The Hidden Cost of Playing It Safe

We rarely make opportunity cost explicit in the military. Because we never think about opportunity cost, risk aversion seems safe.

Opportunity cost - the lost potential gain from an alternative, when a different one is chosen.

Common sources:

• Failure to delegate authority
• Bureaucratic processes
• Delay
• Failure to innovate

Recently the Acquisition Transformation Strategy has instructed the military to deliver capabilities to operators earlier - to take on more acquisition risk, in order to buy down operational risk. It is not immediately clear how to judge acquisition risk vs operational risk. Opportunity cost is one way they may be compared. When senior leaders ask us to take acquisition risk to lower operational risk, opportunity cost is the missing yardstick.