Building the Case for Unassailable ROI - Part 3

Soft ROI

In my two previous posts, I discussed how to adjust ROI calculations to account for market conditions, required internal rates of return, and six principles of ROI-centric innovation. In this final post of the series, I want to highlight the role of “Soft” ROI.

Soft ROI refers to benefits that lack a directly measurable or clearly attributable financial impact on a specific project or product. Examples include improved safety, morale, culture, brand reputation, customer satisfaction, and enabling employees to focus on more meaningful tasks. While these factors undoubtedly have value, the challenge lies in accurately attributing that value to a particular initiative or program. For instance, employee satisfaction can increase retention, thereby reducing productivity losses and onboarding costs associated with employee churn. However, when a project is one of many modernization efforts within an organization, isolating and assigning these benefits to a single product or program becomes nearly impossible.

To build a strong case for an ironclad ROI, the first step in addressing Soft ROI is to explore whether a reliable method exists to measure and allocate the financial benefits that accrue to the buyer. In some instances, this may require the solution developer to design and integrate analytics tools that can measure, calculate, and visualize these benefits, enabling their future inclusion as part of a “Hard” ROI calculation.

A second common challenge with soft ROI arises when the benefits do not directly accrue to the buyer. This is particularly evident in the case of Illuminex AI’s solution for detecting Foreign Object Debris (FOD). While the airport bears the primary responsibility and cost of addressing FOD, the majority of the benefits, such as reduced FOD strikes, are realized by the airlines.

Furthermore, peripheral benefits like reduced travel delays, which the U.S. Department of Transportation values at approximately $40 per hour for personal travel and $70 per hour for business travel, are both tangible and measurable. However, these benefits do not directly impact the airport’s profit and loss statement, complicating their inclusion in ROI calculations.

In such cases, solution providers should seek to identify methods to more effectively distribute costs among the solution beneficiaries through broader engagement and collaboration. While achieving this alignment may sometimes prove impossible, it remains essential to document and track any ROI that is tangible and measurable, ensuring these benefits are clearly articulated and supported with data.

Despite best efforts, and the clear presence of value, it is often impossible to accurately attribute the value of Soft ROI to the customer’s P&L. Even so, these benefits should still be documented and tracked, recognizing that a compelling business case isn’t solely about presenting a high ROI. It’s about demonstrating a well-rounded, risk-adjusted return that aligns with your company’s strategic objectives, cultural priorities, and societal commitments. In an environment of constrained investments, Soft ROI can enhance the appeal of your ironclad proposal, adding an extra layer of credibility and alignment with broader goals.