How to determine ROI
by Beth Ewen
Many companies don’t need a Web site that runs 24/7, because most business-to-business customers don’t shop in their pajamas.
Technology is just a tool that can help businesses make money, not a sector that creates wealth.
If your fancy printer doesn’t work, throw it away.
These and other heresies flow from the mouth of Kirk Hoaglund, CEO of technology consulting firm Clientek in Minneapolis and a self-described technophile. He describes how small-business owners can identify their pain and discover ways that technology can ease it.
Upsize: You’ve written that when it comes to buying technology, business owners should keep it simple and real. What do you mean?
Hoaglund: The past 10 years have gone badly for the tech world because we turned technology into a sector. To me it’s not a sector. It’s tools you use to run a business. There are meaningful sectors like health care, etc. Technology is supposed to help those sectors make money.
Upsize: Why have we turned tech into a sector?
Hoaglund: Because it’s cool. It’s toys. I’m a technophile so I’m the worst person to tell people not to treat technology as toys. I buy everything. But I also stop using things that don’t do anything for me.
If you imagine the CEO of McDonald’s, who reads an article on high-speed wireless networks on a PDA. He doesn’t go back and say to his staff, go buy those high-speed wireless networks on the PDA to sell more hamburgers. He just wants to sell more hamburgers.
Upsize: How can business owners apply that idea?
Hoaglund: We do a CRM seminar, in which I tell business owners they do customer relationship management already. They might do it with a yellow legal pad and pen, but that’s CRM. Accounts receivable, you already manage that, you have to do that to make money. Some of those things, tech tools will help you.
Upsize: Where should owners start?
Hoaglund: You have to think about what hurts about what you’re doing. You have to measure it against productivity and profitability always, and you have to be willing to throw it away.
You can measure the cost of buying everyone a PDA and measure productivity before and after, for example. Every business has metrics that are their vital signs. You can measure those vital signs before and after using the technology.
Upsize: Give an example.
Hoaglund: We have a client who delivers complicated reports. He’d do that by getting on a plane and flying to the customer’s location. He can use his company’s vital signs to see how that method could limit his growth.
Let’s say his limit is one a week. Let’s say technology could help him get to five a week. That’s where technology can help.
Most people have pain. He was tired of planes. He already kind of knew how in a perfect world the pain would go away.
Upsize: So any business owner can use the same approach.
Hoaglund: Most small-business owners love what they’re doing, but there’s some stuff that they hate. For me, I hate invoicing. It’s painful for me. I always think that there shouldn’t be anything I hate about my existence.
We’re looking to measure invoicing, how much does it cost me in person time, etc. Well, not very much, that’s the problem. That’s how you prioritize your pain. It’s not just irrational pain, but the rational side: how much does it cost?
Upsize: What pain do most small-business owners feel today?
Hoaglund: There are a couple of sharp areas of pain, and then one I’ll call false pain.
One thing everyone has trouble with is communications: e-mail, telephones. Our phone system is computerized and last week I was in a conference call and it kept cutting out. We have issues with e-mail, like everyone. I tried to make a rule that all Clientek people answer each e-mail from customers within five minutes of reading it. Well, you can’t if you have 100 e-mails to go through. It’s a problem with a lot of people.
There are sets of technology solutions that scale up in complexity and price.
Upsize: How could someone measure their own communications pain?
Hoaglund: Most companies are close to being able to measure the hard costs, things where you write a check. You could look at how many e-mails to each employee each day, and extrapolate the amount of time it takes to look at each one. Also, you have a set of e-mail servers and you write them a check. Those things you can measure easily and you ought to.
The others are hidden. If you have any kind of CRM automation or sales automation, look over time: How many opportunities are being added to the pipeline? And how long does it take to get to the person who can close the deal?
You can do that with a pencil and paper. Trace it back. Usually you’ll have a gut feeling about how long that will take.
Upsize: You mentioned false pain. What’s that?
Hoaglund: Everybody has to have a Web site, right? It has to be fresh. That’s false. The dot-com philosophy is everyone in the world is my customer. They have an attention span of 15 seconds. They love to shop in their pajamas.
That’s false. So no, not everybody has to have a Web site. Guess what. Your customers are not shopping in their pajamas. Here’s the other horrible heresy. I won’t switch the brand of stapler I buy if your store isn’t open. I think more money is wasted on that than anything.
Your customers are the same as 10 years ago. 24/7/365 up time is very expensive. You have to be sure you have to have it. Yes, if you’re global. But if you cover the U.S., you have to be up in only four time zones.
Upsize: Summarize what business owners can do to get in control of their technology buying.
Hoaglund: Business owners should do two things. One is an assessment of what technology you have now. That has to be as realistic as possible, and are you really using it. That multi-function printer that’s still not repaired? Throw it away. Start with a realistic assessment of what you have and how you use it.
People say, ‘You can’t get rid of it, it’s capital equipment.’ That’s an accounting term. If you use it once a year, that’s not enough. Throw it away.
Second, do the work-flow thing I suggested on three key business processes. One, your sales process, every business has it. Two, a money-flow process. And three, a delivery process. If you flow-charted it, maybe it has to take all these steps, but maybe it doesn’t. Maybe you can use technology to cut 12 steps down to three.
Upsize: Do a lot of business owners follow this method?
Hoaglund: Business owners don’t like to do that. They don’t want to research a question when they’re afraid of the result. But when they see it on paper then they know it’s not right. Then they can improve it.
The temptation, if something isn’t working, they just do it harder. It’s not about doing it harder. It’s about doing it better.
