A big part of my job as a systems designer is to identify efficiencies that could be realized by the SuD (System under Design). We consider efficiency, net cost, and net benefit. In my experience, business leaders are very good at making decisions to reduce cost, but balk by and large in making decisions to capture new opportunity. In my experience, they err on either avoiding it because it is too risky or they jump in with both feet having very little evidence of to validate their market.
This is because some efforts can be very hard to quantify. Some opportunities will be missed by the time the business leader performed an exhaustive cost benefit analysis.
Sometimes entrepreneurs make a gut call when considering not only the well defined costs but the not very well defined lost potential. And then they consider the future potential leveraging step one. So on and so forth.
The Project Management Book of Knowledge identifies business case as an input to a project charter. As a custom software development company, we’re receiving the business case, but usually we’re helping the business with the cost benefit analysis. This makes evaluating new projects an untenable activity for companies like mine. We bear the cost of producing estimates for businesess that are still exploring the project to begin with. Some larger organizations may be willing to pay for a consultant’s labor, but most smaller businesses are not.
This leaves the consultant shooting from the hip in order to contain the cost during speculation. The choice is to perform a deep dive analysis unreimbursed or risk under quoting the cost of the deliverables should the company land the project.
This is the number one cause of poorly performing projects in my experience. There are certainly other factors determining project failure, but this is the most commonly occuring theme in the custom software development industry.
For me, it has made me more aware of estimates that I receive for custom labor from home construction projects to yard maintenance. Being respectful of the cost of the company in producing the effort, I prepare the details of my project in advance.
We’ve begun developing assessments and templates to prepare our customers for these projects which will allow us to continue in this industry. It is no surprise to me that many custom development shops do not thrive or survive.