Figure 1 ROI for a Fixed Technology Frontier

ROI

Decision motivators
Costs

Economic outlook
Demand outlook

1.
2.

Cost of capital
Time for implementation

Benefits
1.
2.

Revenue
Market share

Cost of capital
Payback period

Accept
1.

Accept/reject issue
View of short-run
market conditions

Source(s): MAPI Foundation

2.

Net benefits over a fixed

period > net costs
The companys hurdle rate
is cleared

Reject
1.
2.

Initial costs too high

Acceptable payback period
too short for technology
capacity and market
conditions

Figure 2 ROI for an Expanding Technology Frontier

Decision motivators
Shift in production
cost pressures

ROI

Costs
1.
2.
3.

Risk associated with

unknown technologies
Stranded costs
Labor force adjustments

Shift in product
quality pressures

Benefits
1.
2.
3.
4.

Maintaining competitiveness
with other industry players
Improved cost/quality picture
Increased productivity of
capital
Increased workforce
productivity

Network/supply chain
impacts

Accept

Accept/reject issues
1. Dependence on
acceptable payback
period
2. Accept now versus
accept later
Source(s): MAPI Foundation

1.
2.

Costs of not investing

are too high
Appropriately flexible
payback period

Reject
1.
2.
3.

Cloudy corporate vision

Unmanageable up-front costs
Unmanageable workforce
issues