I’ve been hearing a lot of pushback recently around how useful ROI is as a measurement. As someone who has sat on both ends of the table, I think understand the reasons why it’s a lightening rod issue. It seems ludicrous when you are being asked to measure the un-measurable but at the same time, I remember being incredulous as a CEO when folks asked me to approve large expenditures without any accountability for how they would help the business.
It’s time to face facts on this. ROI matters because it’s the core of decision making and its glue that holds everything together.
We’ve worked with thousands of companies over the past ten years to understand the value and justification behind our efforts to standardize the product management process. Most recently, we sat down for one-on-one discussions with 33 CEOs to get to the bottom of the ROI question. By far the biggest eye-opener was the way in which these CEOs dug into the questions and delivered a pragmatic assessment of how their company measures their value.
What was enlightening is that they ask four very simple questions around almost any major investment decision:
- How much faster can you bring a new product to market and how much money can be saved by eliminating development mistakes?
- How can we ramp sales faster and lower the overall costs of sales and marketing by spending our dollars and resources more wisely?
- What impact will this have on the fundamental measurement that we value the business by—improving customer satisfaction, retention and referrals?
- Will any of these practices create better margins by improving productivity or retention rates?
Pretty simple questions that any business cases should be able to measure. What’s so tough about that? Tuned In companies seem to relish this process. Tuned Out companies run from it. Which one are you?
