• March 21, 2017

Increasing value or lowering costs

Increasing value or lowering costs

1024 724 Roderick Derks

Organizations that want to increase their metrics either invest in:
creating more value for their customers or employees, or doing just enough to keep going, but for less effort and money.

During the last decade, Microsoft and Amazon amazes customers by investing in work that create more value. When you do that, people talk, the word spreads, growth happens.

IT departments too have the choice to create value or save costs. Two organizations I work with are building new digital workspaces for their end users. Both are thinking about using the same free solution to give their users access to applications. An alternative option we spoke about is using a payed product which does the same, but also focuses on social aspects by connecting the people working in their organization, letting them work together more effectively and giving them a voice.

The IT department of organization #1 was almost ready to make the decision to use the free solution. But after some discussion they invited the business to talk about the why, how and what of the new digital workspaces. The business got enthusiastic and unanimously decided to go for the payed product, knowing that they are the ones that have to pay for it. They feel IT is delivering more value to them now.

Business showing their happiness

For IT department #2 the choice is the same, but culture of the company is different. Their focus is on lowering costs. And this is not done by giving people the tools to work smarter, they just don’t see this as their job. They did not invite the business and selected the free solution. I haven’t seen anyone from the business dancing.

Inevitably, particularly for public companies, it becomes easier to focus on keeping what you’ve got going, but cheaper.

This happens to organizations regardless of size or stature. It’s a form of entropy. Unless you’re vigilant, the apparently easy path of cost reduction will distract you from the important work of value creation.

The key question to ask in the meeting is: Are we increasing value or lowering costs?
Race to the top or race to the bottom, it’s a choice.

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