Return on Investment (ROI) is the lifeblood of everything your organization does, right? Or is it?
Product managers and product executives often relate how they spend time and energy developing business cases in order to justify significant investments. Then they run the gauntlet in order to gain the support of other executives. A key component of many of these business cases is a quantifiable return on investment. In other words, a declaration of when the organization can expect a payback on the money that is to be invested.
However, all is not what it seems. In our recent survey only a minority of product team members indicate that ROI is core to the DNA of their organizations. (See table six below.)
Only 16.75% of respondents said that ROI is the basis of everything that is done on the product team and is considered a key measurement in the organization. The highest response (34.01%) indicates that while ROI is used to gauge success against other products, the product team is not held accountable for the ROI. The second highest response reveals that 32.49% of companies represented in our annual study do not actively use ROI in judging their products’ success. Finally, 16.75% reported they occasionally rely on ROI as a measurement, but this is confined only to new products.
Two thirds of product teams do not use or are not held accountable to return on investment (ROI) projections. Additionally, only one third use ROI for new products or as the basis of everything that they do. Given the importance and expense associated with product development efforts these numbers are a bit eye-opening.
Some may argue that ROI is less important in a world where Agile product development methodologies are central to many product teams activities. However, our data suggests that only a third of product teams are actually using Agile while two thirds are using either blended or waterfall approaches. (This is the subject of an upcoming post.) So, while Agile may contribute to these numbers it is not the reason that ROI is not being rigorously utilized.
Is ROI part of the DNA of your organization?