Thursday, October 23, 2008

Forget ROI. Think about ROT.

ROT is a measure of Return on Time. The phrase was first coined by Dr. Joe Webb. Here's how it works.

Next week printers will converge at Graph Expo to see what's new from the vendors. They will be asking themselves three questions. First, "what's interesting?" Second, "what's my competition doing? Third, "should I buy 'that'?" They'll be lots of talk about the ROI associated with various "thats." The problem is that it's impossible to confidently predict how much money a particular "that" is going to return.

At this morning' s, WTT, Dr. Joe outlines the problem:
This is what makes trade shows like Graph Expo so important. It's a chance to look at your costs, yesterday, today, and tomorrow, in relation to what the market will look like. These are the undeniable truths of what is ahead of us: print prices will not be allowed to rise. Materials costs may come down, but will be slow to do so. Lower wages will make attracting and retaining workers harder as they are drawn elsewhere.
If you can't control prices and only moderately control costs of materials and are not sure of market demand, it's a crap shoot to try to calculate ROI. On the other hand, you can get a pretty good idea of your Return on Time (ROT) . So the question is "Will that new "that" allow you to do something you already want to do - only faster?

Time is money. Money is time. Vendors tend to concentrate on press speeds. How many impressions get off the machine in how much time with how much labor?. But business time is not machine time.

Business time is the interval between finding a customer, selling the job, producing the job, billing the job and getting paid. The faster a business turns talk into money, Machine time is usually the least of it.

The bigger parts are usually the necessary intermediate steps:
1.How much time to find suspects?
2.How much time to turn the suspect into a prospect?
3. How much time to turn the prospect into a customer?
4. How much time to deliver the product?
5. How much time to get paid?

Machine time is in the middle of step 4.
1. How much time to clarify specs?
2. How much time to deliver the estimate?
3. How much time to get the files?
4. How much time to get an ok on proofs?
5. Now comes machine time.
6. How much time to finish the product?
7. How much time to get the product out the door?

The good news is that saving times within the process is more about careful thought and focus than about buying a Big That.

But sometimes, a Big That is exactly what you need. In a world of tight credit, this is a harder decision. But if you look at it from the ROT point of view, it's a little less risky.

How much time elapses between you saying Yes and cash coming into the shop? The vendors respond by saying , "We will have That up and running in X time. And then you will find new markets." But "That up and running for new markets" is not the same as cash in the door. Thats have to be integrated into a new production systems. People have to be comfortable with the That. Networks of business communication have to evolve. Production and sales cultures have to change. Plugging in a That is the least of it.

It's conventional wisdom that you have to "cut costs." Dr Joe clarifies why that's the wrong way to look at. Costs are usually measured in dollars. Business investments are measured in time.
So instead of ROI, keep your focus on Time.

Keep asking yourself, How long it will it take, with my people, with my customer base, with the investments I've made to use That to turn possible customers into cash - faster...also better and cheaper. The faster it is, the higher return on time.

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