The trouble with saving cost

Back in my days at the BBC (an increasingly distant memory – it’s nearly 13 years now since I left) I was involved in a project that created the first full-programme online streaming service. It was back in around 2001, a time before YouTube if you can imagine such a thing. The service was aimed at a very niche audience – overseas TV programme buyers, those lovely people who supported licence fee payers by buying the rights to show BBC content in places outside of the UK.

The business case was relatively straightforward: at the time the end-to-end cost of duplicating and distributing a VHS preview cassette of a programme for a buyer to see was calculated at around £450 per half hour of content. Buy making the same available online we could reduce the cost to around £250. Yes, you read that right. Back in 2001 it was extremely expensive to stream something approaching broadcast quality (SD) video online. The years before, as I mentioned, YouTube…

That was the justification. We could save significant hundreds of thousands of pounds.

What happened? Well, the orders for preview cassettes went up. Buyers were viewing things online, and then ordering a preview cassette to show their colleagues. Costs multiplied.

This was, of course, in the days when the only Net Present Value that a CFO would sign off would be one that showed technology delivering cost savings. Everything was framed that way. Cash out of the organisation was a simple to understand metric. Everything else was a bit woolly.

The BBCWorldwideTV project was chasing the wrong objectives, framed by a financial culture that demanded justification through efficiency not effectiveness. What we should have been pursuing was increased profitability of sales. But this was 2001.

I have been reminded of this particular escapade in recent days reading about what appears to have been an unfortunate (and costly) side effect of the scrapping of car tax discs.Now I don’t know the absolute ins and outs of what’s happened at the DVLA, but one could see that removing a scrappy but visible piece of paper might have the effect that people increasingly forget to renew their vehicle excise duty. Merely digitising a paper process isn’t enough. What should have been asked wasn’t “How do we reduce the cost of collecting VED?” but “How do we maximise the correct payment of VED?”

In the public sector it’s even harder to set objectives that aren’t cost-saving based (especially at the current time). But simply heading for savings will, all too often, not have the impact that was first expected (and probably will just drive new costs elsewhere).