How to Establish Costs and Benefits of a Problem in Business Analysis
Even if the problem you’re trying to solve in your business analysis is painful, you also have to consider what potential business risks and value potential lie in this problem or opportunity. In any decision-making situation, you have to consider two factors: costs and benefits.
By identifying pain, you’ve found the source of costs. Stakeholders were motivated to explain the experience of their situation; you can translate this information to cost. But you also need to identify benefits.
Using so what questions is a terrific technique for eliciting benefits information. Ask a stakeholder, So what difference would having a solution make? Her answer gives you a sense for the attraction or interest she feels for finding or pursuing a resolution. She may share specific ideas she’s come up with for solving her problem.
You can then follow up with the question Is the difference important enough that you’d pay for a solution? to identify the potential for the opportunity.
If the answer is no, she wouldn’t pay, then the problem doesn’t offer much opportunity. However, if her answer is yes, maybe she’d pay for a solution, then an opportunity may exist. In that case, your next step is to determine how big that opportunity is. Evaluate whether it’s a solution worth pursuing by quantifying the opportunity with additional cost/benefit analysis. Consider both audiences:
The problem-sufferer (either internal or external stakeholder): Estimate her cost of having the problem, the cost and benefit of purchasing or adopting a solution, and — most importantly — the price(s) she would or wouldn’t be willing to pay for either low- or high-end solutions.
That same consideration applies to both internal and external audiences: Would the department or organization be willing to pay or alter the way it works in order to change its situation? Would it allocate money from its budget to fix the issue or develop and sponsor a business case to do so?
The solution-provider: Identify the investment required to generate a solution and drive the desired use and benefit after the solution is deployed, either internally or externally. Appraise the development and distribution costs for creating and supporting the solution; the number of expected users/buyers (anticipation of market or internal-audience size); and particularly the potential revenue, cost savings, profit, and return.
This analysis doesn’t have to be detailed and researched. Depending on the audience and the amount of information available, creating a broad back-of-the-envelope, order-of-magnitude estimate may be perfectly acceptable. Just be sure to answer this question: Is it worth the investment of resources?
Consider all aspects of solution cost/benefit against each problem. Choose to solve problems worth solving because leaving them unsolved is costly. If you can deliver solutions that create beneficial value, seize the opportunity.