Posted on May 4, 2009 by Paul Ritchie
In a comment, Craig Brown at Better Projects asked me if disbenefits weren’t simply costs. That was my first take as well, and disbenefits do indeed have costs (additional resources or forgone revenue). After further thought, the “disbenefits” concept should be clearly differentiated from the concept of costs, which after all come along with every project.
Disbenefit is a British usage, meaning “disadvantage: something that makes a situation disadvantageous or unfavorable.” In the project context, we Yanks might call these disadvantages side effects or externalities generated by the deliverables of the project or program.
Let’s go back to the poor Dodge Caliber to flesh out an example. Some auto companies use fleet sales to move slow-moving or undesirable inventory. Even if these fleet sales are low or negative profit — when taking into account fixed costs of the tooling — microeconomics 101 says that profit is maximized/losses minimized when one produces and prices to the point where Marginal Revenue = Marginal Cost. However, such a static analysis doesn’t account for the disbenefits generated, per the outline below:
- Due to poor reviews and dealer sales, Chrysler management sells unwanted Dodge Caliber inventory to rental car companies to minimize losses.
- Renters of these unwanted Dodge Calibers are dissatisfied with the Caliber and form negative opinions of the Dodge and Chrysler brands.
- Therefore, these renters are less likely to purchase any Dodge or Chrysler car (lowering sales and profits across multiple marques).
I’ll play around with a couple of spreadsheet scenarios illustrating how to quantify this disbenefit.
Filed under: Cost Management, Sales Management | Tagged: disbenefits, externalities, side effects | Leave a comment »
Posted on May 1, 2009 by Paul Ritchie
Sometimes it is easy being green!
There was great interest in last week’s SAP Virtualization event (SAP Virtualization Week 2009 page here, the SAP Virtualization homepage on the SAP Community network is here). As Courtney Bjorlin notes (post here), Green IT has been an SAP priority for a while::
SAP offered an open invitation to any partners or customers who want to join the Green IT community. All they have to do is email GreenIT@SAP.com for more information. “From a customer perspective, it’s a great way to become an early adopter of solutions and then to go and deploy those solutions,” said Peter Graf, who was named SAP’s first chief sustainability officer in March.
Courtney quotes Peter further on how virtualization is “easy” green, so to speak…
“For me, the natural first step in green IT is virtualization,” Graf said. But why deploy these initiatives now? Graf elicited a few chuckles from the crowd when he remarked that even the mention of “green IT” had some participants nodding off. So he focused on a crowd pleaser — cost savings. Graf put up numbers from an SAP customer that reduced its application servers from 218 to 116, and saved $714,000 on maintenance, $162,000 on facilities, $1,468 on staff and $13,520 on servers — reducing its total costs by 36%.
Virtualization soon will be part of almost every SAP project or program, so read up!
Filed under: Cost Management, Methodology | Tagged: Courtney Bjorlin, Green IT, Peter Graf, SAP Community Network, Virtualization | Leave a comment »
Posted on March 12, 2009 by Paul Ritchie
Craig Brown shares his experience (here) using a project diamond instead of the triple constraint (a.k.a., the Iron Triangle). I was wondering whether someone would do like this… I’ve seen quality represented as a “Q” in the middle of the triangle or as an area “under” the triangle.
I’ll have to think some more about how to use it. I like the concept in theory, but I’m not sure how well the prioritization exercise Craig describes would work in practice.
Filed under: Cost Management, Quality Management, Scope Management, Time Management | Tagged: Better Projects, Craig Brown, iron triangle, Triple Constraint | 2 Comments »