When a business analyst proposes changing a process, one question tends to arrive quickly: How much money will this save?

Cortney Pagel, Senior Business Analyst and Change Manager at Arcadia, formerly ENGIE Impact, encounters it regularly. The problem is that while organisations can often identify what a process costs, they have a much harder time connecting those economics to the individual components of the work. At one point, Cortney resorted to putting cost estimates into comment bubbles on process diagrams because there was no systematic place for them.

But even better cost attribution only solves part of the problem.

In our previous post, Efficiency Tells You What a Process Costs. It Won’t Tell You What It’s Worth, we introduced Economic Process Modelling (EPM) as a way to look beyond efficiency and understand what the components of a process actually contribute economically.

Increasingly, building a solid business case for transformation requires this level of scrutiny and detail.

Cost is measurable. Value is usually not.

Certainly, traditional financial systems focus on tracking consumption, general ledgers tell us what departments and cost centres spend, and activity-based costing (ABC) can attribute those costs more precisely to activities. However, transformation decisions require answers to a broader set of questions:

• Which steps contribute to revenue or customer retention?
• Which prevent losses or reduce operational risk?
• Which generate information that becomes useful elsewhere?
• Which preserve future options?
• Which introduce unnecessary delay, rework or friction?
• Which consume resources without contributing enough value to justify them?

Cost accounting was not designed to answer most of those questions. As a result, transformation business cases can become highly precise about savings while remaining surprisingly vague about value.

One process can contain very different economics

Consider the process of customer onboarding. 

Some activities establish the relationship and influence retention. Others collect information that enables future cross-selling. Validation steps may reduce fraud or compliance risk. Meanwhile, duplicate checks, unnecessary approvals and manual system handoffs may create cost and friction without adding meaningful value.

A conventional process-cost number compresses all of that into one figure. EPM instead evaluates process components across five dimensions:

• Revenue contribution – how the component influences revenue, retention or growth.
• Cost and friction – what it consumes and what delay or rework it creates.
• Risk exposure – what risks it creates, mitigates or absorbs.
• Option value – what future choices or capabilities it enables.
• Information value – what useful data it creates, improves, degrades or destroys.

Each of these components matter because transformation does not happen to an abstract end-to-end process. Teams automate, eliminate, combine, outsource or redesign individual components. The economics need to be visible at the same level where those decisions are made.