The cost of the problem

“The cost of the problem”; what does that mean? How can you discover it in your business? And how does it help you to qualify which IT Business Solution is the right solution from a capability perspective and investment justification perspective.

We could state that overall the core objectives of implementing an IT Business Solutions is (not in particular sequence)

1. Improve productivity of your staff (do more with less or at least the same);
2. Improve the products and/or services you deliver to your clients and partners in the supply chain;
3. Enhance your position in the market by being more competitive (e.g; agility, adaptability, richer business insights that can drive your business in the best direction).

The outcomes of these objectives should result bottom-line in two results:

1. Saving of cost;
2. Increase profitability.

Based on these two measurements the well-known term Return on Investment (ROI) can be calculated afterwards. Afterwards….? I should be able to do this upfront so we can justify the investment and select the best IT Business Solution for now and the long term.

I cannot agree with you more.

Question is; how do you get to this point? One of the exercises business could perform is to analyse “the cost of the problem”. The cost of the problem analysis provides you with the information:

1. What the problems are in the business, how they relate and how much it the business cost currently.
2. A valid list of challenges to verify how the potential new IT Business Solution could solve these and what the investment would be in order to solve.

How? My tip is to let your departments write down their top three challenges they currently face and let them articluate this into cost and or time aspect. Cost could be related to the amount of time it takes to perform a certain activity that could be performed much faster if…, errors that occur and the consequence of that (extra time, missing out on revenue), losing sales due to not having certain information available etc.

Many occasions I have visited companies (prospects) that are out there in the market select (maybe ‘find’ in this case is the better word) a new IT Business Solution. They are aware on a high level why they are looking for a new IT Business Solution and many times have their requirements outlined in the most detailed level. A budget has been established (based on what?) however cannot exactly pinpoint the challenges they have in their organisation currently, how they impact other departments, what the cause and consequence is of them and most importantly what it currently cost the business to deal with these problems. We call this in the IT Business Solution world a map of “The Pain Chain”. More on this in the next blog.

Once you have this information available you have a decent framework to go out to the market and select (not find) an IT Business Solution that meet your requirements, solve your current business challenges and understand how much time and money it will save the business and therefore what the Return on Investment will be once this solution has been implemented.