Cascade Analysis Guide
"Direct costs are what you see. Cascade costs are what you pay."
This guide shows you how to map and analyze cascades — the cost multiplication that turns a $119K problem into a $2.2M+ impact.
Why Cascade Analysis Matters
Most cost analysis stops at the visible problem:
- IT issue? Count IT labor hours.
- Customer complaint? Track support tickets.
- Quality defect? Measure rework time.
They miss the cascade:
- IT issue → Employee overtime → Quality degradation → Customer churn
- Customer complaint → Revenue risk → Employee morale → More quality issues
- Quality defect → Customer trust loss → Regulatory scrutiny → Operational overhaul
Cascade analysis reveals the full impact.
The 5-Step Cascade Mapping Process
Step 1: Identify the Origin Dimension
Question: Where did the problem originate?
| Dimension | Core Signal | Data Source |
|---|---|---|
| Customer (D1) | Support tickets, NPS drop, churn notices | CRM, helpdesk |
| Employee (D2) | Overtime spike, engagement drop, resignations | HRIS, pulse surveys |
| Revenue (D3) | Invoice disputes, payment delays, margin compression | AR aging, financial reports |
| Regulatory (D4) | Audit findings, compliance gaps, violations | Compliance tracker, legal |
| Quality (D5) | Defect rate spike, customer complaints, rework | QA system, support tickets |
| Operational (D6) | System downtime, bottlenecks, manual workarounds | APM, process metrics |
Example: Parts inventory issues discovered in aviation maintenance facility
- Origin Dimension: Operational (D6)
- Direct Signal: Recurring stockouts, expedited orders
- Direct Cost: $119,000 annually in direct labor and material waste
Step 2: Score the Origin Using 3D Lens
Apply Sound × Space × Time to quantify severity:
| Lens | Question | Score 1-3 | Score 4-6 | Score 7-10 |
|---|---|---|---|---|
| Sound (Urgency) | How urgent is this? | Future risk | Current issue | Crisis |
| Space (Scope) | How widespread? | Isolated | Department | Enterprise |
| Time (Trajectory) | Getting better or worse? | One-time | Recurring | Accelerating |
Example: Aviation Maintenance Parts Inventory
Sound = 8 (Critical — impacts all maintenance operations)
Space = 7 (All maintenance bays affected)
Time = 7.5 (Recurring weekly, accelerating)
Origin Score = (8 × 7 × 7.5) ÷ 10 = 42.0Interpretation: High severity (39.2 > 30). Expect significant cascades.
Step 3: Map Primary Cascade Pathways
Use the Primary Cascade Patterns table to predict likely targets:
| Origin | Primary Target | Probability | Secondary Target | Probability | Tertiary Target | Probability |
|---|---|---|---|---|---|---|
| Operational | Quality | 80% | Employee | 75% | Revenue | 60% |
For each cascade target, document:
- Evidence of cascade (observable signals)
- 3D score for the cascade dimension
- Estimated cost (direct cost × multiplier)
Example: Aviation Maintenance Parts Inventory Cascades
OPERATIONAL (Origin)
│
├── CASCADE 1: QUALITY (80% probability)
│ Evidence:
│ - Aircraft maintenance delays
│ - Extended aircraft downtime
│ - Rushed repairs when parts finally arrive
│ 3D Score: Sound=8, Space=7, Time=6 → 28.0
│ Cost: $119K × 80% × 3.5 = $330,000
│
├── CASCADE 2: EMPLOYEE (75% probability)
│ Evidence:
│ - Technician overtime waiting for parts
│ - Frustration with inventory system
│ - Increased turnover discussions
│ 3D Score: Sound=7, Space=6, Time=6.3 → 26.5
│ Cost: $119K × 75% × 4.2 = $370,000
│
└── CASCADE 3: REVENUE (65% probability)
Evidence:
- Penalty clauses triggered for delays
- Airlines threatening contract termination
- Lost expansion opportunities
3D Score: Sound=9, Space=6, Time=6.7 → 36.0
Cost: $119K × 65% × 11.4 = $880,000Step 4: Map Secondary Cascades (Level 2)
Don't stop at Level 1. Cascades propagate.
