5 October 2009 • 7:00 am

Turning Sense into Dollars – Part I

Continuing our introduction of the element of risk into strategic planning, your humble correspondent now endeavors to share a practical, real world example of how risk analysis can enrich the strategic planning process. A caution – some basic mathematics are involved, but I’ll try as best as possible to avoid the use of jargon. And at the end of the case, I’ll offer a tool and an hour of telephone-based guidance on how to apply this tool in your organization for FREE to the first five readers who respond to the offer – with no strings attached.

A few years ago, I was faced with a unprecedented challenge by a client, to attach a dollar value to the benefit of a proposed consulting engagement. The details of the organization are not important to the concepts in the case, but suffice to say I was hungry for the opportunity to consult to this large organization.

A Bit More Background

The organization in question was (and still is) a large, for-profit business with a national presence across the U.S. (let’s call it PrimeCorp), and a decades-long track record as either the largest or second largest player among the few occupying a unique industry niche. Two of my colleagues had been engaged in attempting to sell PrimeCorp on the idea of revising and enhancing its strategic planning process, a process that would take at least two years of design, facilitation, and coaching on our part. Our firm was up to the task we were proposing, but my two colleagues hadn’t yet made the case.

Competing with a few other consulting firms, we had successfully qualified ourselves as PrimeCorp’s preferred consultant. Jim, PrimeCorp’s head of strategic planning, was familiar with our firm and our approach, and had invested much of his energy in paving the way for us. But Jim couldn’t award us the work – the decision lay exclusively with Curtis, the firm’s forceful and charismatic CEO. And he wasn’t buying, yet. The question wasn’t whether we would do the work – it was whether PrimeCorp would make the investment at all.

The Fly in the Ointment

Curtis was secure in his position as CEO, having occupied the job for many years prior to our arrival. He had close ties to members of PrimeCorp’s board, and the loyal support of his executive team. But his firm was suffering from declining profitability, relatively flat sales, and an emerging threat of technology-based competition from outside the industry. Curtis was frustrated with PrimeCorp’s lack of strategic clarity, and poor track record of executing on past strategic intent. With margins becoming thinner, PrimeCorp’s overall management style was a continuation of its long history of risk-aversion.

Determined to better manage rising costs, Curtis had recently imposed a rigorous capital planning discipline on his executive team. All requested capital investments over a low threshold would require sponsors to submit a comprehensive cost-benefit analysis, including projected payback periods. The CBAs would go to PrimeCorp’s board of directors for approval. No CBA, no investment. Since Curtis himself would by necessity be the sponsor of the proposed revamp of strategic planning, he wasn’t about to make an exception for himself from his own policy. So  Jim’s challenge to us was to help him and Curtis make the case for the investment. My colleagues tried to present anecdotal evidence of the benefits of improved strategic planning in other organizations, but Curtis and Jim weren’t convinced. To them, our anecdotes were just marketing hype.

A Different Approach

I had joined the PrimeCorp team quite late in the process, when it appeared that we wouldn’t be winning the business. My task was to scour our firm’s scant data on past client performance, and develop a more compelling set of data describing the benefits they had received. But there simply wasn’t enough data, and what little there was couldn’t be assembled into anything convincing. After some head-scratching, I came up with a different approach. But I needed to pitch it directly to Jim and Curtis. With little to lose, we scheduled the meeting.

Our Challenge to PrimeCorp

Jim and Curtis really wanted to do the work, but needed proof. In what could have been our final presentation at PrimeCorp, I apologized to Curtis for our failure to make the case. “Let’s approach this differently. Instead of using other companies’ data, we’ll only use PrimeCorp’s. Give us two weeks, complete access to both your existing strategic planning documents and your executive team, and $25,000 (for our time), and we’ll make the case.If we’re successful, we’ll credit you the $25k against our overall proposal. If we’re not, we’ll part company.” So PrimeCorp’s downside risk was only $25,000. Curtis was intrigued. “Tell me more,” he said.

Next: The Different Approach

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