Markets constantly change. That means businesses need to be constantly adapting to new trends, competitors and environments. That also means making decisions. Historically, calculating the return on investment of a decision – a new product, service, feature, process, etc. – is what has driven business leaders’ decision making. Does the ROI yield real value? The answer to that determines everything else.
But ROI can’t be the only factor driving decision making. What about the cost of doing nothing? That is, the negative impact to their business of not changing, and instead coasting on provenly successful formulas. If it’s not broken, why spend the time and money to fix it? If it works, it works; don’t rock the boat. Right?
That mentality is the problem: a fear of not wanting to rock the boat, not change something that has proven to work so far, is what lures businesses into a complacency that ends up doing more harm than good. Just because what you’re doing now meets your goals doesn’t mean it always will. In fact, the changing nature of markets and industries guarantees it won’t. Constant inputs don’t yield constant outputs. As markets change, constant inputs result in declining outputs.
That is the cost of doing nothing: failing to re-invest back in the business – in people, technology and workflow processes – is a recipe for your position in the market to shrink and become less relevant.
The cost of doing nothing on consumables
The ecommerce boom created a drastic shift in the mailing industry. Traditional paper mills, for instance, have been closed or converted into cardboard factories to accommodate the spike in online package deliveries. Fewer paper mills mean the cost of paper goes up. In just the last two years we’ve seen the cost of paper grow by 25% principally because of the reduction in paper mills.
It’s not just paper. The print and mailing industry relies on a number of variable-cost consumables, like ink, envelopes, inserts and postage. All of these account for 60% of TCO. That’s two-thirds of your total ownership costs that are subject to market whims and can’t be relied on as steady numbers.
Not making investments into your business to account for how these costs change significantly and quickly will end up putting you behind your competitors and, ultimately, tank your business. All the more reason why performing a cost of inaction analysis is so critical, particularly with the help of a major industry partner that has years-long vendor relationships it can leverage across print, insert, and sortation and to best determine where it would make sense, and how, to reduce or optimize consumable costs like postage and ink in line with market trends. The refresh you get from that kind of evaluation puts you in a more proactive, rather than inactive, position for controlling consumable costs.
The cost of doing nothing on compliance
It’s not just consumables that businesses need to constantly re-assess and reinvest in. Continuing to do nothing and simply lean on past proven formulas means you’re also likely not keeping up with industry regulations either.
This is a potentially devastating mistake to make. New regulatory guidelines like GDPR pose huge risks, with massive financial penalties, for companies that fail to comply with new data privacy and security standards. Service providers that mishandle and consequently expose sensitive, personal private information of their users – like medical data – will run afoul of regulators. Businesses with lax security standards that end up falling victim to customer data breaches could just as likely be held liable for millions of dollars in penalties and lawsuits.
The cost of doing nothing on compliance is everything. No company can afford to shirk regulatory compliance; a failure to invest in the necessary protocols, processes and technologies for staying up-to-date with each new regulation is a potential business-killer.
Getting an outsider perspective
The fact of the matter is, oftentimes companies don’t realize they’re inactive until someone from the outside actually points it out to them. It’s easy to miss the forest for the trees when you’re in the middle of it; the reason the cost of doing nothing is so widespread is because most companies don’t see it as “doing nothing” in the first place.
And they usually don’t realize it themselves until it’s too late. That’s why these companies need to proactively seek outside perspectives and partners who can highlight where they’re falling behind, help educate them about how failing to keep up with market trends puts them at a competitive disadvantage and, ultimately, provide solutions for breaking out of this rut. If a print and mail operation is tasked with a job that it only then realizes it can’t execute on, then that realization is coming far too late in the game.
If you don’t know what you don’t know, an outside look is necessary for finally giving you a sorely needed perspective on trends, pain points and how to readjust your business around them.
Think outside the ROI box
ROI is always a good first step toward determining value, but it can’t be the only step. ROI alone just cannot sufficiently cover everything. Partnerships – forming key partnerships with trusted advisors that have decades of experience and relationships they can leverage across print, mail, insert and sortation – is essential to taking ownership of your cost of doing nothing.
The right partner can help you determine whether you’ve been skirting along on old models that worked in the past, and prescribe the right product solutions and investments you need to make back into the business – for your workflows, people, technologies, processes – to ensure you’re always keeping up and your market position is growing, not stagnating.
The Cost of Inaction : Case in Point for an ERP Implementation
Today’s ERP Systems have evolved from traditional back-office tools used only for record keeping, to sophisticated fully-automated systems embedded with Artificial Intelligence (AI), Machine Learning (ML) and Internet of Things (IoT). A tangible benefit the user derives from this sophistication is “Simplicity”, which aids in decision-making, user adoption and operational efficiencies.
Best Practices
- While doing nothing today may seem like a safe move for any number of reasons, doing nothing will only get you further and further away from your organizational objectives.
- You may easily justify the cost of acquiring an ERP system purely based on ROI, however, the decision should be based on more than just dollars and cents. ERP is the heart of an organization and has a profound impact on the day-to-day operations, change management and most importantly emotional buy-in of an organization’s employees.
- Regardless of the software, the system you choose needs to support key business functions and objectives of your enterprise, today and at least 10 years in the future.
- The right ERP partner can guide a buyer in their journey to objectively evaluate the potential of an ERP system based on business objectives and by implementing features relevant to the organization.
Now, can you really calculate the “Cost of doing Nothing?”
The cost of doing nothing is determined by calculating the difference between the Return on Investment (ROI) of a modern ERP implementation and the Total Cost of Ownership (TCO) of existing, legacy ERP software.
Cost of doing nothing = ROI* – TCO of current systems
Return on Investment – ROI
Return on Investment (ROI) is a standard measure of performance used to evaluate the efficiency of any investment, such as an organization’s ERP. ROI can also be used when comparing multiple systems, directly measuring the possible return of one ERP against another in comparison to the cost.
ROI = (Value of Current ERP – Cost of Investment) / New ERP Cost
Total Cost of Ownership
Total Cost of Ownership (TCO) is a calculation organizations use to make informed financial decisions. For ERP systems, Instead of just looking at the purchase price, TCO looks at the complete cost from purchase to implementation, including expected costs to be incurred during the lifetime of the product, such as service, maintenance, and more.
Both ROI and TCO need to take into account the following –
- Cost of software
- Cost of infrastructure
- Opportunity Costs (Due to the lack of a good system)
- Cost of compliance
- Cost of labor (manual work, paper etc.)