For each Level 1 cascade, check for further cascades:
QUALITY (Level 1 cascade)
│
└── CASCADE: CUSTOMER (85% probability)
Evidence:
- Major airlines questioning maintenance reliability
- Contract renewal hesitation
- Requiring detailed reports on delays
3D Score: Sound=7, Space=7, Time=5.8 → 27.5
Cost: $330K × 85% × 1.6 = $440,000
REVENUE (Level 1 cascade)
│
└── CASCADE: REGULATORY (30% probability)
Evidence:
- FAA documentation concerns
- Missing records for parts traceability
- Audit trail gaps for maintenance activities
3D Score: Sound=6, Space=4, Time=4.6 → 11.0
Cost: $880K × 30% × 0.23 = $61,000Note: Avoid double-counting. If Quality already cascaded to Customer at Level 1, don't count it again at Level 2.
Step 5: Calculate Total Impact
Sum all cascade costs across all levels:
┌─────────────────────────────────────────────────┐
│ TOTAL CASCADE IMPACT │
├─────────────────────────────────────────────────┤
│ │
│ LEVEL 0 (Origin): │
│ ├── Operational: $119,000 │
│ │
│ LEVEL 1 (Primary Cascades): │
│ ├── Quality: $330,000 │
│ ├── Employee: $370,000 │
│ └── Revenue: $880,000 │
│ │
│ LEVEL 2 (Secondary Cascades): │
│ ├── Customer: $440,000 │
│ └── Regulatory: $61,000 │
│ │
├─────────────────────────────────────────────────┤
│ TOTAL IMPACT: $2,200,000 │
│ MULTIPLIER: 18.5× │
└─────────────────────────────────────────────────┘Impact Summary:
| Metric | Value |
|---|---|
| Direct Cost | $119,000 |
| Cascade Cost | $2,081,000 |
| Total Impact | $2,200,000 |
| Multiplier | 18.5× |
| Dimensions Affected | 6 of 6 |
| Cascade Depth | 2 levels |
Real-World Example: Aviation Maintenance Facility Parts Inventory Case
Background
Company: Major aviation maintenance facility, $200M annual revenue, 500 employees
Problem: Recurring parts inventory issues causing aircraft maintenance delays and extended downtime. Issue persisted for 6 months before full impact analysis.
Direct Cost: $119,000 annually in direct labor and material waste.
Step-by-Step Analysis
Step 1: Origin Identification
- Origin Dimension: Operational (D6)
- Root Cause: Parts inventory management system inadequate for demand variability
- Detection: Pattern analysis of maintenance delays and expedited orders
Step 2: Origin Scoring
| Lens | Score | Reasoning |
|---|---|---|
| Sound | 8 | Critical operations — all maintenance bays impacted |
| Space | 7 | All maintenance operations, multiple aircraft types affected |
| Time | 7.5 | Persisted 6 months, accelerating as fleet grows |
| Total | 42.0 | High severity |
Step 3: Level 1 Cascades
CASCADE 1: Operational → Quality (80%)
| Factor | Detail |
|---|---|
| Evidence | Aircraft downtime extended, maintenance delays, rushed repairs |
| Sound × Space × Time | 8 × 7 × 6 = 28.0 |
| Base Impact | $119K × 80% = $95.2K |
| Multiplier | 3.5× (aircraft AOG costs, rushed work quality, re-inspections) |
| Cascade Cost | $330,000 |
CASCADE 2: Operational → Employee (75%)
| Factor | Detail |
|---|---|
| Evidence | Technician overtime, frustration with inventory system, turnover risk |
| Sound × Space × Time | 7 × 6 × 6.3 = 26.5 |
| Base Impact | $119K × 75% = $89.25K |
| Multiplier | 4.2× (specialized aviation mechanics, certification requirements, training costs) |
| Cascade Cost | $370,000 |
CASCADE 3: Operational → Revenue (65%)
| Factor | Detail |
|---|---|
| Evidence | Penalty clauses triggered, contract termination threats, lost opportunities |
| Sound × Space × Time | 9 × 6 × 6.7 = 36.0 |
| Base Impact | $119K × 65% = $77.35K |
| Multiplier | 11.4× (major airline contracts, penalty clauses, reputation damage in industry) |
| Cascade Cost | $880,000 |
Step 4: Level 2 Cascades
CASCADE 4: Quality → Customer (85%)
| Factor | Detail |
|---|---|
