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Analytics Planning: The Cost of Doing Nothing

19/12/2018


​​​​​​​​​​​​​As any good business analyst will tell you, ‘doing nothing’ (i.e. maintaining the status quo) is always an option worth considering.  When weighing the pros and cons of any potential solution, it is generally beneficial to compare those findings with the pros and cons of not taking any action at all.

Data Governance​​ ​​​​​​

Setting the Scales

Imagine yourself as the decision maker for a hypothetical company looking to build an analytics practice.  You would probably look at the total costs of each solution, compare those to the perceived benefits and try to make the best choice with that information.

 Solution ASolution B
Licensing Cost$25,000 / year$30,000 / year
Training Cost$5,000 / 1-time$4,000 / 1-time
Implementation$20,000 / 1-time$15,000 / 1-time
Support$5,000 / year$5,000 / year

(Note: Organizations will generally consider several different solutions and factor multiple variables into the final decision – including the fit with architecture, company culture, skills and other relevant factors. For the sake of simplicity, this example looks at just two options and
their requisite costs .)

Finding the Balance

Next, you look at the expected benefits of each solution – and determine whether it’s possible to extract more value from either choice. 

At this stage, companies can sometimes get stuck in ’paralysis by analysis’ –looking at so many similar and readily available solutions in that they’re unable to decide which is best. After all, nobody wants to to make the wrong decision and find themselves stuck with a sub-par system…

Here’s where calculating the cost of doing nothing can really speed up the process. 

Let’s assume:

  • This solution is intended to serve five managers
  • These managers each waste four hours per week tracking down important data
  • This solution will automate that data collection and reporting process
  • Managers, with benefits and taxes, cost the company $50 / hour

With some quick math, we can calculate the cost of doing nothing nearly equals the cost of either solution… in the first year alone!

  • 5 managers x 4 hours per week x 52 weeks = 1,040 hours
  • 1,040 hours x $50/hr = $52,000 per year

The Cost of Inaction

From a financial perspective, delaying a decision on analytics may be the worst choice of all because there is a real, quantifiable cost to maintaining the status quo. You can spend $50,000 on Solution A, $54,000 on Solution B – or continue to spend $52,000 a year doing.  Each day you delay the expense, you are in fact spending the same amount – with no net benefit.

Doing nothing becomes even more costly when you consider the effect over time – since both Solution A and B cost less each year after the one-time expenses – the status quo becomes far more expensive than any other choice.

​​​​​​Economic Development

So, if you have analytical aspirations for your firm, there is little reason to delay it – open source tools and free trials make it easier than ever to test out your uses cases before making a big investment.  Especially once you calculate how much you are spending by holding the course of inaction.

 

Tomorrow’s technology is shaping business today. To learn more about how MNP can help you can make Advanced Analytics work for you, contact Brian Foster at 204.336.6131 or [email protected]