Customers are demanding new products and services. Lead-times that are expected by these same customers are continually reducing. Both the market and the shareholders require cost reductions. Competition is increasing in most markets.
Innovation and reinvention of the business process is not optional. New equipment can be part of that solution.
When assessing any investment in new equipment there are three key criteria that MUST be rigorously examined before bringing out the chequebook. Fairytale hopes and dreams are a lousy rationale to support a business case.
• Opportunity – What is the Size of the Prize? – Be specific, in dollars!
• Solution – Is our solution rigorously tested and a superior offer?
• Skills – Do we have the skills to execute brilliantly? (Internally & Externally)
If an Opportunity has too long a payback period there are probably higher value uses of the companies funds. Likewise if it is a tremendous opportunity you may divert funds from elsewhere in order to capitalise on the opportunity sooner.
Understanding the solution you are looking to implement in detail is absolutely critical. Projects run over budget because people failed to rigorously develop their solution before committing. This is a key cause of timing and cost overruns in projects for both equipment and especially software. Poor service to clients can also be traced back to failures in the solution development process
Building submarines in Australia is a topical discussion currently. This often centres around real and perceived skills gaps we have in the local industry and in working with other suppliers that will cause a cost blowout to the project. Ruthlessly discussing (the issue, not the person), the skills you can bring to the project from both internal skills and external skills available is required.
All of these conversations will happen. They can happen before funds are committed when it is all theoretical, relatively cheap, and the risk is low. Alternatively they often happen during a project’s execution whilst an unexpected cost is incurred, or a flaw in the solution is being found out. The expense and losses are obviously much higher if we are solving these issues on the run.
Driving a superior return on investment with minimal risk is the objective of all investment decisions on equipment, software, and people!