Here's another great success story, from Caterpillar this time, with some great quantified benefits from their Communities of Practice, plus an ROI figure as well
Caterpillar University wanted to provide credibility to its US$2.5 million investment (from 2000 to 2003) for its knowledge management group and expanding Knowledge Network. CEOs and other leaders started asking questions about the tangible business value of the Knowledge Network.
The organization studied its ROI impact by working with Merrill Anderson, CEO of MetrixGlobal LLC. It selected two communities—one internal and one external—to examine bulletin board discussions. The organization interviewed 120 people who had initiated discussions that received more than one response. After studying 23 threads in the Bolted Joints and Fasteners community and five threads in the Dealer Service Training community, MetrixGlobal identified the qualified benefits and calculated a business-cost ratio and ROI for each.
The return-on-investment ranged from 200 percent for the internal community to more than 700 percent for the external community. The breakdown of intangible benefits fell into these specific areas: productivity (40 percent), cost (25 percent), speed (15 percent), quality (4 percent), and other (16 percent).
The survey determined the percentage of value derived from the Knowledge Network and validated the confidence level of that estimate. The findings revealed a number of interesting factors.
One, members in these two communities saved more than $1.5 million from online discussions in the Knowledge Network. One entry exceeded more than $1 million, which was removed for the ROI calculations.
Two, ROI study results illustrated that the value of discussions in external communities is four times higher ($2500) than the value from internal communities ($600). The total estimated savings from 2003 to 2008 is estimated to reach $75 million.