ROI implies that you put money in at X time and get more money out at Y time. But that is not how it works with collaboration because of three difficult problems. It is trying to solve these problems that has lead me to believe that the ROI for collaboration is fool’s gold.
I have been looking at this issue for almost 20 years now and have identified the following three problems:
1. Defining Collaboration
What constitutes collaboration? I tried to define collaboration and all similar terms (communication, conversation, coordination, cooperation) in light of both commitment and alignment with outcome in 2012 (see diagram of "Collaborative Levels"). Assuming this gives us a reasonable definition for collaboration we can move on to the second problem: how to measure it.
2. Measuring Indirect Value
Since the value of collaboration is often indirect and intangible, there is no good way to my knowledge to measure this. While a correlation can be made between collaboration and things that can be measured (employee turnover, cycle time, quality enhancement), the assignment of collaborative value is somewhat arbitrary.
The best metaphor I have found for looking for the ROI of collaboration is that of an astronomer looking for a black hole. Since black holes absorb light they can’t be seen directly. Astronomers, being the clever guys/gals they are, are able to determine where the black hole is, as well as its strength based on the effect it has on the objects around it. For example, you can measure strength by looking at how fast it can pull things in over a certain distance. You can determine location by triangulating these effects on a number of objects and determining its coordinates. Size can also be measured in much the same way using the data from the first two metrics.
To paraphrase Einstein, “you can’t solve a problem with the same thinking that got you into it!” This required me to throw out the idea of ROI to focus on how I could measure value. But I kept having the same problem when it hit me that I was missing the “context” for collaboration, which provided a framework to determine value to the organization.
Critical business processes provided that value. Instead of trying to sell the general value of collaboration to an organization (which was often a hard sell), I looked at how collaboration made those critical business processes easier. My fifth prediction for collaboration in 2012 included a list of these critical processes that have what I call “Collaborative Leverage.” I define collaborative leverage as "the right tool applied to the right process, at the right time and with the right people.”
Within the context of a process it is much easier to see the value of collaboration. Take for example the new product development process (NPD). For the sake of the example, let's say we are at Intel and inventing a new chip. We may receive some new information from R&D about a way to do multi-core processing more efficiently. We then have to brainstorm ideas on how to get that into a chip (which requires a lot of collaboration), then comes the proof-of-concept, and prototypes -- all parts of the process that can require intense collaboration. Once the prototype is done, the work involves more communication and coordination, both of which can be transaction based. Let’s say all goes well and Intel is able to get the new chip to market a month earlier than expected, and long before any competitors have something similar in the market.
The chip generates $500 million the first year on the market. A big win for Intel, yet how much of that $500 million in revenues do you attribute to “collaboration”? Collaboration certainly added value to the process, but there is really no way to assign a number for ROI. It is clear that collaboration provided great value -- within the context of the NPD process collaboration generally provides great value, and that value is much easier for everyone to see. So the framework of the process provides value in terms of “cycle time” (time to get the chip to market). We have found our black hole, but it is hard to determine how big it is and how strong it is.
3. ROI is Simple, Collaboration is Not
ROI of collaboration is an old and simple measure and not good for measuring complex processes or interactions. Collaboration at its core is a type of social human behavior. A behavior in which 1 + 1 = 3 where we become more than the sum of our parts. Collaboration is an “emergent characteristic” and these emergent characteristics are always a part of complex systems. It should be possible to determine the value of a simple interaction (A talks to B, and B answers A). But human networks of relationships grow at Nn (where N is the number of relationships), and it is this inherent complexity of human interactions that ultimately confounds the simple ROI metric.
It took me many years to come up with these answers, and while they may seem simple now, they are anything but. Miners who dig for fool’s gold and find it think they have hit the jackpot only to find out later that it is worth nothing. This is exactly what most people get in the search for the ROI of collaboration.