The FT Word
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Welcome to the August 2010 edition of the FT Word. Please forward it to your colleagues. (They can get their own subscription here.)
Topics for this month:
- ROI analyses – why most are bunk, and how to conduct a truthful and even enlightening ROI exercise
- A book review: Switch – a book about making changes in your personal habits and at work
- Invitations to be featured in my next book, to attend a Salesforce.com webinar I am headlining, and to attend the upcoming Third Tuesday Forum breakfast, which will welcome John Belanger of Yahoo!
Thank you (again!) to Eric Dreshfield for suggesting this topic, which builds on the Cost per Case discussion in the June edition of the newsletter.
ROI analyses are commonly undertaken at the start of large projects and they are often mandated by the Finance organization to authorize a large purchase. In my mind, ROI analyses are wonderful tools to help support executives make sound business decisions, and to validate decisions after the fact. Unfortunately, most ROI analyses are performed at the last minute and with the exclusive goal of meeting a preset return number, which pretty much guarantees a less than transparent process.
The good news is that it’s entirely possible to create honest ROI analyses and that the (honest) results will illuminate your group’s practices. Here’s how in 8 steps, with rebuttals for 8 common objections.
1. Be open to negative results
If you absolutely, positively have to end up with a 5% return on investment, it’s really easy to create a spreadsheet that, surprise, shows a 5% return on investment. But focusing on the end result may (ahem) cause you to take shortcuts that may not be entirely correct. If instead you start with a completely open mind as to the result, your end number may be less pretty, but will likely be more accurate.
But won’t that mean that some ROI analyses fail to show a benefit? Absolutely! And that’s the point of the exercise: to highlight which projects are worth it, and which are not.
2. Count dollars (or euros, or pounds) not squishy customer satisfaction
Many support projects are undertaken because they will improve the customer’s experience. Some will also bring quantifiable savings, which can go right into the ROI analysis. But resist the temptation of equating customer satisfaction to hard dollars – unless you can prove the correlation. I’ve seen clients of mine wave their hands while explaining that one-point rise in customer satisfaction was worth $1 per customer. But why? No one really knew, it was just “obvious”. Not to me, it wasn’t. If you can document that satisfied customers buy $z more than others, go for it. Otherwise, focus on the quantitative benefits and present the customer satisfaction improvements as icing on the cake.
But won’t that cause customer satisfaction-oriented projects to be nixed? Perhaps. But it’s perfectly possible to justify projects whose main benefit is to improve customer satisfaction without using a suspect ROI spreadsheet.
3. Run a small test
It can be very difficult to forecast savings brought about by a new program. Rather than blindly forecasting a 10% increase in productivity (and such perfectly round numbers seem a bit suspicious, don’t you think?) you can run a small test to validate your forecast. For instance, if you are looking at a new search tool you can ask a small pool of users to try the new tool versus the old one and use the results as the basis for the analysis.
But won’t that mean a delay? Yes, it takes time to run a test but in exchange you get a validated number. Plus, tests often suggest project improvements.
4. Focus on big changes
Let’s say you’re rolling out a new knowledge management system. You figure you will have fewer incoming cases, a slight increase in case productivity, and some possible benefits around cross-selling. My strong recommendation would be to focus the ROI on the smaller case volume, which will bring you the most benefits, and forget about the rest. Why bother adding up a few dollars when other benefits are worth orders of magnitude more? Since forecasts can only be approximate it doesn’t make sense to spend time researching smaller benefits – and they also turn out to be less accurate than larger ones. If all you can find are tiny savings, maybe the project is not worth it after all.
But won’t that mean leaving out tangible benefits? Indeed, but ones that should not matter very much.
5. Add up all costs
Many ROI analyses are strangely silent on costs, especially internal costs. It does cost something to roll out a large project: management time, the services of a project manager, IT resources, training time and resources, so be thorough. The larger the change the more the hard-to-count costs. Don’t just stop at the outside vendor’s bill.
But won’t that mean a lower return on investment? Well, yes, or at least a higher investment on which to get a return. On the bright side you will have a clearer picture of the real benefits.
