ROI is more than one metric: Gartner VP

The basics around ROI hasn’t changed but what has changed is ROI being seen as one metric, its multiple metrics, according to Chris Ganly, VP at Gartner.

He tells Digital Nation, “There are now more value metrics, more outcome driven metrics that we will talk about, that organisations are looking for.

“But there's also additional metrics organisations need to be looking at, that go beyond just the ROI, that talks about the outcomes to the organisation, what it's allowed us to achieve through customer satisfaction, or time to market, growth not just purely the numbers.”

While the numbers are important, Ganly said is more than just about the numbers, “A value conversation needs to encompass more than just straight numbers.”

Different organisations will approve projects based on different reasons and not just off ROI, Ganly explained.

“Not everything's about an ROI, we do undertake some things, because we want to be innovative, or game changers, or we're updating upgrading our infrastructure, and we're doing that around, either setting a platform for the future or a price for performance cost decision.

“Most organisations will use a combination of some discounted cash flow metric, whether it be ROI, payback, it's a very common way,” he said.

One of the mistakes there, Ganly said is he sees many organisations trying to measure every project and initiative the same way and forcing an ROI when there is none.

“It was never about ROI, so having your portfolio understanding what type of initiative it is, is important. Then measuring in the right way, having the right metrics and identifying them upfront. Not after you've kicked off the project, identify them upfront, and then track them over a period of time,” he added.

While some organisations think they are effective at measuring ROI, in reality they’re not, Ganly said.

“They're trying to get better, but they're just not effective because they don't focus on the right things. They don't focus on what value or outcomes, they focus too much on the internal view of technology of what we're doing, and what the parts are, not what the product is, and what the product allows the organisation to deliver and to achieve,” he said.

Ganly said it becomes an insular conversation around operational metrics rather than outcomes metrics.

“That’s probably the downfall for a lot of organisations is focusing too much on the work, the activity, the technology, and not on what it enables the organisation to do. What does it allow the organisation to deliver, achieve or get as an organisation?” he said.