KNOWLEDGE MANAGEMENT FROM THE INFORMATION PROFESSIONAL PERSPECTIVE
MEASURING RETURN ON INVESTMENT
How can the millions of dollars invested over the past few years in knowledge management systems be justified, and what is the justification for investing even more money, time, and labor in these systems? Eventually some return on this investment must be documented.
Journal articles dealing with measurement of return on investment (ROI) in knowledge management technology and programs indicate that some companies:
❑ are not measuring ROI because they are not required to do so,
❑ do not know what to measure,
❑ have anecdotal evidence of value returned, and
❑ have successfully calculated ROI and linked it to performance objectives.
Familiar examples of companies successfully documenting financial benefits from knowledge management initiatives include BP (now BP Amoco), and Schlumberger, Ltd.
BP (now BP Amoco) reported gains of $20 million in 1997, and $260 million in savings in 1998—with $400 million more likely but not yet booked from sharing best practices and reusing knowledge. (“Telling Tales at BP Amoco”, by Thomas A. Stewart, Fortune, June 7, 1999).
Schlumberger Ltd. earned an estimated 668% ROI on its $72 million investment in knowledge management over six years (“Wise Investments”, CIO Enterprise, Section 2, October 15, 1997, P. 28).
Consider the following quote from "A Closer Look – Knowledge Yields Impressive Returns" by Stephanie Stahl in InformationWeek, May 5, 1999, P. 115:
"Platinum Technology, saw a $6 million return on its investment of $750,000 for a Web system that lets sales and marketing staff find product data. That's just the measurable cost. The system also help employees save two hours a week searching for information."
"But for many companies, measuring ROI is not only difficult, it's undesirable. The goal is to leverage intelligence, and a price tag simply can't be put on that. 'If you are...