Five Secrets to a Successful ROI

Realistic Returns through Storytelling

As a Field CTO, and having held various senior management roles in the past, I’ve had plenty of experience in building and presenting the case for investment. There are plenty of resources out there for calculating Return on Investment (ROI), but I haven’t seen many that talk about how you should present them to leadership or how you can help influence a positive outcome.

In this article, I’ll be sharing some of the techniques that I’ve used to secure multi-million investments and how you can avoid some of the most common pitfalls.

Tip #1 - The Secret of Storytelling

Like any other presentation, an ROI is about storytelling. You’ll have spent hours on gathering data and putting together calculations, but they are not enough on their own. You also need to craft a compelling and persuasive narrative around them. The basis of a good ROI can be explained in a sentence or two, and should be understandable by a middle-schooler.

It’s very easy to get drawn into the depths of the numbers and potentially lose track of the underlying, basic story. I could easily provide pages of evidence of how expensive and impractical a private helicopter might be for taking my kids to school. I might talk about the initial cost, how expensive a helicopter is to maintain, or the many legal aspects that need to be considered when owning a helicopter. Frankly, it makes a 700 horsepower sports car look like a sensible purchase, but I don’t think that’s going to convince my wife we should buy a Ferrari 488 Pista.

When creating your ROI, think carefully about how you can articulate the logic in its most basic form.

Tip #2 - Does Productivity Save Money?

Efficiency, Productivity, Scalability, Reliability and Security are all great to have, but businesses are naturally more focussed at how an ROI will save them money.

I often see ROI proposals where there is a “cost saving” around the automation or process efficiencies enabling the workforce to do something faster. Getting things done faster is great, but any seasoned leader will be quick to point out that it’s only a “saving” if they terminate the employment of some members of staff.

It’s important that you understand the fundamental of how a saving will be realised so that your narrative make sense:

• A “cost saving” is a tangible reduction in an existing business expense.

• A “cost avoidance” is the reduction of some likely future spend.

Naturally, a business will prefer to see direct cost savings as part of an ROI, but those may be difficult or unpalatable to execute.

When you can’t show a direct saving, you should think more laterally about what future savings might be avoided. For example, if there is an improvement in developer productivity, then perhaps the organisation doesn’t need to hire more people in the future or they might see a reduction of churn thanks to less developer toil. In that scenario, I’d be looking to find out how much they spend on advertising and filling new roles. Additionally, I’d be looking at how long it takes for a developer to become productive, along with the cost of any training (formal or informal) that happens. By gathering and presenting this data to your decision-maker, you’re start your conversation with value.

Tip #3 - The Customer is Always Right

When producing an ROI, your aim is often to change or influence the opinion of a set of stakeholders … opening their eyes to new perspectives or ideas. The most common challenge that trying to overcome is cost - either in terms of a build vs buy conversation or perhaps a debate on private cloud vs public cloud.

Rather than enter directly into a confrontation where you’re trying to prove your point, it’s often best to describe the customers’ current opinion and build from there. Let’s look at a “build vs buy” example where a customer has already built their own “free” tool and perceive commercial software as being too expensive. The problem is generally that they’re not making a fair comparison.

So, starting with common ground, your first ROI slide would show your product being high cost, compared to low internal tool cost. That might seem counter-intuitive, but it shows that you understand their perspective.

Great … now we can start building on that shared understanding. There’s a few angles you might then explore:

• Estimating the time it takes to train new staff on the solution. An off-the-shelf solution will usually have good documentation, training courses, certification. This all helps in finding people with demonstrably the right skills. Meanwhile, a bespoke DIY solution will always take several weeks/months for new employees to learn.

• Internal tools aren’t “free” - what you save in license costs, you pay for in development and maintenance costs. You might work with the customer to understand how much effort they’ve put into developing the tool - and thus discover its cost to date. You can reasonably assume that this effort will continue to develop new features, which of course, would usually be catered for as part of a license of an old-the-shelf product.

• Most customers will agree that the expectation is that an off-the-shelf solution is that it will require less effort to “operate”. You can build upon the above by looking at other areas of operation, such as the cost recovering from outages, the potential for a security vulnerability, etc.

Tip #4 - Yes, and Also This

Similarly, it ‘s often difficult to sell the benefits of “security” because the customer has a different perception of risk. It’s a cost avoidance of a thing that might never happen.

I’d firstly recommend reading the IBM Cost of Data Breach Report; it provides lessons learned from real-world data breaches from across the world. The data provided in the report enables you to have a more reasoned conversation about the risks your customer is facing in their specific geography or industry.

I’d also spend time thinking about the day-to-day cost of security.

• Buy a coffee for programme managers and talk to them about the impact of delaying projects because a security problem was found. Ask how often last minute exceptions are raised and how long (if ever) they’re retrospectively reviewed to resolve the underlying problem.

• Talk to compliance and audit teams about the time they spend each month on gathering data and generating reports to satisfy external auditors. Development teams will often avoid any interaction with these teams wherever possible, so they be unaware of the pains undertaken on their behalf.

• Speak to incident management about the frequency of incidents caused by out of date software and the time taken to resolve them. Look to build a picture of what a real-world security incident might look like at the organisation and the time/cost of investigating it properly with their existing capabilities.

• Consider the culture of the organisation and where poor collaboration between teams is hurting productivity. Better tooling that provides everyone with a shared view of the world can be immensely powerful at resolving day-to-day niggles between teams.

Tip #5 - The Moon on a Stick

Finally, I would encourage you to be realistic with your ROI numbers. You will quickly lose all credibility if you promise returns that are unbelievably positive. Generally speaking, business leaders will expect to see a return on their investment within 12 - 24 months.

There are two tactics that I use when tuning and presenting ROI figures.

• Present three different ROIs, based on how aggressively the organisation is able to adopt change. This gives you an opportunity to show that even low adoption can show a positive ROI, whilst hinting at what they could achieve with the right level of internal support.

• Focus on the one element of the ROI that your decision maker is likely to care about. Base your numbers on that figure alone, but then list other parts of the ROI that you’ve not considering. This shows that there is a larger opportunity, but keeps focus on an execution path that is more achievable.

In both of these examples, the goal is to have a more honest conversation about outcomes that are realistic and relevant.

Conclusion

I hope some of these suggestions are useful to you. Presenting an ROI is no different from any other presentation - it will be more powerful if it is relatable and authentic. Presenting an ROI isn’t about convincing people you’re right; your goal should be to expand the horizons of your decision maker by offering new perspectives and propose a path of action that delivers the most valuable outcomes for them.