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One trap good PMs still fall into is building business cases around transactional ROI by default - "Put $1 in, get $2 back". That's almost never the case.
Let's look at the 6 main types of return R&D / product development efforts usually have that you need to master.
1/7
Let's look at the 6 main types of return R&D / product development efforts usually have that you need to master.
1/7
1) Cumulative - "put $1, get $0.10 back every month in perpetuity"
This usually will look underwhelming from a financial impact perspective as the investment will look like a failure in the short term. This is accentuated if there's build-up period (the return grows over time)
This usually will look underwhelming from a financial impact perspective as the investment will look like a failure in the short term. This is accentuated if there's build-up period (the return grows over time)
2) Multiplicative - "put $1 in, get $0 back, all initiatives of type x are y% more efficient"
This is a common type of perceived product development failure. The saying "product's goal is to enable sales / marketing to set higher goals for future quarters" is relevant here.
This is a common type of perceived product development failure. The saying "product's goal is to enable sales / marketing to set higher goals for future quarters" is relevant here.
3) Operational efficiency - "Put $1 in, operational cost or cost of revenue x goes down y%"
These are usually kinda easy and straightforward. But a lot of PMs fail to assess whether opex/cogs savings are really valuable in a growth-focused company.
These are usually kinda easy and straightforward. But a lot of PMs fail to assess whether opex/cogs savings are really valuable in a growth-focused company.
4) Execution efficiency - "Put $1 in, new feature development speed accelerates x%"
There are a lot of mistakes made here as the proposition of "better efficiency" isn't a real business case. You have to leverage future investment theses to show the long term $ value here.
There are a lot of mistakes made here as the proposition of "better efficiency" isn't a real business case. You have to leverage future investment theses to show the long term $ value here.
5) Risk mitigation - "Put $1 in, reduce the risk of getting the pants sued off of us by x%"
Easy to understand at the face of it, but what's the real value of risk mitigation? What's the current risk? Is it existential or for a specific cost?
Easy to understand at the face of it, but what's the real value of risk mitigation? What's the current risk? Is it existential or for a specific cost?
6) Enabling - "Put $1, the universe of opportunities expands to x, y, and z"
The "Civilization Tech Tree" bucket! What is the value of allowing future options? This is a common type of investment in R&D, but notoriously tough to build a business case around.
The "Civilization Tech Tree" bucket! What is the value of allowing future options? This is a common type of investment in R&D, but notoriously tough to build a business case around.
Master building a business case for all these types, and building those cases in the wider context of everything else happening in the org, and you’ll make friends in high places.
