I surivived the Giro delle Dolomiti last week, but I won’t be giving up my day job to become a professional cyclist. My family would starve if I did. (I’ll do a cycling post later for those interested in gear ratios, heart rates, calories, recovery drinks, and how to cope with being dropped by people who would normally be offered a seat in the lifeboat first)
I havent posted in 10 days or so, and I have had very little internet or blog access. Well, I tried to read a couple of blogs via the blackberry, but riding the 27kms up Stelvio was less painful. (I like to say slower, but that wouldn’t be fair to the blackberry)
So I fired up newsgator this morning, and the first thing I read was a gem from Andrew McAfee on business cases. He points to the recent Kaplan and Norton book, Strategy Maps, which I suppose I ought to add to my reading list. Measuring the intangible has always struck me as something of an oxymoron, because the moment you measure it, then it starts to have tangible properties. (bit like Heisenberg etc)
I especially liked this paragraph
Across the hundreds of quantitative IT business cases I’ve seen, I’d estimate that the average ROI figure was about 100%. This brings up an obvious question, which I asked to every business case author that I could find: “If this ROI figure is at all accurate, why are companies spending money on anything else except IT? If there really are all these 100% ROI projects out there, doesn’t Finance 101 say that companies should immediately start lots of them, and not stop until the marginal return is less than the return from traditional investments like advertising, R&D, capacity expansion, etc.?”
I remember someone from marketing being upset with an ROI study at SAB Miller because the number was too low…
The ROI of 24% coupled with a payback period of 6.64 years proves SAB Limited’s investment to be quite sound. More specifically, the improved analytics and real-time delivery of people-related information has helped SAB Limited in its global growth endeavors.
The number seemed credible to me.
I would love my own little investments to have an ROI like that.
This is a through ROI analysis based on a strong Gartner methodology. (James, I can link to it though) The report is well worth reading.
SAB Miller is a very successful company, and I wish I had bought their shares rather than just their product in my youth.
The report goes on to state:
The implementation of mySAP ERP HCM has been an enabler to SAB Limited’s strategy by providing more accurate information and analytics; however, the HR team at SAB Limited is truly responsible for the superior human capital management practices and people-focus that is engrained into the culture. The end result is a firm that can not only state that its people are its competitive advantage, but can also back up the claim with analytical data
This backs up a lot of what Andrew was on about with cause and effect chains. The system alone is not the ROI, it is the improved process and the people that make the ROI. ROI claims of many 100’s percent are rarely credible. If they were, hedge funds would be financing IT projects.
The report also picks up on a couple of themes that I have been on about before, HR processes and the importance of HR analytics. (see my post at the human Captalist..)
The most useful thing about an ROI study is not the numbers though. It is the discipline needed to actually measure what it is you do now, then change, and then measure again. This is the same discipline that has made SAB one of the world’s most successful companies.