Lean Thinking

Don't Panic I.T. Solutions - Items filtered by date: Tuesday, 12 June 2018
12 June 2018

The Cost Trap

Published in Agile

Time to close out our series on common traps with a look at probably the most common trap organisations fall into. I don't think I have ever worked for an organisation that wasn't caught to some extent in this trap. What I'm talking about today is the cost trap. You get into this trap by having the wrong sort of conversations - conversations about cost. "How much will this cost?" That question has lead most organisations astray. Why is that? Surely how much it costs is an important question. And indeed it is. The problem occurs when that's the only question you ask. Cost is important, but there is something else you need in order to make a good decision. There is half the information missing. That other half is value. "What will I get in return?"

Let me put it this way, if I were to ask you "would you rather I took $10 from you or $50?" I suspect most of you would chose $10 (and for those who wouldn't, you are very generous, please leave your name in the comments below...). If, on the other hand, I asked "Would you rather I took $10 and gave you back $50 or took $50 and gave you back $500?" I'm guessing most of you would pick the $50. Just focusing on the cost would drastically lower your return. But this is what most organisations do. To be fair, most organisations do consider value, particularly at the top levels of the organisation. Every idea starts with a cost/value decision. ROI is a key consideration. But as work moves down the organisation, the discussion starts to become less and less about value and more and more about cost. The point at which the organisation falls into the cost trap is the point where the value part of the discussion vanishes and the discussion becomes entirely about cost. Often, this is where an idea becomes a project and is handed over for delivery.