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    Business Decision Making: How to Think Better
    Business Decision Making: How to Think Better
    Business Decision Making: How to Think Better
    Ebook181 pages1 hour

    Business Decision Making: How to Think Better

    By Dr. Eduardo A. Morato and Jr.

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    About this ebook

    Business Decision Making is not just about sharpening the manager's tools and techniques in defining, evaluating and making decisions. It is also about stretching the mind to think better. That means being able to tap into the brain's patterns of thought, sequencing of ideas and creation of insights. That means being able to see both the big picture by zooming out and the small picture by zooming in. That means being able to ferret out what is relevant, important, urgent, doable, and big enough to matter. That means being able to imagine many different ways of solving problems, finding opportunities and crafting strategies. That means being able to diverge into countless possibilities but converge into one powerful solution or direction. That means being able to program a series of action steps that would convert ideas into reality.
    LanguageEnglish
    PublishereBookIt.com
    Release dateApr 26, 2016
    ISBN9781456609689
    Business Decision Making: How to Think Better

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      Book preview

      Business Decision Making - Dr. Eduardo A. Morato

      methodologies.

      CHAPTER 1: THE BUSINESS CASE

      TOPICS COVERED

      What is a good Business Case?

      Proponents of a Business Case and Skills Required

      • Exploiting Opportunities

      • Solving Problems

      • Strategizing and Operationalizing

      A Business Case is a management proposal to enter into a product, project or program opportunity or to solve existing and/or potential problems that would lead to the attainment of business objectives. The opportunity or problem presented may be of a strategic intent or one that is merely tactical or operational in nature.

      A Business Case is a planned course of action that needs to be decided and implemented by managers in a methodical and systematic way in order to assure the best possible outcome(s). Usually, but not always, a Business Case will affect more than one functional unit of the organization, thus requiring a cross-functional perspective and approach in the case analysis and synthesis. A Business Case will normally require substantial investments in terms of people, money and physical resources. This demands a good cost-benefit and a thorough risk-return analysis.

      A Business Case will, invariably, need considerable buy-in from other managers in the organization (if not from the top management or the board of directors). This would entail a more participative and consultative decision-making process. A Business Case will, most probably, tap the expertise of several people. This would imply a team approach or, at the very least, ready and easy access to these experts. Their opinions may make or break the case.

      A good Business Case:

      1. Clarifies the goal or objective to be achieved. What impact does the attainment of the goal have on the organization? Is it a priority objective?

      2. Examines the situation at hand using critical thinking

      a.What are the relevant areas for consideration? (What is relevant?)

      b. What are the important or critical factors that would significantly influence the attainment of the objective? (What is important?)

      c. Determine the magnitude and direction of the trends, patterns, movements and future scenario of the relevant and important factors? (Where are the magnitudes headed?)

      d. What issues, obstacles or hurdles must be addressed first before others in attaining the objective? (What is urgent?)

      e. What is the business capable or not capable of doing now and in the future? (What is doable?)

      3. Designs a decision framework using systemic thinking to aid in decision making. (What is the best framework to use?)

      4. Defines the criteria to be used in evaluating the many alternative ways to reach the objective. (What are the measures of success?)

      5. Generates the most appealing alternatives using creative processes to reach the objective(s) set. (What are the best alternatives?)

      6. Evaluates the alternatives in a logical, structured way by using the criteria established, by applying the most sound, reliable and valid methodology, and by presenting credible evidentiary proof. (What is the proper evaluation methodology?)

      7. Recommends or makes a decision based on both qualitative and quantitative analysis and synthesis. (What is the recommended decision and why exactly?)

      8. Prepares for uncertainties and potential problems, and provides responsive contingencies. (What preventive or contingency measures should be taken?)

      9. Clarifies how the decision would be implemented. (How to implement properly?)

      Proponents of a Business Case and Skills Required

      Business Cases come in several generic forms. The first generic form entails exploiting opportunities in the marketplace. The second form involves solving existing or potential problems that hinder an organization’s ability to achieve its expected performance outcomes. (Problems are, thus, significant deviations from performance expectations.) The third form is to choose the best means, among several alternatives, to attain an objective or desired end result. The choice may be of a strategic or an operational nature.

      The third form differs from the first in the sense that the first form focuses on one or more concrete opportunities that are being presented while the third form is still in search of potential opportunities that could be converted to strategies and operational programs.

