In a comment, Craig Brown at Better Projects asked me if disbenefits weren’t simply costs. That was my first take as well, and disbenefits do indeed have costs (additional resources or forgone revenue). After further thought, the “disbenefits” concept should be clearly differentiated from the concept of costs, which after all come along with every project.
Disbenefit is a British usage, meaning “disadvantage: something that makes a situation disadvantageous or unfavorable.” In the project context, we Yanks might call these disadvantages side effects or externalities generated by the deliverables of the project or program.
Let’s go back to the poor Dodge Caliber to flesh out an example. Some auto companies use fleet sales to move slow-moving or undesirable inventory. Even if these fleet sales are low or negative profit — when taking into account fixed costs of the tooling – microeconomics 101 says that profit is maximized/losses minimized when one produces and prices to the point where Marginal Revenue = Marginal Cost. However, such a static analysis doesn’t account for the disbenefits generated, per the outline below:
- Due to poor reviews and dealer sales, Chrysler management sells unwanted Dodge Caliber inventory to rental car companies to minimize losses.
- Renters of these unwanted Dodge Calibers are dissatisfied with the Caliber and form negative opinions of the Dodge and Chrysler brands.
- Therefore, these renters are less likely to purchase any Dodge or Chrysler car (lowering sales and profits across multiple marques).
I’ll play around with a couple of spreadsheet scenarios illustrating how to quantify this disbenefit.