As a performance measure, Return On Investment (ROI) is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.
So what is typical for ROI? Dow Jones typically returns 0% to 20%, property rental 6% to 8%, and bank savings are currently < 2%.
It’s reasonable to expect that a lean programme should deliver a ROI the same way that any other investment should. So should this level of performance set our expectations or should we expect more?
Imagine what would an organisation look like that was delivering 10x ROI (that’s 1000%).
Is this even possible?
Fortunately, the answer is yes and it’s within your grasp. More importantly if you’re already running any kind of continuous improvement programme and you’re not getting at least 5x ROI then you should take a hard look at what you’re really achieving
One of the key things here is to actually have ROI as one of your measures of success. Too often programmes like lean are held up as being important for service improvement or culture change and not about moving the financial numbers. Well, here’s the news it should do both.
For example, imagine a hospital that can reduce its length of stay, inventory or delays in obtaining diagnostics results. We know that it would mean a much better patient experience which is fantastic. It would also probably be a better place to work which would improve the working environment. But actually reducing all of these measures will drive ROI by reducing costs or creating capacity for growth.
Making the process change is important, however making the organisational change to capitalise on the benefits is critical. This absolutely doesn’t need LEAN to equal MEAN here. It doesn’t mean that we have to fire everyone, in fact if that happens as a direct result of improvement then that would probably be the end of the CI programme. But let’s not avoid the fact that having a solid “cashing in” strategy is key to driving the ROI.
And the great thing about delivering ROI is that it provides an appetite within the organisation to do more. Do more improvement – get more ROI.
We know that aligning the organisation from top to bottom to deliver a truly transformational improvement programme is key, and with our experience this is showing 5X ROI as a starting point. Double digit ROI is absolutely achievable.