‘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 build 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 to 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