Why the Current Innovation Model is Under Pressure: Part 4 - High Stakes, Hidden Costs & RoI

While supply chain leaders own the challenge, they rarely own the solution and building an investable business case comes up frequently in discussions. The tension is clear. On the one hand, proposals need to be ambitious enough to capture board-level attention. On the other, if expectations are set too high, disappointment follows and scepticism grows. That scepticism then makes the next business case even harder to land.

This cycle links back to the way change is often managed. As we saw in Part 2, waterfall-style programmes promise big outcomes but take years to show results. Boards, however, want to see confidence-building wins quickly. If the first milestones look distant or uncertain, enthusiasm wanes and investment appetite fades.

SaaS as OPEX, CAPEX in Disguise

Several directors point out that software-as-a-service is often presented as a more flexible OPEX model, but in practice the financial shape feels much closer to CAPEX. Implementation, integration, and migration carry large one-off costs. As one leader put it, “It is OPEX on the surface, but once you factor in the hidden spend, it is still a capital project.”

Deloitte has found that firms underestimate SaaS integration costs by as much as 50 percent¹. IDC research adds that the total cost of ownership can double initial expectations when training, data migration, and vendor management are included². What looks lean on paper quickly becomes heavy in practice.

The Weight of Technical Debt

Even before new projects start, most supply chains already carry financial drag from technical debt. Customisation built up over years adds complexity and fragility. Gartner estimates that technical debt consumes 20 to 40 percent of IT budgets³.

In discussions, leaders often describe how a single custom feature added years ago still generates cost today. Every new investment has to account for that complexity. In effect, part of every innovation budget is spent untangling the past.

The ROI Dilemma

At board level the question is always whether innovation generates measurable return. Bain has shown that only 12 percent of large digital programmes deliver sustainable cost or growth benefits⁴. McKinsey has found that fewer than 30 percent of transformations create impact that is both financial and lasting⁵.

This is where the tension is sharpest. Make the business case too modest and it will not win approval. Make it too ambitious and you risk fuelling the very scepticism you are trying to overcome. Several leaders describe this as “walking a tightrope.” You need enough upside to excite investors but enough realism to avoid being accused of overselling.

Ravi’s observations add context here. He noted that vendors under pressure to close deals often over-promise, and when those promises fall short, buyers are left with scepticism that lingers long after the project ends. The danger is not just a missed ROI target, but an erosion of trust that makes future innovation harder to champion.

Investment Cycles and Payback Horizons

Boards increasingly expect payback within 12 to 18 months, but supply chain programmes often require three to five years. That mismatch creates hesitation. PwC has found that more than half of executives believe digital investments are strategically critical, but fewer than a third are confident in their payback models⁶.

In discussions, directors highlight the importance of sequencing. Smaller, modular investments that prove value early can unlock further funding. This reflects the private equity mindset, where capital efficiency and shorter horizons are the norm. It also connects back to agile approaches in change management. Incremental proof points build confidence, which is as important as financial return in sustaining support.

Innovation Fatigue

Another element is fatigue. Many organisations have experienced multiple waves of transformation, each accompanied by a strong business case and bold projections. When results do not match the promises, people become wary. One leader described it as “the hardest part of building a business case is convincing people that this time it will be different.”

This fatigue is not just cultural. It has financial implications because sceptical stakeholders apply a higher bar to new proposals. They want evidence of results before committing further capital, which creates a catch-22: it is difficult to show results without initial investment, but without results investment is withheld.

The Investor View

Investors have long wrestled with this balance between ambition and credibility. Private equity firms, in particular, focus on capital efficiency. They expect measurable improvements within their three-to-five year investment horizon and rarely back programmes where payback is vague or overly long.

This perspective is starting to influence corporates as well. Executives are more likely to demand clear lines between spending and value creation. That does not mean innovation stops, but it does mean the shape of investment is shifting from big, monolithic projects to smaller, staged bets.

Why It Matters

Financial reality underpins all other aspects of innovation. Systems may be rigid, skills may be lacking, but without credible ROI business cases do not get funded. The challenge is not just that money is scarce, but that trust is fragile. Too much excitement without delivery breeds scepticism. Too much caution fails to capture attention.

The leaders we hear from are not opposed to investment. They simply recognise the tightrope. They need to show progress quickly without over-promising. They need to build confidence in payback without pretending risk has disappeared.

Conclusion

The financial challenge of innovation is not just about numbers. It is about balancing ambition with credibility. SaaS often hides CAPEX-style costs. Technical debt eats into budgets. ROI projections are hard to sustain. Payback cycles are misaligned. And fatigue creates scepticism.

What emerges is a picture of tension rather than failure. Leaders know they must innovate, but they also know that unless the financial case is compelling and believable, support will not last. The future of supply chain innovation will depend not only on new technologies, but on the ability of leaders to frame investment in ways that are both exciting and credible.

JP Doggett

Sources:

1. Deloitte, Cloud Economics: The True Cost of SaaS, 2021
2. IDC, Total Cost of Ownership of SaaS Deployments, 2022
3. Gartner, Tackling Technical Debt for CIOs, 2022
4. Bain & Company, Only 12 Percent of Digital Transformations Deliver Sustainable Results, 2021
5. McKinsey & Company, Unlocking Success in Digital Transformations, 2018
6. PwC, Digital Investment Decisions Survey, 2022