The ROI of Doing Nothing
I have recently been thinking about the concepts of investment, cost, and return — and how these relate to action and inaction.
The ability and prerogative to act. That's why I enjoy my job so much — I get a rush from the creativity and activity a successful consulting practice requires. I believe successful, action-oriented companies share this feeling!
Inaction is Risky
Inaction — ignoring problems or deferring decisions — may be viewed as playing it safe. As author Seth Godin puts it, "Playing it safe. Following the rules. These seem like the best ways to avoid failure. But being safe is risky." When sales or profits begin to unravel, inaction is risky.
When a potential client doesn't accept our engagement letter, it's typically not because they select another firm, or handle things themselves — they choose to do nothing! From over 18 years of consulting experience, I feel justified in saying our biggest competitor is — by far — "do nothing."
Now, keep in mind, before they even called us, they had already admitted to themselves they have a problem to address — so it's not a lack of awareness. What's really going on is a failure to act, a failure to truly change. Author Mary Jane Ryan comments, "We're all experts at talking about change and beginners at putting change into action."
So the problem remains a problem.
"Do Nothing" Companies Face a Negative ROI
What does this mean? It means the "do nothing" companies are willing to stay exactly as they are, unaware of — or, more likely, ignoring and rationalizing — the costs of overwork, rework, and inefficiencies.
Let's look at the true cost of doing nothing. While the investment required for doing nothing is zero, the return on doing nothing is not zero — the ROI is actually negative. The reason? There are costs — alternatively, negative results — to inaction. Failure to address a known problem is inaction. For example, a manager who fails to coach an employee with a consistent, well-known personal problem affecting her job performance allows gossip to flourish, poisoning the positive atmosphere the owner wants to build.
Failure to consistently search for possible business improvements is also inaction. For example, a "do nothing" company not bringing sufficient value to its customers and owners might see them take their business and capital to competitors committed to consistent and conscious improvement.
Avoidance May Lead to System Erosion
Even if you invest in improving your business, it could still produce a negative ROI. The reason? The investment might not be sufficient to offset the insidious problem of system erosion — your processes and technologies will naturally erode unless investments are made and actions taken to counteract this. (For more on this, please see: System Erosion — Part 1 and System Erosion — Part 2). I know one company that dropped operating system maintenance on its main computer system 10 years ago, just as networking and the Internet became an integral part of business — as a result, this system quickly became virtually useless, handicapping this company's agility.
This negative ROI for "do nothing" companies actually worsens in a slowing economy. While most companies choose to trim spending through a downturn, smart companies have determined which processes and technologies bring the highest return, and will continue investing in these. In fact, they may choose to increase such investments, taking advantage of their weaker "do nothing" competitors, who are likely to cut spending in all areas.
Which processes and technologies have the highest return? The ones aligned with their competitive discipline — Operational Excellence, Product Leader, or Customer Intimate. The choice of competitive discipline dictates the key processes supporting their mission — so the largest technology investments support mission-critical processes. Such technologies are typically business applications enhancing business performance — including business intelligence, mobile computing, workflow automation, and knowledge management — which enhance business performance, as opposed to technologies maintaining infrastructure.
Doing nothing is a choice, and an easy choice at that — just realize your competitors may decide the ROI of inaction is simply too risky.
Todd L. Herman
Client Project Update:
I am pleased to provide you with an update on our client projects. Projects we have completed over this period are...
Developed a prototype custom web application enabling clients of this medical services company to securely retrieve their monthly statements via the Internet, significantly simplifying complex monthly statements and reducing processing costs for both this medical services company and its clients.
Analyzed the address records of several municipalities against those of utility companies providing services to identify additional franchise tax due, resulting in greater revenue for the municipality.
Analyzed a large volume of complex accounts receivable and collection activity underlying a mediation case, helping attorneys for this law firm understand the industry-specific issues, to better formulate strategy for their client.
Designed the functional and technical requirements for an application integrating travel logs and compensation information, identifying data needs and decision criteria to enable compensation allocation by state.
Planned and designed the chart of accounts restructuring for this national industry association, helping managers balance the need for more detailed revenue and expense reporting with the cost and complexity of more accounts and cost centers.
Advised this professional services firm on various technology issues, helping them understand the costs and benefits of options being considered.
Planned enhancements to a software application integrating insurance operations data into the financial system of this multi-state insurance company, designing the framework to produce both statutory and GAAP ledgers for various lines of business.
Developed financial reports for the Infinium financial suite, allowing this company to analyze profits by product line, customer, and division.
Future projects we are planning include...
Evaluate the technology issues and key business processes for this construction products firm, developing technical and functional requirements to support the selection, implementation, and integration of a Customer Relationship Management (CRM) system with the AIX-based business system.
Develop specialized investment allocation procedures for the pooled investment accounts of a foundation, enabling timely and accurate allocation of investment results and fulfilling fiduciary responsibilities for their endowment funds.
Upgrade the capabilities and integration of a company's BlackBerry devices by moving from the basic BlackBerry Internet Service to the feature-rich BlackBerry Enterprise Server, taking full advantage of the BlackBerry platform and markedly increasing user satisfaction.
Work with attorneys and forensic investigators to analyze and interpret complex data in a post-acquisition dispute, helping attorneys prepare an effective arbitration case for their client.
Integrate the Cisco Unified Messaging product into this Domino environment, incorporating the ability to use e-mail to receive and reply to voice mails into their systems infrastructure.
Outline options for integration and coexistence of Domino and Exchange servers in their e-mail environment, enabling this company to quickly integrate a newly acquired company.
Develop and deploy an application integrating travel logs and compensation information, permitting this publicly traded company to rationally allocate compensation of traveling employees to the states in which they worked.
Complete development and deploy a custom web application permitting secure retrieval of monthly client statements via the Internet, streamlining the billing and collection processes, with the goal of speeding client payments.