Why it's interesting is not so much because of what it says as because of what it doesn't.

Now, to be fair, it is geared toward CIOs - and in that way, it's a handy-dandy guide to looking at the various cost factors that come into the IT decision.

On the other hand, because it's geared toward CIOs it misses out on the most important ROI factor questions of them all:

  • Does the new technology fulfill the strategic, market-building and profitability goals of the enterprise?
  • How do you know?  Have the other executive team members seen and bought into the win you're proposing through this technology change/adoption?
  • How long until that return is seen - for everyone?
  • How will you know - in hard measures - that the ROI has been accomplished?
  • How long will it last?  In other words, how long - according to the vendors and your calculations - before you're having to come back for another capital injection?
Technology is a wonderful thing.  It's also expensive.

CIO types are now arguing that with the cloud available - and all the providers making those clouds bigger and brighter with ever more silver linings every day - that technology costs are decreasing.

True - at least for the actual costs of the technology and its implementation.  And that's a good argument. (For the best argument along those lines, take a look at the Google Apps/Microsoft Office wars that have just begun.)

But the cost of technology is - and must be - part of a larger whole.  It can't be seen as separate from anything.  Especially because technology is - and must be - a driver toward strategic success.

(By the way, you entrepreneurial types, if you're building an IT-related product, make sure you calculate and include these arguments as part of your value proposition.  Otherwise, the WIIFM for your potential customers isn't really being addressed.)

So, take a look at the Forbes article, because it's good information and useful.  Then, before you approve any further IT purchases, take those calculations and put them into a broader context.  A strategic context.

That way you'll ensure a win.

From Training to Profits

When Marc Andreessen and Ben Horowitz teamed up to form the venture firm a16z, they gave everyone a bonus:  A blog.

Andreessen (the as good as child prodigy who created Netscape - then in his adolescence, LoudCloud...and he's still a baby) started up a blog that was a good read and fun.  It's called blog.pmarca.com.  Then he took a break.

When he came back again, there was a completely different strategy for that blog.  It was an entree to the blog of his partner, Ben Horowitz (another of those Netscape/LoudCloud prodigies).  That eponymous blog (ben's blog) is a different story altogether.

For whatever reason, Horowitz decided, along with being a venture capitalist, that he was going to become a teacher - and a great one he is.

Every one of his posts has valuable information on everything from strategy to structure to pitching your plan to anything you could possibly imagine (and far more) if you're entering into the world of entrepreneurialism.

But, whether he knows it or not, almost every single post of his applies just as much in one way or another to every size organization in every industry across sectors.  Countries, too.

This time, he takes on training - why it's important and how to ensure your training programs translate to profits.  Even though he's talking start-ups, his points apply to every training program to be considered.

For my part, and as you well know if you've read my writings over the years, the points that I agree with most are upfront in his piece:

  • Training provided by outside vendors/external consultants is, more often than not, underwhelming
  • This is because, at least in part, these external providers don't know - nor do they make the real effort to know - your organization and
  • The more that management is directly involved in the training program - the so-called "cascade" system - the greater the application, speed, ROI and profitability of the training provided.
Unless you get smart - really smart - about your training programs, you're wasting your employees' time and lots of money.  You're also killing morale, which means you're working from a deficit position when you bring in the next training program - no matter how good it is.  Your people will expect the worst - again.

So be smart and be directed.  Most important, be involved.  You'll see the benefits immediately.

Just like Ben says.
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For more information about how executives and managers can drive training to profits in your organization, check out The Executive Field Guides.