Making Great Decisions in Business and Life by David R. Henderson & Charles L. Hooper

Author:David R. Henderson & Charles L. Hooper
Language: eng
Format: mobi
Publisher: Chicago Park Press
Published: 2005-11-04T14:00:00+00:00

Chapter 9

CONSCIOUSLY SELECT THE BEST ALTERNATIVE

A man is too apt to forget that in this world he cannot have everything. A choice is all that is left him.

— H. Mathews

Destiny is no matter of chance. It is a matter of choice. It is not a thing to be waited for, it is a thing to be achieved. — William Jennings Bryan

Early Decisions are Important

When designing a building, the saying goes, all the really important mistakes are made on the first day. Efficiency expert Joseph Romm explains:

Although up-front building and design costs may represent only a fraction of the building’s life-cycle costs, when just one percent of a project’s up-front costs are spent, up to 70 percent of its life-cycle costs may already be committed.85

All you have are wispy lines on drafting paper, but those lines commit the concrete, metal, wire, glass, and wood that will make the building. On the surface, you’ve just begun, but in reality you have committed more than half of the project. You never get another chance to make a good first start on a project.

The same thing happens in other situations and industries, even without building plans sketched on drafting paper. We all create expectations when we make small, or seemingly small, decisions early in the process, as the following example shows.

A large, successful pharmaceutical company was preparing for the launch of a major new cancer medicine. A year earlier, a company employee worked on the sales forecasting planning model. The forecaster was essentially a programmer, skilled at making forecasting models, but not skilled at pharmaceutical marketing. He plugged available information into the model so that he could check the mathematical calculations. Price was a glaring gap, so he set a ballpark price to enable his model to calculate reasonable results. A year later, when the price of this medicine was considered in earnest, can you guess what price was the starting point? That’s right: the price the programmer had hurriedly put in the model a year earlier. Expectations had been created within management. The product team knew this, and they also knew they would need a good reason to stray from this price because the burden of proof would be on them. This is called “anchoring.” The chronology of events extensively determines the final outcome due to human resistance to change. “The price is set at $10 in the forecast model. Why should we change it? What are the reasons? How will we explain the change?” Objective Insights helped this company work through this problem and, after lots of research and lots of insightful analysis, the company agreed to set the price at about double the original value. Our recommendation was compared to the original price by everyone on the team. “Why is yours better?” they asked. We took them through the data and analysis step by step until they, too, agreed that the higher price was better. This breakthrough cancer medicine was doing very well when this was written.

Early decisions are important because of all the downstream resources and actions they commit.

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