And, why exactly is this a good idea?


illustration borrowed from Flatland.com

We’ve all experienced it before.  Some VP or director has a brilliant idea for a new distribution method, a plan to launch a new product line, or any number of other schemes that have the potential to be a really good idea.  The idea makes its way onto the company’s strategic road map, and resources start getting thrown at it to complete the project in some crazy time frame.

At some point the project will make its way to some smart analyst’s desk.  He starts to do some investigation and quickly finds that either no work has been done to look into the potential costs and benefits of the project, or that the figures being thrown about are little more than someone’s educated guess.  As an analyst, this is when I usually ask, “Why exactly is this a good idea?”  But by then it’s too late.

Businesses often leap before they look into projects, both large and small, without taking the time to delve into the data and use facts to determine if benefits justify the costs. For large decisions, such as new product launches and entering new distribution channels, such an analysis is crucial to the well-being of the company, but is often overlooked or done in a superficial manner. The same is equally if not more important for small projects since such analysis is so often missing.

Taking the time to investigate the value of a project helps reduce the amount of money, effort, and energy we waste on projects that just aren’t worth it.  So, why do businesses so often jump into projects without taking the time to look at the data and make well informed decisions?  I think the answer is twofold.

First, businesses are run by people, and people have more motivating factors than the best interest of the business. The personal (not business) cost of answering these questions can be high.  It takes time and effort to do the research required to make an informed decision.  Not everyone is going to be inclined to put in that kind of effort for an idea they already believe to be a winner.  Furthermore, answering these questions upfront runs the risk of having to kill one’s own project, which can create a conflict of interests between the individual’s ego and the business’s best interest.  The business often loses out.

Second, managers empowered to make decisions do not always have the right skills, tools, or data to identify and access the information needed to make these decisions.  Even if I had the best possible intentions to thoroughly examine my next initiative, if the data didn’t exist or I didn’t know it existed, I would have to rely on my gut or just make up some numbers.  This is often the case in projects with no existing analog.

Alternately, when dealing with projects that extend or modify existing methods, the information to drive such decisions should exist.  However the needed data might be incomplete or non-existent because the designers of the system at the time didn’t bother to store it.  This is problem of design intention and a failure to think adequately for future needs.

In another possibility, the data may exist, but it is buried deep down in the unearthly bowels of several databases and would take an expert to retrieve.  This is a situation where the business decision makers need to have strong relationships with the analytical and technical folks who know how to get this information.

The solution to the problem of making informed decisions is a two-way street: it is equally incumbent upon analytical and technical folks to build relationships with the people running the line of business. Such relationships could save us all from having to ask, “Why, exactly is this a good idea?”

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