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The Business Case – Emotion & Logic

In every company, the fundamentals are the same – operations, sales and marketing, finance and admin.  If you want to get approval for a project, it is Important to demonstrate the benefits to each are of the business.  Here is an outline of items to consider when looking to develop a proposal.

 

Operations

  1. Cost of ownership
    • Labor required – staffing
    • Energy consumption
    • Perishables – helium, fuel, etc.
    • Opportunity costs
  2. Maintenance
    • Regular/scheduled downtime
    • Expertise required to maintain
    • Service and support strategy
    • Operator skill level to operate
  3. Logistics
    • Part flow and frequency
    • Expected support required

 

Sales and marketing

  1. Sales tools – Is this something to brag about?
  2. Capacity – Does this increase the ability to take on more business?
  3. New customers – Helps leverage experience for obtaining new customers.
  4. Technology – Does this technology give sales and marketing something to talk about? Does it uniquely position the organization for more business?

 

Finance and admin

  1. ROI – What is the ROI? Make sure the calculations are realistic and accurate.
  2. Capital vs. Tooling – Customers will often pay for tooling so breaking that out can help justification.

 

 

This is where the logic matters in the process of approval.  My experience has been that when we walk through things logically for finance, the likelihood of approval is increased.  In order to have the best chance of getting financial approval, you must understand how they calculate ROI.  Each company utilizes different values in their calculations.  Having a clear calculation guide is key.  All you need to do is ask the financial department what they use and make sure to use it for your justification.  Take the time to evaluate the formula.  How are the data weighted?  How will your initial numbers affect the results (ROI)?

 

When it is necessary to secure funding for a program, it is critical that you clearly understand the key elements of business.  I have seen good plans go down in flames many times because the engineer used logic to validate.  Business is multi-faceted and so logic is one component but not the most often used decision making tool.  All decisions are made emotionally because humans are emotional creatures.  This is important when developing the business case to purchase new capital equipment or expand operations in general.  Here are the emotional elements to keep in mind when putting your plan together:

 

  • Consider the risk – The overwhelming majority of humans suffer from loss aversion. This means they would rather forgo a potential gain than risk losing something.  Thousands of studies have proven this phenomenon.  An example is that when people are given the choice between a guaranteed $50, or $100 by properly calling the flip of a coin, most choose the $50.  They visualize having the $50 and are unwilling to risk losing it for a 50/50-coin flip.  When you are developing your business case, it is critical to consider the risks and develop a plan for managing those risks.  Your proposal is much more likely to go through when risks are addressed and planned for.

 

  • Be the hero – This might seem a bit out there, but people in management have egos. Heck, we all have egos!  If you want to get your proposal through, let management be heroes.  Help them understand clearly how this project is going to make the company better.  Give them the glory and they will champion the project from start to finish.  To do so you will need to remove your ego from the process.  The most successful engineers I have worked with understand this strategy.

 

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