‘Accepting High Costs’ Transcript

00:00:06:23    Recently, I’ve seen more and more examples of companies

00:00:11:22     particularly large companies accepting poor performance

00:00:16:06    and I see this happen quite often in the costs of delivering things

00:00:22:07    and it’s what I like to refer to as the ‘boiled frog syndrome’.

00:00:26:13    So you might know the story of if you put a frog into a boiling pot

00:00:32:09    of water the frog will immediately jump back out.

00:00:34:18    But if you put a frog into a cold pot of water and gradually turn up the heat

00:00:39:20    it will boild itself alive and I see this happen in organisations quite often.

00:00:45:00    So, what happens is that they’re so used to the costs of things

00:00:51:17    being so ridiculously expensive that they’re unaware that that’s not normal

00:00:57:14    and it has become a new normal for them. I’ll give you an example

00:01:01:05    I was in a company recently where we were adding a single screen to

00:01:05:15    a mobile app with very little logic built into it

00:01:09:03    and the quote for this piece of work came in at something like £370,000

00:01:15:07    and my immediate reaction when I looked at that was,

00:01:18:04    that’s an obscene amount of money for the amount of work that needs to happen here.

00:01:22:12    And when I gave that feedback, the reaction I had from the business was

00:01:28:00    “What do you mean? That’s pretty cheap for this kind of work,

00:01:31:06    that’s normal. That’s what we pay” and this is where the ‘boiled frog’ comes into it

00:01:36:22    because that’s not a normal price at all and by questioning it

00:01:42:01    and challenging it, we managed to get it down to £177,000

00:01:47:06    so, nearly a £200,000 saving. But even that revised figure it was still ridiculously high

00:01:54:02    I couldn’t push it any further at that particular client

00:01:57:00    but if I was to give that same spec, that same piece of work to a small digital agency

00:02:02:09    they’d probably charge me in the region of 10, 15 to 20 grand to do the work

00:02:07:15    because that’s all the work required but we’re so used to seeing things being

00:02:14:00    very very expensive that we’ve become immune to that challenge

00:02:18:22    and I see this time and again. So, I think it’s something we need remind ourselves

00:02:23:22    that we should always look at things with a fresh pair of eyes.

00:02:27:10    Particularly where costing a piece of work trying to avoid the temptation

00:02:32:00    to compare it to what another piece of work costed and get different quotes.

00:02:36:18    The other thing you see these days are preferred suppliers or

00:02:39:16    not even preferred supplier but single suppliers where big tech companies

00:02:44:06    and big implementation companies have sown up all the work

00:02:47:16    and so you’re stuck with them the price they quote you to do that is

00:02:51:15    the price you’re going to pay whether you like it or not.

00:02:54:00    I think it’s a great opportunity to have more than one supplier.

00:02:57:14    If I was a really big organisation I think I would even consider hiring

00:03:03:12    a firm not to do any delivery for us but actually just to provide

00:03:08:21    alternative quoting so that we can see how much of a delta there is

00:03:12:24    between what work really needs and what our preferred supplier is actually charging

00:03:18:08    us for that work. It’s another form of waste that we see in organisations

00:03:22:01    and one that kind of goes undetected by most firms.

00:03:26:22    It’s another powerful way of looking at your supply

00:03:32:02    and how you can improve performance in your organisation