It's What Social Media Enables that Provides Value

Natalie: thanks for the post. You've framed the question in an interesting way. As marketers and salespeople, we've attempted to answer similar flavors of this question because prospects ask them so often:

"What's the ROI of the data warehouse?"
"What's the ROI of bar coding?"
"What's the ROI of IT security?"
"What's the ROI of outsourcing?"

We reflexively answer, but should we? Is it more appropriate to answer the question with a question: "What outcome do you want to achieve using social media? (or, substitute any technology-de-jour.)"

Regardless of which financial analysis tool a decision maker uses, it's impossible to answer the question of how much value will be returned to the organization (assuming that's what the decision maker is really trying to uncover) without embedding the technology they're wondering about into a system that does something.

As evangelists for social media, we're all adept at describing its benefits in terms of reduced expenses and revenue increases. We're less forthcoming about the risks. What scares the bleep out of many decision makers is the long genesis of CRM and social media-related projects. There's slow start up. Significant organizational learning. Three years of time-to-benefit isn't unusual. And the R&D expense can't be capitalized. All of which represents risk--lots of it--to CFO's. None of which, of course, obviates the need to frame social media in the context of what it's supposed to provide.

(A related blog I just posted on CustomerThink: ROI Hype: Finance for Fools?)