Don’t get caught by the Triple Constraint

January 12, 2015

Don't get caught by the Triple Constraint

Time, budget, and scope are three of the most important elements of each and every project. They are called the “triple constraint”. The overall performance of a company is effectively the summation of the success of all projects. Therefore, time, budget, and scope are the important factors to build a business.

But, anytime we consider multiple projects, we must also consider opportunity cost.

Opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen. This is an extremely important consideration for most start-ups working with limited time, a small budget, and changing scope.

Changing one of the three constraints – time, budget, or scope – automatically causes variations to the other two constraints. Let me show you by taking web development as an example because start-ups encounter at some point the need to have a website.

Green Bags: an introduction

Suppose a company, let’s call them “Green Bags”, sells reusable shopping bags to consumers and retailers. Green Bags has differentiated itself from other makers of reusable bags by employing artisans in the developing world to weave traditional patterns using recycled materials. The result is a more colourful, more versatile, and more eco-friendly bag that is sold to consumers as an accessory in boutique stores and sold to retailers as a branded product to give away for promotions.

Green Bags has a fairly simple business model. It has one product line (reusable bags), two customer groups (consumers looking for a chic, socially responsible product and retailers looking to stand out from their peers), and two channels to get its product into customers’ hands (boutique stores and large retailers).

Defining the scope of the website

Starting with scope – what does Green Bags want a website for and what does it want the website to do, now and two years down the line?

Green Bags may want a website then for two reasons:

  • Reaching a larger audience of potential customers by going online
  • Having a better tracking system for sales in order to better forecast demand

Let’s also assume that Green Bags wants its new website to have an online store, be easy to modify for people without extensive website building experience, and provide granular data on consumer behaviour, for example the correlation between length of page views and the purchase of individual items. Furthermore, Green Bags wants as many as 1000 payment transactions a day

How scope influences time and budget

How do these scope requirements influence the time and budget requirements for Green Bags’ website? Green Bags can likely find a WordPress theme and plugins that will allow its employees to create a website with most of the desired functionality in two weeks’ time at a cost of several hundred dollars.

Getting the data on page views will likely require the purchase of a WordPress theme and plugins as well as several weeks of custom development and testing by a third party. The additional cost of that development and testing could end up being thousands of dollars to ensure the created website has the scalability to handle a 1000 transactions daily (or worse, an entirely new website must be build).

Enter opportunity cost!

Now let’s consider opportunity cost. Hiring a web development firm to build the website that will deliver 100% of the scope requires a larger budget than an in-house build and less of Green Bags employees’ time. That translates into time spent finishing other projects. And what other project can Green Bags allocate money to during this time? Marketing campaigns and sales!

Time, budget, scope, and opportunity cost is a good framework for start-ups to use when making informed decisions about projects. All four elements are inter-related and dependent upon each other.

Most importantly, start-ups cannot afford the luxury of focusing on a single project and should instead consider the trade offs between all projects when making decisions on how to allocate time and money with the maximum impact on growth.

Author

Will Mattfeld-Sarbaugh

Through his work with Epic Perks, Will Mattfeld-Sarbaugh helps SMEs access business perks that give them the ability to compete with large business for customers and talent. Find Will at epicperks.com or on twitter at @Epic_Willms.