For each area, returns for investments follow the shape of an S curve. That is, if you spend too little or too much, returns are modest. If you spend less than $500,000 in a single round, chances are you will see little return. An investment of $1.5 million in a single round produces a cost-effective cumulative impact: The slope at this point is at its steepest.
If you spend more than $2 million in an initiative in a single round, the return on the investment beyond $1.5 million offers decreasing returns. An investment of $1.7 million in a single round produces a greater cumulative impact, however the slope begins to flatten at this point, and additional investment yields less and less additional impact.
Companies that invest in the same initiatives over two or three rounds (depending on the amount of money) will experience decreasing and eventually no returns for their investments. Expenditures beyond $5 million over two or three years on a particular initiative in most cases produces no additional returns.
For example, suppose a company wants to reduce the time required to complete R&D projects by investing in Concurrent Engineering. The most aggressive schedule would be $2 million this year, $2 million next year (which would not produce as much benefit, but would continue to improve R&D cycle time), and $1 million in the third year (which would reach the maximum possible benefit).
The effects can be seen in the current year on the TQM/Sustainability spreadsheet. As companies make decisions, a worst-case/best-case set of outcomes is predicted. These are also carried into the Proforma Financial Reports, which will use the middle of the range as it calculates your expenses in the upcoming year. The spreadsheet can only offer a range of possible savings. Actual results appear the following round on Page 12 of The Capstone® Courier in the HR/TQM/Sustainability Report.
