ROI is Deceptive Without REAL Requirements and Quantified Intangibles
by Robin F. Goldsmith
Common presumed best practices for determining Return on Investment (ROI), advocated by almost all apparent authorities, in reality often undermine ROI's very purposes.
ROI is supposed to provide a valid and reliably supportable objective basis for making decisions: the quantified dollar benefits of an approach versus its quantified dollar costs. However, the customarily recommended practice of listing but not quantifying the dollar value of "intangible" benefits leaves a gaping loophole that can render even seemingly conscientious ROI analysis a deceptive sham.
The dirty little secret of ROI is that voluminous documentation and calculations often are merely a smokescreen obscuring the fact that in most organizations the proponent's favored outcome almost always prevails. Although perhaps not consciously recognized, calling the exercise "justification" indicates a mindset where there's not even a pretense of objectivity, since measurements are chosen to justify the proponent's predefined answer.
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Problem Pyramid
I like the problem pyramid. A couple of questions about it:
1. What is the relationship between the Now Measure and the Goal Measure? The Now Measure is "the measure of the problem now that tells us it is a problem". The Goal Measure is "the desired measure of the problem that indicates it's been solved". Shouldn't the metric be the same, and the limits we apply to the metric be different?
2. What is the relationship between the Requirements and the Goal Measure? Are they perhaps one and the same? Or perhaps the difference is that the requirements measure the extent to which we address the As Is Causes, while the Goal Measure measures the extent to which we've solved the problem itself?