Social Product Development – What’s the True ROI?

Web 2.0 is everywhere, and social business software is quickly moving into the enterprise, but is there real value? What’s the ROI for a manufacturing company whose product development team is pumping out new product innovations every day?

Social Product Development is what happens when you combine Web 2.0 and product development – but how do you justify an investment in Social Product Development technology? Read on…

Social Product Development is about improving product development by allowing engineers access to communities and experts – improving the sharing of information, exploration of ideas and innovation, and allowing for better insight into R&D activities and shortened feedback cycles. At its core, it is about product development organizations deriving value by better connecting PEOPLE around product development activities.

With such promise, how do you get everyone at your company onboard?

The benefits of Social Product Development are both qualitatively and quantitatively. From a qualitative perspective, Social Product Development improves collaboration and encourages a positive culture within the organization. Quantitatively, you can improve efficiency and build more innovative products.

Here are some questions to consider when evaluating the qualitative benefits you might gain from Social Product Development technology:

  • Can executives take the “pulse” the organization easily?
  • Can managers get quick feedback on an important program, project, or concept?
  • Can the company be made to feel small again by better connecting a distributed workforce?
  • Can a company better recruit and retain employees with modern tools in work place?
  • Does a better informed workforce provide efficiencies?
  • Are employees helping each other by pointing out valuable content or answering questions?
  • Is there duplication of effort?

And here are some quantitative benefits/metrics to consider:

  • Time saved looking for information and experts
  • Time saved for on-boarding people
  • Improved responsiveness to customers , first call resolution, and client satisfaction ratings
  • Reduced email storage expenses
  • Decreased recruiting and retention costs
  • Lower IT and help desk support expenses
  • Decreased premium content subscription fees (i.e. disseminating professional info)
  • Increased ideas generated within the company
  • Fewer meetings and lower travel costs
  • Improved problem solving and troubleshooting with experts, and quicker feedback cycles
  • Better products and better reuse of parts, designs, and information
  • Better quality from improved problem solving and troubleshooting with experts

Supporting industry data:

A recent study by McKinsey The Rise of the Networked Enterprise: Web 2.0 Finds Its Payday looks at the impact of Web 2.0 technologies on how organizations collaborate internally and externally. It found that fully networked enterprises are more likely to be market leaders or to be gaining market share and have higher operating margins than companies who do not use Web 2.0. The survey results showed that of the organizations deploying Web 2.0:

  • 77% are seeing faster access to knowledge;
  • 60% are reducing communication costs;
  • 52% are seeing faster access to internal experts;
  • 41% are seeing increased employee satisfaction

In the whitepaper EMC|ONE: A Journey in Social Media, EMC expresses the benefits of social computing within its company this way:  “When looking for information on a topic, it’s far easier to scan the social platform for information – and individuals – that are relevant, rather than “asking around”…  As an example of a “back of the napkin” calculation, imagine 1,000 knowledge workers who deem themselves 10% more efficient through use of a social platform. At $100k per knowledge worker – that’s $10M.”

Other findings from International Data Corporation (IDC), an international market research firm, indicate that there is an 11-30% time savings for employees who use social software. Its surveying found that one of the key benefits noted by end users is: “It makes me more productive.”

Example:

To demonstrate the value of Social Product Development we can use a theoretical company of 500 engineers using Social Product Development software inside R&D.

Company Statistics/Data:

  • Total Revenue                                                 $1.5B
  • Number of total employees                         5000
  • Number of engineers/PLM users 500
  • Revenue from New Products                       15%
  • Average FTE expense (engineering)            $75,000/year ($37.5/hour)
Area of Improvement Assumption(s) Calculation Benefit 
Top Down Approach:
Improved Productivity 10%  more efficient – finding info, getting feedback, problem solving, fewer meetings…(see EMC, IDC data) 10% * $75K * 500 engineers $3.75M annually
More Innovative New Products in the Market 46% of product development resources are spent on products that fail  (Cooper, Product Development Institute)5% improvement in creating successful new products with better ideation (less failures) 5% *46% *75K*500 engineers $863K savings in man power lost on failed products
Bottom Up Approach:
Less Time in Meetings 1 hour less per week 1 * $37.5/hr *500 $19K
Less Travel 5% of engineers travel at average cost of $2K 5% * 500 *$2K $50K
Help Desk Savings 1 less FTE supporting software help desk at company (e.g. CAD) 1 * $75K $75K
Time Savings Getting Answers 15 minutes savings per issue with better problem solving using a network,3 problems per week 15min *3 * $37.5/hr * 500 engineers $14K
…continue identifying line items of savings and/or value to build ROI(see “quantitative” examples above)

This is a simple theoretical example…. your actual mileage may vary, but even if the assumptions are off, the resulting benefits can be substantial.

Do you see ways in which Social Product Development may help improve your workflow? Has it done so already?

This entry was posted in Best Practices, Product Lifecycle Management and tagged . Bookmark the permalink.

4 thoughts on “Social Product Development – What’s the True ROI?”

  1. Jim Brown says:

    David,
    I commented on this over in the Social Computing in PLM group on LinkedIn, but I thought I would share it here as well (sorry for the repeat if you already read the other one).

    I am curious, do you see companies needing an ROI for their social computing initiatives in engineering and NPD? It seems like most of the efforts I have heard about have intuitive value and are small enough that they don’t need a formal ROI. I wonder how many companies need to justify this as opposed to getting started with a recognition that there will be value. A recent study I participated in did indicate that manufacturers were stepping back and re-planning their social innovation efforts (http://tech-clarity.com/clarityonplm/2012/social-innovation-2012/), maybe we should have asked whether they had a formal ROI. We (Kalypso and Tech-Clarity) will likely repeat the survey this year, we should add that question and possibly drill down on what they included. Thanks again for bringing the group’s attention to this.

    1. David Blair says:

      Jim,
      In general, I think a lot of companies are “just doing it” in terms of social computing or social business software. However, I have found that when we go in through engineering (as this is where the value is for social product development), we are still being asked to help justify the investment. People are still building ROI’s to get sign off on investing in this technology.

  2. Sarah Hemsworth says:

    An external Social Product Development company that might be worth looking into is Vancouver based Big Dreams Big Ideas. It is interesting to see this type of company spring up outside of the organization. I am not sure what the longevity or viability of this site will be, but it should be interesting to watch.

  3. Gururaj Bengeri says:

    While I think Social product development is good but do you think product companies would go for such a technology?
    What type of Product companies need Social Product development?
    And Finally can we quantitatively measure ROI when we know that we don’t have the starting point?

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