| Evidence | Major airlines questioning maintenance reliability, contract hesitation |
| Sound × Space × Time | 7 × 7 × 5.8 = 27.5 |
| Base Impact | $330K × 85% = $280.5K |
| Multiplier | 1.6× (airline reputation sensitivity, detailed reporting requirements) |
| Cascade Cost | $440,000 |
CASCADE 5: Revenue → Regulatory (30%)
| Factor | Detail |
|---|---|
| Evidence | FAA documentation concerns, missing parts traceability, audit trail gaps |
| Sound × Space × Time | 6 × 4 × 4.6 = 11.0 |
| Base Impact | $880K × 30% = $264K |
| Multiplier | 0.23× (preventive audit costs, documentation remediation) |
| Cascade Cost | $61,000 |
Step 5: Total Impact
Direct Cost (Operational): $119,000
Cascade Cost (All dimensions): $2,081,000
───────────────────────────────────────────
TOTAL IMPACT: $2,200,000
MULTIPLIER: 18.5×Lessons Learned
- Early detection is critical — 6-month delay allowed cascade to compound
- Revenue dimension had highest impact — Airline contract penalties are severe
- Employee turnover risk underestimated — Specialized aviation mechanics are costly to replace
- Regulatory cascade was preventable — Better parts traceability documentation needed
Cascade Analysis Template
Use this template for your own cascade analysis:
markdown
# Cascade Analysis: [Problem Name]
## Origin Dimension: [Dimension Name]
**Direct Cost:** $________
**Root Cause:** ________________________________
### 3D Scoring
- Sound (Urgency): ___
- Space (Scope): ___
- Time (Trajectory): ___
- **Origin Score:** ___
## Level 1 Cascades
### Cascade 1: [Dimension] ([Probability]%)
- **Evidence:** ________________________________
- **3D Score:** Sound × Space × Time = ___
- **Base Impact:** $________ × ___% = $________
- **Multiplier:** ___×
- **Cascade Cost:** $________
[Repeat for each Level 1 cascade]
## Level 2 Cascades
### Cascade [N]: [Dimension] ([Probability]%)
- **Evidence:** ________________________________
- **3D Score:** Sound × Space × Time = ___
- **Base Impact:** $________ × ___% = $________
- **Multiplier:** ___×
- **Cascade Cost:** $________
[Repeat for each Level 2 cascade]
## Total Impact Summary
| Level | Dimensions | Total Cost |
|-------|------------|------------|
| Level 0 (Origin) | 1 | $________ |
| Level 1 | ___ | $________ |
| Level 2 | ___ | $________ |
| **TOTAL** | **___** | **$________** |
**Multiplier:** ___×
## Recommendations
1. ________________________________________
2. ________________________________________
3. ________________________________________Common Cascade Analysis Mistakes
| Mistake | Impact | How to Avoid |
|---|---|---|
| Stopping at Level 1 | Undercounts cascade by 30-50% | Always map at least 2 levels |
| Ignoring low-probability cascades | Misses high-severity tertiary impacts | Track all cascades >20% probability |
| Double-counting | Inflates totals | Mark cascades already counted |
| Using same multiplier for all | Inaccurate estimates | Use dimension-specific multipliers |
| Forgetting time dimension | Misses accelerating trends | Always include trajectory in 3D score |
When to Conduct Cascade Analysis
High-Priority Scenarios
- Major incidents (system outages, security breaches)
- Customer escalations (executive complaints, churn threats)
- Regulatory issues (audit findings, compliance violations)
- Strategic decisions (restructuring, acquisitions, platform migrations)
Regular Practice
- Quarterly business reviews — Analyze top 3 issues from quarter
- Post-incident reviews — Include cascade analysis in retrospectives
- Budget planning — Estimate cascade costs for known risks
- Vendor selection — Predict cascade impact of vendor failures
Next Steps
Remember: The cost you don't see is the cost that multiplies. Map the cascade. 🪶