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Return on Imagination: Investing in the future

Published: 10 Mar. 2025, 00:02

Lee Hyang-eun

The author is an executive director of customer experience at LG Electronics.

What if we replaced return on investment (ROI), a key metric in business management for over a century, with a new concept — return on imagination? This shift would emphasize rewards for forward-thinking creativity and innovation. While ROI is a useful tool for measuring corporate efficiency, it focuses solely on profitability and fails to account for a company’s social role or long-term vision. As a result, investment in innovation — whose benefits cannot always be quantified by ROI — often becomes a contentious issue.

ROI reimagined [KIM JI-YOON]

Human nature inclines us to avoid uncertainty. When economic conditions deteriorate, businesses instinctively turn to cost-cutting measures as an immediate and effective response. Declining revenue and shrinking profits naturally prompt companies to seek reductions wherever possible. One of the easiest areas to trim is investment in future-oriented research and new business ventures. Since emerging technologies and new industries do not guarantee immediate returns — and often result in initial losses — many companies hesitate to allocate resources to these areas. While such decisions may bring short-term financial stability, they can ultimately threaten a company’s long-term survival.

ROI is an effective tool for assessing current returns on investment but is inherently short-term in focus. Immediate losses can sometimes serve as stepping stones to securing market leadership in the long run. Companies that prioritize ROI alone risk losing their future.

Consider IBM. Once a dominant force in the hardware and software markets, IBM hesitated when cloud computing emerged as a new paradigm. Despite recognizing its potential, the company chose to rely on its stable mainframe and Software as a Service businesses rather than making a bold transition to cloud computing. Consequently, IBM — once a market leader — fell behind Amazon Web Services and Microsoft, becoming a market follower instead of a trailblazer. The company’s reluctance to invest in innovation while focusing on ROI-driven decisions ultimately caused it to lag in the industry.

The case of Kodak is another well-known cautionary tale. The company, which once dominated the film camera market, invented the world’s first digital camera in 1975. However, because its film business continued to generate stable profits, Kodak’s leadership undervalued digital camera technology and reduced investment in its development. As a result, the innovation remained uncommercialized for years. Despite possessing a technological advantage, Kodak ultimately missed the opportunity to lead in the digital camera market, becoming a textbook example of how failing to invest in the future can lead to obsolescence.

General Electric (GE), once one of the world’s most innovative manufacturers, tells a similar story. The company aimed to lead future industries through its industrial internet platform and advancements in digital twin technology. However, in the mid-2010s, faced with the pressures of financial crises and restructuring, GE scaled back its investments in digital innovation. Meanwhile, competitors surged ahead, and GE’s influence in digital transformation diminished.

In contrast, Starbucks took a different approach during the 2008 global financial crisis. Despite severe economic downturns — global GDP contracted by approximately 1.7 percent, U.S. unemployment neared 10 percent and stock markets plummeted — Starbucks did not abandon investments in future growth. Although its sales declined and some stores were forced to close, the company made strategic investments to enhance its long-term value. By introducing digital payment systems and innovating store designs, Starbucks strengthened its brand. When the economy rebounded in 2010, these preparations paid off, fueling sustained growth.

A financial stock market graph illustration embodying the concept of business investment and stock future trading [GETTY IMAGES BANK]

Preparing for the future is what earns a company the right to be remembered. Businesses must resist the temptation of short-term cost-cutting at the expense of future investment. That said, indiscriminate spending is equally dangerous. Companies must adopt a strategic approach, carefully analyzing and validating potential investments to distinguish true opportunities from costly missteps. Even the most advanced technology or innovative business idea can become an empty expense if not thoroughly vetted for feasibility and relevance.

Investment in the future should be bold yet calculated — and, above all, continuous. Businesses must guard against decisions that prioritize immediate performance at the cost of long-term success. After all, if a tree is not planted today, one cannot expect shade tomorrow.

Translated using generative AI and edited by Korea JoongAng Daily staff.