6. Stage the benefits
So you’re going to spend $2 million on a new tool and you will get your money back, and more, in less than three months. Yeah, right (I mean, no way!) Projects are often delayed, especially complex ones, and the initial rollout typically brings confusion rather than a clear benefit. Be reasonable: stage the benefits over a reasonable period of time.
But won’t that mean a slower return on investment? Yes. Life’s like that.
7. Measure outcomes
Let’s say your ROI analysis is based on case productivity going up. Do you currently measure case productivity? If not, how will you ever know that your forecast was correct? If you use any metrics that you are not already collecting while creating the ROI, define a way to collect them in the future.
But won’t that create extra work. Yes, all for a good cause: a justifiable, believable, accurate ROI.
8. Look back
Why bother creating a ROI analysis if you never check on it again? (I know, I know: you do it to mollify the CFO.) Looking back at past ROI analyses can be cringe-inducing, especially if you got a little overoptimistic when creating them, but it’s a great way to learn for the future so you can make better business decisions. Did you spend more than you thought you would? Why? Did the benefits match your expectations? Why and why not?
But won’t that show that the ROI analysis wasn’t quite right? If predicting the future was easy, we would all be rich (and bored, I think). The point of looking back is to improve your forecasting ability.
Want a little more guidance to create an ROI? Contact me. ROI analyses are a specialty at FT Works!
Book Review: Switch by Dan Heath and Chip Heath
Summer is a great time to reflect on habits – and to make changes for the better. I recently read and enjoyed Switch, a book that discusses how to make changes, whether personal or in organizations, interleaving techniques with practical examples drawn from many different fields, from schools to families to businesses. While I was unable to wrap my head around the main metaphor of rider vs. elephant (one is the rational side and the other the emotional side, but I could not keep them straight even while I was reading the book), I found the techniques useful especially these three: get started, even with a tiny step; find a bright spot and work from that; and tweak the environment to make the new behaviors easy and easier than the old ones.
I think you will find it helpful, especially if you are in the midst of making changes to organizations or processes, and what support organization is not in the midst of change? And if, inspired by the book, you’d like to plan some improvements in your support organization, check out the Smarter Support library for practical tips.
FT Works in the News
Channel Support Book
Eric Eidson and I are writing a new book of the best practices for providing support through channel partners. As I did in my last book, Selling Value, we will rely on case studies to add variety, a grounding into reality, and diversity. Do you have a great way to leverage channel partners to provide support? We’d love to hear about your experience and highlight you and your company in the book. It’s really easy: we interview you and we write up the case study. All we need is an hour of your time – and you will get the thrill of fame and visibility, not to mention a free copy of the book. Please let me know if you are interested and Eric and I will schedule a time to talk. Thank you!
I will be speaking at a Salesforce.com webinar on August 24th at 10am Pacific on the topic of “Getting Started with Support”. If you’d like to join please let me know and I will send you an official invitation once it’s out.
Las Vegas TSW Conference
I will not be attending the conference but a presentation of mine will! My long-time colleague and client Rob Shapiro of Oracle will present our findings on Oracle support communities in a talk entitled Communities that Give Back scheduled for Tuesday October 19th at 2pm. If you are traveling to Las Vegas go listen to Rob and hear about how Oracle manages its hundreds of communities – and measures their success.
Third Tuesday Forum
Are you based in the San Francisco area (or will you be there on Tuesday September 21st)? That morning, David Kay and I will be hosting The Third Tuesday Forum, a roundtable for support executives to discuss the topics we embrace and wrestle with every day. Our presenter will be John Belanger from Yahoo! To register or for more details, click here. Space is strictly limited to ensure an interactive session.
If you cannot make it this time but would like to be on the mailing list, sign up. You will be the first to know about new events. You can also join the Third Tuesday Forum groups on LinkedIn and Facebook.
Curious about something? Send me your suggestions for topics and your name will appear in future newsletters. I’m thinking of doing a compilation of “tips and tricks about support metrics” in the coming months so if you have favorites, horror stories, or questions about metrics, please don’t be shy.
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