Don’t Use ROI to Rank

Many managers and organizations want to calculate ROI to decide how to rank or whether to fund projects. In my experience, ROI is almost always a lie or, at the least, fun with numbers. Many organizations attempt to calculate ROI as the total return for a product divided by the money invested into developing that product.

That’s because for product companies who sell to a mass market—one where you cannot identify each customer—you can’t predict sales over the product’s lifetime. Much of the time, you can’t even predict the sales for a given year. If you can’t predict sales, you can’t calculate your ROI, the producer’s ROI. The consumer’s ROI is a different question. See Qualitative Questions That Help You Determine Waste ...

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