Home > Articles > Software Development & Management

  • Print
  • + Share This
This chapter is from the book

What to Invest In?

There are always more pos sible investments than time or money available. We find some products make better investments depending on the time needed to realize a return. Figure 2.2 summarizes this idea.


Figure 2.2 This model helps to manage expectations of ROI. High invest ments in a strategic product usually result in a quicker ROI than the same amount invested in an infra structure product. This does not neces sarily mean it is better to invest in strategic products, only that expectations for re turn on investment are different and should be recognized as such.

A strategic product is one that adds value to your organization by providing a ser vice or product not currently provided. Further, it provides some long-term market or operational advantage. For example, at the time of writing airlines are converting to e-tickets. This is a strategic product as it enables passengers to interact differently and may eventually significantly reduce the cost of check-in.

At the time of writing, Apple has become very successful with its online iTunes Music Store. The millions of songs sold through this site have added considerably to Apple's revenue stream. This product is strategic: Though it is not part of Apple's core (no pun intended) computer and software business, it is a logical add-on to its digital lifestyle approach.

Infrastructure products on the other hand are changes more than additions and are intended to make some internal process run more smoothly or at a reduced cost. For example, when you changed to using barcode scanners in the warehouse to perform inventory, that was an infrastructure change. When you abandon barcodes in favor of radio-frequency identifiers, that will be another infrastructure change. You do not sell infrastructure products (unless you are a vendor of ERM or CRM or similar kinds of software), and infrastructure products do not generate revenue.

Think of an infrastructure product as something you build (or buy) to use.

Returning to Figure 2.2, suppose you are a bank. Let's say a strategic product for you is a new type of bank account intended to attract a type of customer you do not have at present. Your investment is probably high but you expect to realize a high return in a short time.

Continuing with the banking analogy, suppose you make enhancements to your Internet banking so your customers can pay any bill using the Web site. This shows on the diagram as infrastructure to a high worth area. Your investment is high (to enable paying any bill is expensive), it is likely your return will be longer term because you are providing a better ser vice and it may take people a while to realize it. After all, paying bills is not uppermost on most people's wish lists. (As an aside, if you could produce a product whereby people did not have to pay their bills at all, that would be a strategic product, and the payback would be quick and spectacular.)

You can have a low investment and get a fast payback from doing a quick fix like making corrections to something that is not currently working. You might also make an enhancement to the ordinary infrastructure that bank employees use to order stationery. The payback is longer term: While the bank infrastructure works better for the employees, it is not a high-worth area that adds value to your organizational purpose.

  • + Share This
  • 🔖 Save To Your Account