ROI and Reinvention in SME Context

Reinvention is fundamentally about change and transformation. In the business context, change represents a transformation occurring at the organizational level. While business is organized, it is not simply an organization.

Traditionally, business has been viewed as an interaction between a producer and a customer. However, modern business models take a broader perspective, typically including other stakeholders beyond just producers and customers. As a result, business change is often a multi-party transformation.

The Challenge of Business Transformations

Transformations are inherently difficult. Data from large corporations shows that over 70% of transformations fail. This figure is likely not any better for smaller companies.

Since I don't have access to specific research data, what follows is an analytical exploration of the topic. First, what does it mean for a business change to fail? Essentially, it means not meeting your objectives. Failures can range from total collapse to more minor setbacks. In the context of transformation, the primary goal is to achieve more successful outcomes. Fewer failures translate to greater returns.

However, it's important to recognize that transformation is not a one-time event but a continuous process. If a system is flawed, the same mistakes will be repeated, leading to increasingly significant financial losses as changes accumulate.

Investment in Reinvention

Investing in reinvention means adopting the Reinvention Method in the context of business transformation. This is a system-level investment.

The new system can be seen as an upgrade, as all businesses undergo change, regardless of how haphazard or bureaucratic their current transformation processes might be.

Key Characteristics of the Reinvention Method

Modern and Integrated: The method specifically addresses questions and needs related to change.
People-Centric: Human aspects are emphasized more than in traditional business change approaches.
Broad Applicability: The method is not only for producers but can also be applied in customer and partner contexts.

Potential Investment in the Reinvention Method System

Leadership Support: Leaders must understand and support the new method as system gatekeepers.
In-Depth Understanding: At least one person within the company should delve deeply into the Reinvention Method.
Reinvention Team: Those involved in change activities should receive basic knowledge of the method and initial support from an external Reinvention expert.
Modern Approach: Specific customers and partners may also learn the basics of reinvention before a change begins.

A rough estimate of the initial investment cost is $20,000.

ROI Considerations

Let's assume a $10 million business with a 10% profit margin. How much would profits need to grow to break even on the Reinvention investment?

The investment cost is $20,000, and current profit is $1 million. Therefore, break-even would be reached with a 2% profit growth in the next change.

If the use of the Reinvention Method leads to a 10% increase in profits, we could calculate the ROI as follows:

Increased Profit: 10% of $1 million = $100,000
ROI: $100,000 / $20,000 = 500%

These calculations are based on a single business change. As the system continues to produce improved results, the actual ROI is much higher, given that the investment in the foundational system is sustainable.

The key success factors include how effectively those involved learn and apply the Reinvention Method in business transformations, as well as the starting point—specifically, the quality of the previous change system.

Conclusion

Investing in the Reinvention Method system is a lucrative option for SMEs.

Bonus Insight

The Reinvention Method is not limited to business-level changes; it can be applied to any change context, large or small, within or beyond organizations. This broad application scope makes business systems more agile and productive. Business change then ceases to be a threat and instead becomes a source of competitive advantage for the business community in question.

Do you have any experience or data that could supplement this analysis?