Time to market 'a better measure than RoI'

Industry should 'quit obsessing' about RoI when time to market is a better measure of success in digital era, according to SAP's chief digital officer

Time to market (TTM) is a better measure of success than return on investment (RoI) in the era of the digital economy, SAP's chief digital officer has argued.

In a blog post, Jonathan Becher claimed RoI is yesterday's man because the speed at which the technology market now evolves has undermined its assumptions.

The new measure of success for the digital age should instead be TTM, because it "prioritises brevity, encourages momentum, lets you learn more sooner, and promotes 'good enough' delivery", Becher said.

"Quit obsessing about RoI and embrace TTM."

Laying out his case, Becher said the central foundation of ROI calculations - ie the Latin phrase ceteris paribus, meaning 'all other things being equal' - is outmoded for the modern era, where market changes occur so rapidly.

Citing Ben Thompson, the author of Stratechery, Becher gave the example of P&G's 2005 $57bn (£44bn) acquisition of Gillette, the RoI analysis of which he said likely assumed that the fundamentals of the razor industry were immutable.

But then Dollar Shave Club came along with a low-cost model that undercut Gillette by 50 to 75 per cent, the book outlines. Becher questioned whether P&G would still have spent $57bn if it had looked at the razor industry without the ceteris paribus assumption.

"In the digital economy, you have to assume that the fundamentals of any market will change by the time your product reaches it," Becher argued in his blog post on LinkedIn.

"You may not know how it will change, but you should assume it will change. This means the best indicator of success will likely be TTM.

"Adopting TTM as your primary success criteria provides more benefits than just minimising the likelihood the market will change before you arrive. By favouring TTM over RoI, you'll favour action over indecision and flexibility over rigidity. You'll fail more often - but you'll also be more likely to find the formula that succeeds."

Becher also drew on figures from a study to support his thesis. It found that technological products which arrive on the market six months late but on budget generate 33 per cent less profit over five years, compared with a four per cent profit reduction for products that are on time but 50 per cent over budget.

Crowdfunding companies such as Indiegogo and Kickstarter, which allow tech firms to acquire paying customers before even building a product, are an example of the way the market is moving, Becher said.

"In the digital economy, change is the only constant. So quit obsessing about RoI and embrace TTM. You won't stop change, but you might be able to keep up with it," he concluded.