Do you mean ROI or ROP?

“What’s the ROI?”

“My boss wants us to show ROI.”

“This doesn’t have to show direct ROI, so I dunno, let’s call it brand marketing or culture-building stuff or whatever?”

It seems to plague everybody under the sun, and yet we all think we’re alone in the fight: ROI. We either want to prove what we’re doing is working by pointing to direct sales or leads, or we have to.

It’s easy to think the problem is proving ROI. This leads to certain behaviors as a result: We look for the right technologies to help us measure stuff, approve the ideas that feels easy to measure, and reject the stuff that doesn’t feel quite so easy to track. It feels like the stressful part of “ROI” is the ability to prove something. And while that’s certainly a challenge, I don’t think it’s the fundamental issue behind all the internal battles (or at least, the headaches we feel) when we talk about ROI.

No, I think the real issue is that we’ve stopped understanding what we mean when we say the phrase itself.

When we say “ROI,” how often do we really mean the “I” part? Return on Investment. Most actual investments are longer term plays, designed to yield steadily compounding gains over time. When we talk about investments, we’re talking about it from the standpoint of our delivering capital into something else. But the reason we yield a profit down the road is that the thing we’ve invested the money into benefits from receiving that money. We are contributing to the overall success of something in some small or large way with our dollars. It grows in value. Then we extract that value. Later.

When we say ROI in the workplace, I don’t think we can ignore the fact that we’ve largely stopped caring about the “I” part — and everything that implies.

So what do most people mean when they say ROI?

Purchase.

They mean purchase.

Go out to the giant store that is the internet, or one channel, or one idea, and purchase the result we seek. Do X, because that gives us Y. That level of direct, transactional value isn’t an investment at all. It’s a purchase.

At best, when we say ROI, what we really mean is a day trade: a quick injection of capital in order to then quickly extract a tiny bit more value within the next few hours. This is unsustainable and shortsighted and, again, the best case scenario. Because we mostly mean Return on Purchase. Not Return on Investment.

So which is it? ROI? Or ROP?

It can’t be both.

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Posted on October 7, 2019 .