Some thoughts on ROI

A recent article on ROI by Mike Wittenstein prompted me to add this comment:

“My experience, selling disruptive technologies B2B, has led me to this conclusion: if the prospect’s primary focus is ROI, (s)he’s not a real prospect.

This is consistent with the ‘Crossing the Chasm’ TALC model – the early adopters buy into the vision; the late majority want to know feeds & speeds, ROI and reference accounts. ROI fails in these situations because the biggest benefits of a new technology investment are often the hardest to quantify.”

To expand on this: conventional capital investment analysis (ROI, IRR, payback, etc) is like using PowerPoint – it forces you into a mindset that restricts your thinking. To take one example from the printing industry, many printers look at digital printing investments in terms of the potential savings they can bring in labor, materials and time. They fail to consider the potential of new market opportunities brought by the ability to deliver short-run jobs that would have previously been uneconomical; and to deliver work just-in-time in smaller batches. These could mean incremental customers, higher pricing or a higher barrier to entry for competitors. Validating these benefits needs research, and possibly a leap of faith (‘build it and they will come!’), but their impact will far outweigh the easily-determined cost savings that go into a conventional ROI analysis.