Value is the first thing. Not ROI.
What exactly is ROI? One could say that ROI, like other things, is actually in the eye of the beholder. Each business, each organization, each industry has different foci when it comes to return on investment. But with all of the talk that goes into setting goals and executing on them in order to receive a desired ROI, how do we prevent ourselves from putting the cart before the horse, so-to-speak? And what is the relationship between value and ROI?
Your model for evaluating your efforts may be outdated.
Firstly, let’s go ahead and say aloud that value does not always equal money. I have seen nonprofits struggle with this idea when the teams hold a mix of people coming from for-profit and mission-based organizations. And I have seen for-profit entities struggle with short-sightedness that often relates to short-term financial gains. The former has the challenge of balancing the very real onus to keep the lights on with the similarly very real desire to fulfill a higher or more transcendant need in the world. The latter sometimes works at such a breakneck pace that it cannibalizes more sustainable initiatives in favor of “shiny objects” that appear sexy in the moment, but weren’t built to last. Alas, unsurprisingly, the hunt for money brings more complexity than we realize at times. Don’t worry - I am not at all suggesting that money does not matter. I am not so naïve. I am suggesting that models that put too much focus on the ROI first are in need of a refresh.
And I am not alone in this idea. When you do a simple search amid articles and whitepapers being written and circulated to B2B and B2C communities, you will notice a marked surge in the prevalence of discussions on methodologies like the Lean Startup method, design thinking, Agile development, and the like. There is a reason for this.
Sustainable and reliable ROI only comes from consistent value creation.
What these popular frameworks and ways of working all have in common is a preference toward the user when making decisions. Each one focuses on the concept that, at its core, an organization is performing its best when it is prioritizing the needs of its user above its long-term pursuit of loyalty and ROI. This is certainly not new information, and I’m not breaking new ground by mentioning it, but think about it. How can we ever assume that we will receive any lasting ROI from a model that only prioritizes getting revenue fast, or hooking customers with some clever technique to obfuscate our inner motives under the guise of an uncannily altruistic facade, or that pays attention only to recruitment but hardly ever to retention? Can we make strategic decisions that chart a course for our businesses without putting in place a means to protect that ROI through consistent value creation for the user? Honestly, the answer is yes we can. Many of us have worked in places that have done just that. And while I do not wish for any business to fold, I am eager to see the mindset that says business ROI is the ultimate goal go recede into the background and go the way of the dodo.
I would say that our roadmaps — however strategic they may be in their intentions — are losing merit year over year if they are consistently void of some open and transparent vision surrounding more than just what a company intends to achieve for itself and how it will do that. They need to show what its users will achieve now and in the future, as well as how we are going to help them get there. So how might we do that?
….. any decision that is made without a consideration for user value is a guess, at best.
In the midst of an operation that prioritizes the user experience, ROI is a more naturally obtained result.
Pivot your operations to put user value at the heart of all decisions
If I were a car manufacturer and I were interested in the ROI of revenue generated through sales of my automobiles, I would have revenue as a north star metric. If I want to see fast ROI, I might decide to make parts for my cars using the cheapest material I can find. This would be great at first for me, but terrible in the long-term for my user. If I know that my user needs to be able to avoid starting new shopping cycles every few weeks, I would have failed. What might an alternative option be?
I could begin to develop the features of the car that matter the most to the user, and do so with materials in mind. A user that receives maximum value is more likely to become a returning customer, and will be more than happy to pay for your services in part, in bulk, or otherwise, and you will find that the revenue increases as value to the user increases. Users are becoming more educated regarding their options, and can easily see through veiled altruism. Gone are the days where one might choose to trick the audience into thinking we care more than we actually do. A user needs to see their pathways to what they need first, and foremost.
You might ask yourself: What are the most impactful resources I could give to a user with X motivation? How about Y? Z? How will this initiative that I am planning address the needs of users with Motivations X, Y, and Z? Will it at all?
If it does not, rework the initiative to do so, or sunset it. There is no point in developing something that doesn’t assume some level of value for the user. We’re all busy. Do work that matters.
P.S - If you are want a cliffs notes summary of this post, it would probably read: “Value and ROI are not mutually exclusive.” 🙂
Shoutout to June Ko for a nudge that I paraphrased!
