Go with your gut

Written by Cumulo Nimbus

Last month, I told you about our expansion dilemma here at Nimbus Co. After making some extra cash last year, we’re now debating whether to invest it in an old, underperforming product or an all-new line. As our controller, Betty Cash, pointed out, “It’s the essential challenge of business, in one decision.” No big deal — except our company has trouble deciding on a date for the Christmas party. (We’re now into a fourth ballot. It looks like January 17th.)

How do you approach a strategic decision like this? I was about to call a marathon executive meeting when Wirtz, our foreman, reminded me that we had named 2007 as The Year We No Longer Manage By the Seats of Our Pants. So, I asked Wanda, our general manager, to conduct market research into our two options. “And don’t let Kernel talk you into making lacrosse sticks,” I warned. “Count on it,” said Wanda.

I thought she’d hire a researcher from the local business school, but apparently firms that don’t manage by the seat of their pants don’t do that. She hired a consultant to map out a plan, which he handed to a research specialist, who outsourced the data collection to a grad student. (Same result, twice the price.)

Anyway, the researchers recruited by the grad student asked our clients why they’re not buying Component X, an add-on we thought would take off like chocolate-covered pretzels. They told us they can’t afford it, don’t like the packaging, don’t know where to buy it and can’t understand what it does. “Is there anything we did right?” I asked. “They liked the colour,” said Wanda.

The researchers also interviewed prospects for our proposed product, a line of friction-resistant coatings aimed at fast-food restaurants and the military. They talked to lots of defence officials in the U.S., but no one in the Canadian Forces answered the phone. “It’s as if they’ve all left the country,” said Wanda. “All we heard were messages saying, ‘To volunteer, press 1’.”

Nonetheless, the results looked promising. The U.S. Navy wasn’t interested, saying repainting ships every year gives sailors something to do. But HappyBurger offered to try out a few barrels to fight washroom graffiti. And the U.S. Army was keen, so long as we could guarantee our coating resists Earth’s most abrasive substance: camel dung. They even promised to pay for tests if we could supply 20,000 gallons by the end of the month. My problem: the product doesn’t exist yet. We can’t afford to develop it till we know there’s a market.

So, I called an executive meeting to discuss our new dilemma. “Hmm,” mused Kernel, our vice-president in charge of missing the obvious. “Is that Canadian or U.S. gallons?” “The way I see it,” I continued, “the army is forcing our hand. If we spend all our money developing the coating, we can kiss Component X goodbye.” “The research says there’s a big opportunity there,” said Wanda. “Are you suggesting we drop Component X to pursue an unproven market?” “I’m not suggesting anything,” I said. “I’m recapping for slow readers.”

“Sorry,” sneered Wanda. “Sometimes I forget we only exist to provide fodder for your column.”

“Any suggestions?” I asked. “I’d trust a customer’s order over a student’s research,” said Betty. “He had an MBA,” I protested. She flashed a satisfied grin.

“Let’s go for it,” said Wirtz. “The army is a huge client — and CNN says they’re up to their neck in camel dung.” “But what about our existing market?” asked Scanelli, our director of strategic alliances. “They need us to upgrade Component X. We should look after loyal customers before we chase new ones.” “But we need new clients, too,” argued Wirtz. “Is this a good time to mention the burgeoning market for strong, flexible lacrosse sticks?” asked Kernel.

Here I’d commissioned all that research — and now I realize there’s no such thing as an informed decision. Business is about creating things that haven’t existed before. All you have is your gut.

“I know,” said Wanda. “Let’s ask the readers!” “No, we did that last year,” I said. “Sometimes we have to make our own decisions. Let’s go with Component X. It’s a smaller investment and a better bet than taking on the defence market.” “But what about finding new customers?” asked Wirtz. I smiled at Kernel. “Maybe we’ll look at the lacrosse market.”

The seat of my pants isn’t much to look at. But it gets me through the day.

Originally appeared on PROFITguide.com