![]() ![]() Opportunity costs can often outweigh the costs of the learning experience and it’s very important to take them into account. The 3-4 years’ salary you lose is known as an “opportunity cost”. So, for example, if you want to go to study a degree at university, you’re not just paying the course fees, living costs, etc., but you’re also giving up the chance to work a full-time job for the 3-4 years of the course. ![]() It is also the cost of the missed opportunities that form part of the learning. Investment is more than just the direct cost of the learning experience. Profit = Return – Original Investment Investment So if you make $20,000 and you spend $10,000 to do so, your profit is $10,000. Profits are calculated as the money you make, subtracted with the investment you made. To do this we use a calculation that is very standard for calculating present value, which you can find here on our website. So when we calculate the “profit” from learning we also need to adjust the calculation so that we examine how much all that extra money would be worth today (which is when we’re paying for the learning). Why? Because $2,000 in 20 years’ time is going to be worth much less than $2,000 today. This isn’t quite as simple as taking say a $2,000 raise and multiplying it by the expected length of our careers. We’re looking instead at personal profit, and that is measured by how much extra money we will earn based on either promotion or a salary raise or a job change (to a job the pays more than our original salary). When we talk about profit in terms of learning for ourselves, we’re not talking about company profits. Let’s take a look at each of those terms: Profit The formula for Return on Investment (ROI) is as follows: The higher the return on investment, the better the learning opportunity is for us. Return on investment is the amount of money that we expect to earn over and above the costs of the learning experience. Do you go for the university degree or book-learning or e-learning or pay for classroom learning? While we all have some natural preference for one (or more) of these learning methods, one thing we really need to consider is the return on investment for the path we choose. One of the biggest challenges facing designers is how to begin and how to further their design education. ![]() With an enhanced scope when determining what features a design needs versus those which may be superfluous, a designer can concentrate on how the value of convenience the user will place on it will reflect the financial health of the work after rollout. Thus, having a solid grasp of ROI and an appreciation for how they can translate the dynamics involved to the user experience will give designers a powerful advantage. The Design Management Institute, for instance, has found that design-centric companies (such as Apple, Coca-Cola, and IBM) outperformed the S&P index (which indicates the industry’s average performance) by 228% over a 10-year period from 2003 to 2013. While calculating the ROI of design efforts is difficult, some organizations have attempted to do so by analyzing the net effect that a focus on design has on the overall profitability of a company. In design projects, an investment is often money or time, but the benefit could be increased user satisfaction, improved user efficiency, or the reduction of user error-all of which will probably lead to an indirect increase in profits. When used in this way, ROI cannot be calculated as simply as in finance, because the investment is not always measured in the same unit as the benefit, and the effect is not always direct. ROI is used more broadly in design to describe the effect of an investment in a design-related area-e.g., investments in design, usability, or user research. For instance, if you invest $1,000 in creating a website and it increases your sales by $1,500, then the ROI = (1,500 - 1,000)/1,000 = 50%. ROI = profit from an investment / investment cost, and is usually expressed as a percentage. Return on investment (ROI) is a financial metric used to analyze the efficiency of an investment. ![]()
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