When I met Jean Tirole, who is the author of renowned “The Theory of Industrial Organization”, while I was in my first year of graduate studies in 1995, I was impressed by his theoretical view in Microeconomics and rationality in corporate decision making, and he became a god-figure in this area for me.
The late Murat Sertel, my professor in Bogazici University later introduced me to Prof. Fuad T. Aleskerov, and my ideas of “rational” microeconomics was shaken a bit as I learned about psychological sides of choices, compromising mechanisms, manipulation of choices et al. That the companies would act rationally in a perfect information environment, nevertheless, I always believed.
I have been working in different positions in a software company, from which I have the opportunity of working with clients directly for the last 20 years. During these years, I have gathered plenty of C-level insight and industry knowledge. These showed me rational behavior is not a robust part of corporate DNA unless it is coupled by value estimations and hi-fi prototypes. I don’t think I was naive to think of people acting always ‘rationally’ when they face a threat or an opportunity. It was mostly due to my skewed knowledge of real-life situations.
To have a rational judgment on an investment, these two inputs should always be the primary support of the decision-making process: Value Estimation and Prototype.
Moving ahead with the first sine qua non of important investments, Value Estimation. One should always ask a robust Business Case estimating the ROI of the future investment. This will not only show you a basic TCO and ROI, it will also help to construct a base line for the future value realization. This feasibility study will help you identify the benchmarks that you might not see while you are deeply drowning in operational workload. This exercise will take your organization’s and customers’ experiences (practices), match them with your operational data (KPIs) and present you the gaps and pain points, and support answering the question what actions are necessary to improve your current state.
An estimation of future value sounds brilliant however it will have limited value if you don’t build a prototype. And this is our second essential point, building your prototype before everything else. I always suggest my clients to have a sand-box before anything – exploration, blueprinting whichever. Have your Model Company before your to-be design, apply your gap-covering-strategies you have determined in Experience Value Engineering exercise you have done before, and roll it out to real life.
“Not easy,” I image you are saying. Having a full-fledged Business Case and Experience Engineering supporting and supported by a prototype Model Company. If you imagine the sunk cost of a failed implementation – not only the monetary value but all the psychological burden of having failed, I believe you will feel safe and secure once you have these two outputs at hand.