Comments on: Whose ROI Is It? http://www.jrothman.com/blog/mpd/2008/09/whose-roi-is-it.html Management, especially good management, is hard to do. This blog is for people who want to think about how they manage people, projects, and risk. Fri, 18 May 2012 15:02:36 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Kevin Rutherford http://www.jrothman.com/blog/mpd/2008/09/whose-roi-is-it.html/comment-page-1#comment-23188 Kevin Rutherford Sat, 13 Sep 2008 13:04:39 +0000 http://jrothman.com/blog/mpd/?p=8503#comment-23188 If you take away the constraint of measuring Consumer-ROI only in monetary terms, I think this idea is also very close to Tom Gilb's approach to requirements analysis. (http://www.gilb.com/) If you take away the constraint of measuring Consumer-ROI only in monetary terms, I think this idea is also very close to Tom Gilb’s approach to requirements analysis. (http://www.gilb.com/)

]]> By: Rich Stone http://www.jrothman.com/blog/mpd/2008/09/whose-roi-is-it.html/comment-page-1#comment-23185 Rich Stone Sat, 13 Sep 2008 12:18:50 +0000 http://jrothman.com/blog/mpd/?p=8503#comment-23185 Sounds close to the concept that I have used measuring earned value. ROI is a financial measure used to PROJECT (guess) whether or not the completed state (as defined in requirements) will deliver the value that caused management to fund the project. Earned value is closer to understanding how much of the projected value, has actually been delivered, or is scheduled to be delivered in the current release. Glen Alleman (Hearding Cats) has a number of posts about earned value, and is generally right on in comparing agile or iterative strategy for project management to other project management paradigms. check out his recent post http://herdingcats.typepad.com/my_weblog/2008/08/a-new-agile-pm.html Sounds close to the concept that I have used measuring earned value. ROI is a financial measure used to PROJECT (guess) whether or not the completed state (as defined in requirements) will deliver the value that caused management to fund the project.

Earned value is closer to understanding how much of the projected value, has actually been delivered, or is scheduled to be delivered in the current release.

Glen Alleman (Hearding Cats) has a number of posts about earned value, and is generally right on in comparing agile or iterative strategy for project management to other project management paradigms. check out his recent post

http://herdingcats.typepad.com/my_weblog/2008/08/a-new-agile-pm.html

]]> By: Remus Stratulat http://www.jrothman.com/blog/mpd/2008/09/whose-roi-is-it.html/comment-page-1#comment-23164 Remus Stratulat Sat, 13 Sep 2008 07:26:56 +0000 http://jrothman.com/blog/mpd/?p=8503#comment-23164 I don't know if this is also related to Consumer ROI, I'm still learning this things, however last time we were trying to define an MVP for our product we start looking at how much money can our customers make using our product and how can we make him earn more money. This way we were sure we will pick the most valuable features. It was a shift in the way we looked at the problem. Usually we were looking at ROI per feature. We decided just as an exercise to start looking at ROI per product for customer. I don’t know if this is also related to Consumer ROI, I’m still learning this things, however last time we were trying to define an MVP for our product we start looking at how much money can our customers make using our product and how can we make him earn more money. This way we were sure we will pick the most valuable features.

It was a shift in the way we looked at the problem. Usually we were looking at ROI per feature. We decided just as an exercise to start looking at ROI per product for customer.

]]> By: Jim Ward http://www.jrothman.com/blog/mpd/2008/09/whose-roi-is-it.html/comment-page-1#comment-23044 Jim Ward Thu, 11 Sep 2008 14:57:35 +0000 http://jrothman.com/blog/mpd/?p=8503#comment-23044 Ultimately, I think that producer and consumer ROI yield the same result, with producer ROI being the aggregate of all consumer ROIs. ROI is most useful as a project selection tool. Projects that produce products or services with higher "potential" ROI, often having to exceed a specified internal rate of return, called a hurdle rate, are more attractive to an organization than projects with lower ROI. Of course, these are future looking measures, and, as such, require forecasting tools and a fair amount of risk assumption. New products are introduced with the expectation that they will sell at a profit. As we know, this does not always happen. ROI may be readily more applicable for projects which yield products for internal use, e.g., a new accounting system that has an expectation of increasing internal efficiency and saving the organization an expected amount per transaction. ROI, like Payback Period and NPV, is a financial measure of future revenue and cost streams that are used to evaluate investment alternatives. They may be applied to a given project or to a portfolio of discrete projects. It has been my experience that the project team is only responsible for managing the development cost of this calculation. It is up to the internal customer or the sales and marketing people to achieve the revenue or cost savings part of the equation. Ultimately, I think that producer and consumer ROI yield the same result, with producer ROI being the aggregate of all consumer ROIs. ROI is most useful as a project selection tool. Projects that produce products or services with higher “potential” ROI, often having to exceed a specified internal rate of return, called a hurdle rate, are more attractive to an organization than projects with lower ROI.

Of course, these are future looking measures, and, as such, require forecasting tools and a fair amount of risk assumption. New products are introduced with the expectation that they will sell at a profit. As we know, this does not always happen.

ROI may be readily more applicable for projects which yield products for internal use, e.g., a new accounting system that has an expectation of increasing internal efficiency and saving the organization an expected amount per transaction.

ROI, like Payback Period and NPV, is a financial measure of future revenue and cost streams that are used to evaluate investment alternatives. They may be applied to a given project or to a portfolio of discrete projects. It has been my experience that the project team is only responsible for managing the development cost of this calculation. It is up to the internal customer or the sales and marketing people to achieve the revenue or cost savings part of the equation.

]]>