When I used to teach undergraduate courses in International Relations and Security I would typically start any balance of power lecture by making students guess how much the United States spent on the military versus the rest of the world. At that time, the United States spent as much as the next 12 largest spenders combined. That gap has only widened.
While the relative difference is incredible, I would caution that it isn’t simply how much you spend, but how you spend it. There are numerous debates about whether the military is spending its funding appropriately (case in point, the debate over the F-22) given current and likely future opponents. One can easily relate this to business. It isn’t simply how much a business spends on R&D, sales and marketing, etc. It’s how the firm spends those dollars. Are they allocated efficiently? Are you tracking the progress (or lack thereof) of the spending, calculating an ROI, and shifting course if the return and outcome is not what you originally sought? It’s a key distinction, one that organizations often lose sight of.
Filed under: Uncategorized Tagged: | military spending, resources, ROI
I don’t know what your experience is with trying to quantify things like roi on r&d efforts in an organization but from what I have seen this is often easier said than done. For instance, if you decide to add a couple of features on a fielded product, one might be aimed at an individual customer, one might enhance all users of the products experience, and one might make up for a product shortcoming.
The only feedback we may ever receive is informal feedback from a few (most of the time not all) of your customers. I would be more than open to hearing some different ways to try to generate metrics for this type of thing.
Hey Patrick:
I agree it is easier said than done. I think my issue with it is often times (certainly not all cases) people simply state “it can’t be measured” or scoff at the idea of measuring these types of things when in fact we can–maybe not exactly, but within a particular range that allows us to determine whether or the resources expended are not worth the return.
Very early and exploratory R&D probably should not have as tight a leash, as it is hard to put a value on that kind of experimentation. But I would think that specific upgrades (either client specific, applicable to all users, or fixing a shortcoming) are made only once an analysis has been done as to whether the resources expended are worth it.
In the case of the client, is that client’s experience significantly degraded such that a) the product is simply unusable, and/or b) failure to address the client’s concern will lead to lost revenue and the cost of the upgrade is less than the potential revenue loss (short term loss may be necessary to secure the long term relationship, but that can be factored in as well). The same can be said of upgrades that would affect all users—is the cost of research, developing, and deploying that upgrade greater or less than near- and long-term revenue increase or loss? Additionally, and I think this goes for any R&D effort, what are the opportunity costs of deploying resources to one problem and not another?
Again, I think it can be done, and no, it isn’t easy.
How are you currently handling this? We can chat off-line about it if you like.
One author I’ve been reading recently on this topic is Douglas Hubbbard and his How to Measure Anything. The book is more focused on so-called ‘intangibles’ and how, in actuality, they can be measured.