When called upon to review and approve a capital proposal, executives need tools for spotting gaps and missteps in the business case.
My favorite business course was Marketing Research, an unusual favorite for a Finance & Strategy major. After all, aren’t Finance and Marketing forever clashing?
It began the first afternoon when Professor Fader announced, “Welcome to Marketing Research. I will not be teaching you how to do marketing research.” Now that he had our undivided attention, he finished with: “I’m here to teach you how to spot bad marketing research, because most of the research is flawed.” He wanted to equip us as wise consumers of research claims since we would often encounter market research during our careers.
We first studied many common errors made in marketing research, and then armed with a new perspective, we scrutinized news clippings of research pronouncements.
Everywhere there were symptoms of likely errors — evidence that the conclusions couldn’t be trusted.. The scariest part was that many of these studies were by highly respected research firms and companies were making critical strategic bets and investments based on their recommendations. In the end, we walked away with a profound respect of how very difficult sound market research is as well as the skills to judge the validity of research claims.
Arming Wise Consumers
A parallel need exists for executives to be wise consumers of business proposals for IT upgrades, capacity expansions, new business initiatives and other capital expenditures. Like marketing research, proposals are prone to dozens of hidden gaps and missteps that produce inferior solutions masquerading as winners. Executives must be adept at detecting symptoms of those gaps and missteps to avoid wasting capital and squandering opportunities.
Executives don’t need to become technical specialists or spreadsheet jockeys to become highly adept at detecting gaps in proposals (those skills can actually work against the decision-maker). They need higher-level skills that lock onto symptoms such as:
- The project title is the solution. If from the outset the project was dubbed something like “Payroll System Replacement”, the team likely fixated on an obvious solution right from the beginning and minimal effort went into seeking break through alternatives.
- The team is stacked with the same profession (IT, Operations, etc.). With a single, dominating perspective, it’s virtually impossible for them to give serious consideration to solutions outside their mindset. We don’t get answers outside the box if everyone has lived their careers inside the same box.
- Vague project outcomes. Good proposals provide specific commitments to measurable business goals at the time of the request. These extend beyond the implementation cost and schedule to include business improvements (e.g. the resulting volumes, revenues or operating costs).
These skills don’t replace the need for a disciplined problem-solving process that teams need to apply. As discussed in “When Solutions Are The Problem”, we can’t detect all the potential missteps that can derail a team’s decision-making. Instead, these skills work in concert with a sound process, bringing accountability and quality assurance to strategic decisions. Together, they are a power combination for fostering innovation, wringing out hidden waste, and gaining maximum impact from every dollar in the capital budget.
© 2011 Verax Point Consulting LLC