Cost benefit analysis

1435964958 weightTo choose between alternative solutions, cost-benefit analysis can help you make the right decision. It can be challenging to quantify the effect. It requires the ability to see the complete picture and how the change affect the overall business. 

Lean Six Sigma focus on gathering neutral information and make fact-based decisions. Improvements should create bottom line results and true root causes are to be solved by choosing the best option among several alternatives. Lean Six Sigma's problem-solving method DMAIC follows these steps:

  1. Define: Select the right projects and collect data to understand the problem
  2.  Measure: Map the current situation and baseline the process
  3. Analyze:  Identify root causes and analyze data to prove / disprove them
  4. Improve the process by implementing and verifying the best solution
  5. Control the new process by maintaining the solution.

The improve phase of Lean Six Sigma identifies different solutions and prioritize based on cost & benefit of the different options.  To make the right decision it's important to evaluate pros and cons of the various alternatives. Time, effect on problem and cost of implementing are important to consider when deciding.  

A cost benefit evaluation does not need to be 100% correct, 90% is usually more than enough to make the right decision. Lean Six Sigma includes prioritizing tools (e.g. Impact Effort Matrix) and is well suited for cost-benefit analysis. 

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