‘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