      1. Exploiting Opportunities

      The first generic form has four varieties. The first variety deals with exploiting opportunities which an enterprise is already familiar with, thus making it easy and attractive to pursue.

      The first variety includes: (a) expansion of existing product lines to serve customers in geographic areas that have not yet been tapped; (b) extending the product offerings to new product lines that would cater to different segments of the bigger market; (c) introducing product variants (with additional or different features) that specifically cater to the other subsegments of the existing customer base.

      A second variety of opportunities that could be exploited encompasses both vertical and horizontal integration. Vertical means going forward to the downstream market (e.g. from manufacturing to distribution to retailing) or going backward to the upstream supply chain (e.g. from processing, to semi-processing to raw materials production). Horizontal integration exploits opportunities in related and ancillary businesses such as after-sales services, financing of customers, complementary products (e.g. accessories to fashion wear) and piggy-back offerings (e.g. promotional toys in fastfood stores).

      A third variety of opportunities seeks to improve the Quality, Delivery and Price (QDP) value proposition to customers. Different customers have different QDP expectations. This suggests that a one-size-fits-all strategy would not be able to delight all of the customers.

      Quality improvements include measurable, palpable and experientiable attributes such as durability (lasts longer and does not break down), serviceability (easy to maintain and operate), taste (sweeter, spicier, saltier, more sour, more bitter, crunchier, softer, etc.), elegance (looks sleek and classy, opulent and indulgent, modernistic and aesthetic) and feels good (comfortable, soft, right fit, flattering).

      Delivery improvements mean (a) consistently being more on-schedule at the precise time expectation, (b) being at the right place, (c) having acceptable terms and conditions, (d) being supported by accurate documentation, and, (e) using the most appropriate delivery mode, etc.

      Price improvements can be one of three things: (a) reduced price offering at the same quality and delivery; (b) same price offering but with improved quality and/or delivery; and (c) higher price but with higher perception and actualization of quality and delivery value proposition. On one end, price improvements can come from greater cost efficiencies and economies of scale that allow the enterprise to lower its prices. On the other end, price improvements can come from product enhancements or logistical and market channel enlargements that enable the enterprise to charge a premium price vis-a-vis competitors.

      QDP improvements may be obtained through better technologies, better product formulations, better work and operating systems, better supply services, better management and better market distribution. Any of these can be the subject of a Business Case decision.

      A fourth variety of opportunities to be exploited is composed of entirely new venture opportunities. They are unrelated to the existing products and markets of the enterprise but are, nevertheless, very attractive to the owners and managers of the enterprise. While these opportunities are supposed to spread the risk by betting on several industries (not just one), they also present greater risks because management is less familiar with the opportunities. In fact, the opportunities may even be out of line with the company’s expertise. However, if these risks can be controlled and managed well, then the opportunities should enable the enterprise to widen its business horizons.

      2. Solving problems

      If problems are deviations from expectations, then solving them would just return the organization to its normal or expected state of being. There are four types of problems: (1) there are simple problems with singular causes, (2) there are complex problems with multiple causes, (3) there are problems that create other potential problems, and (4) there are problems that might potentially emerge if the decisions were made and carried out, meaning they are future threats.

      For the first type, the single cause should be discovered or uncovered, and then corrected through an intervention mechanism. Examples of this type of problem includes: (1) machinery and equipment that suddenly do not work because of a faulty part; (2) increasing level of rejects because one portion of the work process is not being done correctly; (3) reduced output due to a particular bottleneck that has lessened the overall capacity; (4) delayed deliveries due to a greater number of outlets; (5) higher level of customer complaints due to bad handling of delivered packages.

      In complex problems with multiple causes, all the significant causes must be identified and evaluated as to their impact on the desired or expected results. For example, the problem of frequent stockouts in an enterprise may have several causes such as poor forecasting of sales, poor ordering and re-ordering practices and lack of working capital to make timely and cheaper purchases of the merchandise to be sold. Another example is the declining sales of a product due to: (1) more competitive products in the market; (2) higher prices being charged by the enterprise due to its higher costs and inferior promotional campaigns, and; (3) poor selling practices compared to the competition.

      Problems that lead to other potential problems are significant performance deviations, which, if not arrested, would precipitate a chain effect of unwanted consequences. For example, a series of bad operating losses by a bank would lead to: (1) reduced cash inflows from collections; (2) more regulatory intervention by the authorities; (3) a

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