ROI And The Value Of Time

MIT Sloan Management ReviewThere’s few organizations willing to forgo an ROI calculation and instead back a hunch. So huge kudos to GE, whose investment in CoLab, its social media platform, did exactly that, as GE’s Ron Utterbeck explained in the latest MIT Sloan Review :

“We haven’t tried to come up with an ROI. Haven’t wasted a moment’s notice even thinking about it.”

But the GE team is absolutely on the ball, tracking every aspect of CoLab’s uptake across GE – recognizing that adoption is where its true value lies:

“It’s not a system that people have to go to, but people still come back every single day. They come back because it makes their job easier, because they’re getting value out of it. Going and spending money on ROI would be, honestly, in my opinion, just a waste of money because your true value of this is people are coming back”.

Most organisations of course don’t have this kind of self-confidence and insist on seeing the ROI.  And that’s where the difficulties start for projects – like social media – which deliver more effective collaboration.

I’ve been involved in ROI exercises with several clients where time savings have underpinned the business case.   We often use only the most conservative of assumptions, and constrain the benefits to what can be properly quantified.  But even these savings are often perceived to be flimsy.  Faced with justifying it to the COO, stakeholders readily fall back to apologising that ‘it’s just time savings..’

Which is curious because, as any economist will tell you, the value of time underpins most transport infrastructure investment.  It’s time savings for users that have driven the development of roads and railways in many countries for at least the last thirty years. [I happen to know because I started life as a transport economist, calculating time savings for Asian highways, African railways and the Channel tunnel].

Maybe it’s because the time savings are measured in seconds and minutes rather than days and weeks.  Saving a day is obviously valuable. But when it’s the summation of five minute savings, people fall to wondering whether it won’t be wasted.

Whatever – we need to recognize that time matters, and that we should value it appropriately (as individuals, of course, we do it every day: paying for express lanes and priority, or for toll charges to use a shorter route, for instance).  Otherwise we are choking off initiatives with potentially very substantial ROI.  Even better, we need more GE-like chutzpah.

Related Posts

29 Oct 2012    IT Project Failure: How Did We End Up Here?

28 Aug 2012    The ROI On Process Visualization

© Text Michael Gammage 2012

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