Unidimensionality bias. ROI requires that all benefits from a project be translated into financial terms. However, most e-business projects result in payoffs on multiple dimensions. For instance, a partner relationship management initiative may provide lower inventory costs (measured in dollars), faster order fulfillment (measured in time) and improved partner satisfaction (measured subjectively). Not all returns are financial returns in the short run, although they eventually may impact financial performance of the company.

Fixedness bias. E-business projects often follow the law of unintended consequences because they cross functional and enterprise boundaries, and may produce payoffs in ways that were hard to imagine at the outset. Cisco Systems’ Connection Online began as a customer-care initiative. However, the forums proved an excellent tool for the new product development group to gain customer insight. The payoffs may accrue to marketing, in addition to customer care. An ROI calculation at the outset would have missed that point.

Immediacy bias. Most e-business initiatives take time to get accepted and widely adopted. Declaring failure or success based on a three-month or a six-month ROI may be misleading, especially for projects that demand significant change management.

Getting Beyond ROI

The key to escaping the ROI trap is to think strategically about the outcomes and the payoffs from e-business. Here are some prescriptions.

Focus on value. The anchor for any e-business project should be the value created. The business case should be anchored in a quantifiable and precise value proposition for internal and external audiences, defined in terms of benefits and in a vocabulary that is relevant to the audience. For example, when Eastman Chemical began its e-channels initiatives, it declared: "We will be the easiest company to do business with in the chemical industry." The proposition of "ease of doing business" needs to be translated into specific outcomes and measures, which then become the basis of measuring progress and performance. Focus on value created for customers as opposed to cost savings for the company.

Think broadly and softly. To avoid the unidimensionality bias, supplement hard financial outcomes and metrics with soft ones that may be more strategic in nature and may be important leading indicators of financial outcomes. Measures such as customer and partner satisfaction, customer loyalty, response time to competitive actions and improved responsiveness are examples of soft measures. And subjective measures can actually be quite objective if used consistently over time. For instance, customer satisfaction measured consistently on a five-point scale can be an objective basis for measuring the performance of customer-facing initiatives.