Viewpoint Beyond ROI
There are other ways to measure value
By Tim Healy
Return on investment (ROI) has become a business yardstick by which companies measure their success.
Any CEO, board member or stockholder needs to be certain they're receiving a significant return on their investment dollar. It's a business basic that's thought to be relatively easy to quantify and comprehend.
Unfortunately, nothing is that simple. Business investment isn't merely a matter of purchasing technology that performs a mission-critical task at five times the rate of an individual employee. In that model, the technology pays for itself in a specific period of time, through increased productivity, as well as through cost-avoidance related to personnel expenditures.
Who entrusts their entire sales and marketing efforts solely to technology automation? Anyone who has ever spent time in the sales and marketing realm understands that the key ingredient to effective sales and marketing initiatives begins with building relationships. It's personalized, individualized interactions that make the difference.
Companies always will rely on marketing and sales personnel to bring products to market. Because of this, enterprises must be able to monitor and track intangible assets and investments, namely knowledge management, collaboration, business-process management, information access and overall productivity. These so-called soft initiatives are inextricably tied to ROI, though the connection often is difficult to quantify. This is particularly true of marketing ROI, since defining relevant metrics to compare customers' reaction to sales and marketing initiatives often is a less-than-exact science. If these soft initiatives can't be qualified, however, how can corporate decision-makers know they're on the right track?
A report published earlier this year by the Gartner Group states: "In the 'knowledge economy,' managing and leveraging intangible assets will become an imperative for all enterprises."
Rather than evaluate initiatives on the basis of "dollars in, dollars out," enterprises now must begin looking at the bigger picture, since the dividends created by investments in intangibles will be tracked and measured as the value on investment (VOI) by more than half of all Fortune 1000 companies by 2006, according to a November 2001 Gartner Research Note. "VOI is the total measure of benefits derived from soft initiatives; ROI is a component of VOI.