The Business of IT

Cost vs. Value

Are you in an organization that can not or will not fund improvements because there is zero cost-savings accrued as a result? Are important decisions forcefully hammered flat into a single-dimensional cost metric? Must you justify every action with a business case that boils down to a price tag? If so, I feel sorry for you. The most respected organizations in every field take a more mature view: Value, not cost, is king. And value attracts business.

Value is not cost. Your organization already knowingly or unknowingly invests in value without knowing the associated cost or without being able to guarantee a monetizable benefit. Consider these activities:

  • Improving customer loyalty
  • Delivering innovation
  • Assuring quality of product or service
  • Maintaining relationships with partners
  • Fostering employee satisfaction
  • Improving relationships with suppliers

None of these activities would ever be conducted if cost-savings was the yardstick by which the decision was made. If you do not invest in earning customers, you will have no customers whose satisfaction matters. In fact, no new venture would ever begin if cost-savings was the overriding criteria. And if cost-savings is your only criteria for operating an existing venture, then your venture is not accruing value—it is stagnating, slowly dying in place. You can’t cut your way to growth.

Explore these and other dimensions of value when you next consider a business decision. Business is about more than maximizing revenue and minimizing cost. Business is about value, and value is multidimensional.