The danger of ‘no brainer’ decisions in business

Person about to step on banana skinIf I were to take a guess, I’d bet that we’ve all been in situations where we need to make an important decision quickly – where one of the possible options is presented in such a compelling way, it seems like a foregone conclusion.  Perhaps the option appears to have benefits that are so hugely significant, it is seen as a ‘no brainer’ – a decision that is so ‘obvious,’ there is little point in putting much thought or contemplation into the decision making process itself.  Perhaps it’s ‘obvious’ that we should launch into a new market, slash our prices, buy a new software package or restructure a particular department.

 

This desire to make decisions quickly is understandable and rational – after all, it’s important that we avoid ‘analysis paralysis’ – yet a real danger awaits the unprepared.  In many cases, ‘no brainer’ decisions have far wider consequences than the decision maker might initially appreciate.  In fact, further analysis of the data might show that you are being duped into making a bad decision with confidence.  Let me illustrate with a hypothetical example.

 

Imagine an online retailer sees a sudden sustained drop in its sales.  It knows that competition in the market is cut-throat, and it needs to retain its market share.  It could be seen as a ‘no brainer’ to temporarily cut prices or offer some other type of incentive to increase sales volumes.  In some cases, this might be an appropriate response – but in others, it might lead to a dangerous race to the bottom – with all firms lowering their prices until they can bear it no longer.

 

In the hypothetical situation mentioned above, it would be far better to look at the business situation holistically. It would be beneficial to carry out analysis and look at the business environment and establish what data and insight is available.  Maybe there are other reasons that sales have dropped overnight, or other factors that should be considered.  For example: was there a similar drop last year?  Is there a seasonal peak in sales?  Has the weather been unusually hot/cold (which might affect the pattern of people buying or ‘shopping around’)?  Are people buying a completely different substitute product altogether (think Netflix affecting DVD sales)?  There would, of course, be many other factors to consider too.

 

In situations like this, it is hugely beneficial for organisations to look at their data and analytics for insight.  Carrying out analysis in this way – before making so called ‘no brainer’ decisions – helps to avoid the ‘knee jerk’ reactions that can lead to unexpected and unfavourable outcomes.  Ensuring that businesses move from data collecting to curating actionable data and insight is key.

 

So – if you’re presented with a ‘no brainer’ decision, what should you do?  Here are five key questions that you might consider asking:

Continue reading The danger of ‘no brainer’ decisions in business

Forced Business Cases and the danger of faulty thinking

Picture of man at junction with mapThe humble old “business case” gets a very bad reputation in some organisations.  A good and well written business case is a crucial document that helps organisations and teams decide which projects to progress with and even which products to launch.  In many ways, a business case is a mini business plan, showing the costs, benefits, risks and impacts of adopting a proposed course of action.  It shows the reasons for the recommendation, and it shows the options considered.  Depending on the organisation it might be written at different levels of formality—in many ways the underlying thinking and analysis is more important than the document itself.  The business case draws on insight and data from within the organisation, and a good business case will draw on the organisations analytical capabilities.

 

Overall, the business case protects those making an investment in a particular project or product launch and ensures that they go into the endeavour with their eyes wide open.  It ultimately contributes towards protecting the interests of the organisation’s owners – who may as well be shareholders.

 

On the face of it, the creation of a business case sounds logical, and it sounds like a perfectly natural thing to do.  I mean why would anyone object to knowing the costs and benefits of a proposed course of action?  Yet I suspect many people reading this—from organisations of all sizes whether multinational or midsize— will have experienced situations where there was a desire to “fudge” the business case.  Perhaps you were asked to selectively ignore some data, or put a particular spin on things to “force” a particular course of action.

 

There, I’ve said the unthinkable.   Call me a heretic!  However, in reality, business cases get fudged.   And this isn’t always deliberate—sometimes business cases are unconsciously misinterpreted or misrepresented and this faulty thinking leads to organisations unknowingly taking bad decisions with complete confidence.  They might even end up with a “turkey project” that should have been culled at the outset.

 

Warning signs for a faulty business case

Continue reading Forced Business Cases and the danger of faulty thinking