So how do we make the best decision – the rational, reasonable decision?
Dr Philip Mizzi, economics professor at Arizona State University West teaches MBA students to analyze the why’s and wherefores of how businesses make decisions. While regression theory, value of information and probabilities are all relevant – perhaps the most important tenant to understanding decision making is that Rational Choice is based on the decision maker’s current assets. Current assets defined as not simply financial, but also time and information and so forth. And this is best illustrated in the extremes.
For example, is robbing a bank a rational decision? Our current asset, information about other bank robberies gathered from the 6 O’clock Eyewitness News, tells us that few bank robbers get away with it, most bank branches don’t have a great deal of cash on hand, there are cameras, dye packs, security… so most of us decide that wouldn’t be a rational choice – the cost of getting caught outweighs the probability that we’d get away with sufficient cash to make it worthwhile – thus we arrive at the decision ‘robbing the bank is not rational’.
Now let’s change the current assets of the decision maker. Say for some reason, the life of your child depended on your robbing that bank, if your current asset was information that your child would come to immeasurable harm unless you rob the bank within the next 20 minutes – you may well decide the life of your child outweighs the possible cost of 5-15 in Sing Sing – so in that case, under those conditions, with those current assets, we arrive at the decision ‘robbing the bank IS rational’.
So how does this affect a companies’ Software Evaluation?
Primarily, once we’ve bought, installed and implemented ERP software, all of our reports, all of our information on costs, price, market performance, literally thousands of future business decisions will be based on the information (current assets) of your managers (decision makers). So knowing that so much rides on our selection of ERP software, literally the value of all future decisions, is it enough to simply make a rational decision? Or is this one key decision too important to leave to chance, untested evaluation methods, even the best processes we can imagine – having very little background in selecting software from which to rely on?
Secondly, Our decision on which ERP software to purchase, how we implement and deploy, when and what we’re going to devote to the project – all relies on the information we have available to us at the time of the decision. If we decide on incomplete information, our end choice can be less than optimum. If we place too great a value on the wrong information, a completely rational choice while certainly rational, may also be entirely wrong.
Also – we need to assess the cost of perfect information. Understood, that if you took your entire management team and devoted them exclusively to finding software companies and vendors, undergoing endless demos and pilot room tests, visited headquarters and development centers, client sites, user group conventions, in 6, 8, 10, or 18 months depending on your team’s productivity, you’d amass a great deal of information. You’d also have lost out on 6-18 months productivity from your most senior staff. But wait, as they say, there’s more. One moderately successful ERP client recently boosted bottom line profits by $350,000 in a single quarter. Should you have the same success, your 18-month evaluation process just cost you $1.57m in lost opportunity cost.
Enter a new vision
We take the experience of literally hundreds of successful (and many not-so-successful) software evaluations and re-create the most effective decision making guides, tools, resources, and methodologies all with the goal of identifying the right information for your business in a reasonable amount of time. We look at where previous committees have gone wrong and let you learn from other’s expensive mistakes. We create the current assets, useable information, with the emphasis on the critical information that allows your team to make the rational and optimal decision.
If you’re like most companies, you may select your core business software once every 8-10 years. So if Joe The Project Manager has been with the company for 20 years, he may have the experience of 1 or 2 software implementations to go on.
Might Joe make a different decision if he’d been involved in over 300 software evaluations in the last 10 years? He might have picked up a trick or two.
That’s where we offer advice and consultation, giving you the information you need to make a rational decision.
But wait, you say, as a representative of a particular software – aren’t all your recommendations going to lead to your own particular ERP offering? That would be a good trick if we could pull it off. However, consider that by showing our client companies what to look for – identifying what’s important – establishing a roadmap for success we’re betting a better educated customer will make a more rational decision – and a better educated customer will utilize the software more effectively – making a better case study and market recommendation – so you see, it’s in our best interests to help you find the right software solution – both for our short and long term success, and more importantly, your short and long term success.
Gene Hammons MBA can be reached at GH@GeneHammons.com