< Back to Tools
This tool is so simple yet so powerful. At its core, product development is an investment. Like any investment, the Return on Invest quantifies its success. Understanding this ROI at each step of the product development stage gate processes is paramount to making good decisions.
It’s not uncommon for product development teams to think that the goal is to find the lowest price. It is true, price is an important component of Return on Investment (ROI) — but it is only half the equation. Price is what you pay, and value is what you get. You need to understand both halves to get an idea about ROI.
If an increase in price creates a proportionately higher increase in value, then the ROI will become more positive. An example of this would be DFM (Design for Manufacturability). DFM will cost more — no doubt. However, DFM will lower unit cost (COGS, or Cost of Good Sold). If the decrease in COGS creates more value than the cost to do the DFM, then it should be done, all other things being equal.
Most products have many DFM opportunities, and DFM is only one of many categories of ROI opportunities to choose from. Most product development projects literally have hundreds of ROI decisions that need to be made.
Exactly how you make all these decisions is the subject of the Product Development ROI Calculator.
This tool calculates the ROI for a product development project. Of course, it is only as good as the assumptions in the model, but that is exactly the point. Get the team focused on these assumptions now and not after the design is completed.
The goal of product development is to obtain a high ROI. You can’t manage what you can’t measure.
It provides a means to optimize ROI decisions within a product development project.
It should be used at each step in the stage gate process: Market Validation => Requirements => Conceptual Design => Detail Design => Design Verification Testing => Sales & Marketing Process Development => Pilot Production
We have numerous other tools for validating the assumptions in the model. As always, if you would like us to walk you through it, just send us an email.