Saturday, February 4, 2012

go to hell with ROI

In my last 5 years of industrial work one of the most irritating things that I had come across is the question to "Justify the Return on Investment" or to come up with sales prediction when an certain types of solutions are proposed. 

I fully understand the importance for a corporate to have an eye on the ROI and the revenues, but if you want to exploit certain market gaps you should be willing to trust the instincts and experiment. Just imagine if Mark Zuckerberg was asked to come up with a revenue prediction when he started facebook or if Steve Job's was asked to justify the ROI on the MAC when he wanted to use translucent silica for casing or if some had to come up with the number of  PCs that can be sold in the marketing in 1980's to create a revenue prediction. 

In certain solutions at times its impossible to quantify such values. In most cases these solutions exploit market spaces which had not been exploited up to this point. They might a substantial risk of not being able to open up the desired market space, but if it works out it, gives a unconditional first mover advantage which would out do any kind of financial prediction. What financial professionals should remember is that what ever that's in the book cannot be used for all project evaluations and picking one with the highest NPV doesn't always give a healthy growth to organizations. 

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