When creating a plan, you calculate the return on investment, or ROI, for taking action. But unless you also calculate the cost of inaction, or COI, your plan lacks context. You must ask both; otherwise you make the decision with only half the information.
I want to share a crucial tool for decision making that many people tend to overlook – and that means they make decisions with only half the information.
Recently, I was honoured to be recognised by Thought Leaders 360 as one of the top 50 thought leaders in digital disruption worldwide. I do talk a lot about disruption and change – and not only digital disruption. After all, we have all experienced the disruption of a global pandemic!
On the other side of the pandemic, we know there’ll be even more uncertainty and change. And it’s essential for us to make better decisions.
Typically, when making a decision, many people calculate the return on investmen, or ROI. This is good! You consider the costs and benefits of taking action, and use that to judge the decision.
But many people overlook something else – what I call the cost of inaction, or COI.
Here’s an example …
Imagine going on a long drive on holiday with your family. You’re on the freeway, which is the fastest way to reach your destination. A few kilometres ahead, there’s a turn-off to take a longer, more scenic, route. What should you do?
There are benefits – it’s a nicer road, we’re on holiday so we have time, we might find something interesting on the way. And there are costs – more time, more petrol, and the kids might get cranky in the car.
That gives you an ROI. But it’s not enough. What about the cost of staying on the freeway?
What if you notice billowing smoke or even flames in the distance? Suddenly, the COI shoots up because you’re driving into a bushfire!
That’s why you need to account for both the ROI and the COI when evaluating a decision. Your decision won’t always involve a bushfire, but there’s SOME cost to doing nothing.
To help you, I have prepared a downloadable worksheet that asks you some key questions about the cost of not taking action. Download and use this in your decision-making process.