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I will tell anyone who stands around long enough ‘don’t depend on cost avoidance business cases’. I learnt this from one of the Financial Directors at Rolls-Royce and have learnt more about this nebulous form of argument since.

A cost avoidance business case is one where you say ‘because X will no longer happen, we will save Y’. It seems reasonable, doesn’t it? But there are pitfalls – some of which you can overcome.

Pitfall one – your solution doesn’t stop X happening. CRM projects often promise to keep customers in the sales funnel longer. In fact, to sell to them. This avoids sales costs. But it relies on your solution truly stopping X happening. How can you get around this? Get down and dirty with your data. Make sure you have found the root cause of the problem you are solving (X) and know how many people will not churn if you fix it. Remember, customers often have a mixture of reasons for leaving your funnel. Some are personal and others might be too embarrassing to share.

Pitfall two – you add up a whole bunch of time – let’s say 30 seconds on a few thousand actions. Let’s say reducing the time of call centre calls by 30 seconds or 8%. But that time doesn’t add up. You cannot carry time over from one day / shift to the next. You can’t add Barbara’s time to Jeremy’s and get a cost saving, unless they share common work. Personally, I think this is the most nefarious of cost avoidance business cases.

Pitfall three – even if the time adds up, you can’t realise the benefits. In the image, you see an imaginary call centre team. A change will reduce call times by 30 seconds. But that is about half a person. Unless you have lots of very flexible contracts and people who don’t mind being sent home early unpaid, you have no business case.

Pitfall four – just supposing all that time adds up to a whole person. You now have two costs to add to your business case. The cost of letting someone go and the cost of that team resisting further change. These create near and long-term headwinds on your business case.

How can you get around the last three pitfalls? Spend the 30 seconds on value adding activities. Improve customer satisfaction by spending the 30 seconds with customers. Add a VoC review at the end of each shift. Use the time to change other aspects of your work, or take on extra responsibilities. BTW that last suggestion will really test how much you believe in those 30 seconds…

These pitfalls apply no matter what situation you are in. Whether you are a team leader asking for investment in new tools or a founder who wants to persuade others to buy their new app.

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