Prioritizing Organizational Wants Versus Needs - How to Tell the Difference

...and make the right decisions

In strategic planning, we must learn to separate wants from actual needs. We are forced to make tough decisions that open one door and close another. Weighty strategic decisions can be made easier if we apply a decision triage to help structure the cognitive process we must complete. But how do we separate requirements from desirements in the business world fairly and consistently? Sometimes budgetary constraints drive us to adopt a strategy of eliminating options that are not actually requirements for our business, at least not at this time. For that first round of elimination, we need a litmus test of sorts. More to the point, what we need is a decision process to help us filter the wants from the needs. This article provides a system for making such an evaluation within our strategic planning process. The Brains Decision-making Process Psychologists believe the human mind has two systems for decision-making: intuitive and reasoning. The intuitive system, sometimes referred to as the Reptilian Brain is responsible for neurological response that evolved to help humans make good decisions in a limited amount of time (say, before getting eaten by a saber-toothed tiger). Such decisions are based on survival and are intuitive in nature. The intuitive system is emotional, fast, automatic but slow-learning, while the reasoning system is emotionally-neutral, slow, controlled, and rule-governed. Neither, of course, is always right, but there are definitely limits to what intuition can offer. Experts say it's important to distinguish between decisions that should be made by intuition and those that require careful calculation. "With respect to accuracy, it all depends on the nature of the decision. I would not rely on my gut judgment when picking stock options for my retirement portfolio, for example," said Alexander Todorov, assistant professor of psychology and public affairs at Princeton University. Given the reasoning systems rule-controlled, emotionally-neutral orientation, would it be useful to us if we could rely on a decision-making approach that offered objectivity in evaluating and classifying wants versus needs? Strategic decisions in our business bring with them long-term consequences, so carefully analyzing our available options is all the more crucial to running a successful business. Having such a system gives us a little edge over our own impulsive human nature. The Need For Prioritization Process Business leaders are constantly faced with opportunities they would like to pursue and situations where they must choose between them with care. There are hundreds and thousands of shiny new ideas and opportunities that glitter and sparkle with appeal, lying in wait to tempt us. The opportunities may come in the form of a potential acquisition, an investment in a new product or service line or perhaps simply the contemplation of expanding our office space to accommodate the growth we sense is coming soon. Regardless, such desirements are all around us. Sometimes our wants are founded on legitimate needs and should not be ignored. Other times we desire things that are self-serving, motivated by pride or by impulse. These are the wants that we would be better off filtering out. How often have we rationalized making a decision to classify a want as a need, only to realize that later that we regret the choice and made a mistake? Inputs to a Prioritization Process

Lets look at some options for an evaluation process to determine if something is a want or a need. As mentioned earlier, this is a first important step in the decision-making triage process. To begin, lets define inputs to be used in the evaluation process. A simple approach to take is to define each variable with a domain of values ranging from one to five in order to setup a relative scale for measuring each factor. In this case, a 1 indicates the lowest relative score and a 5 represents the highest possible score, so a 5 would indicate the strongest response possible, but a 1 would not necessarily be scratched off the list. Borrowing from the software development world, another technique used in evaluating software requirements is called MoSCoW. The use of MoSCoW was first developed by Dai Clegg of Oracle UK Consulting; in CASE Method Fast-Track: A RAD Approach. MoSCoW is a prioritization technique used in business analysis and software development to reach a common understanding with stakeholders on the importance they place on the delivery of each requirement - also known as MoSCoW prioritization or MoSCoW analysis. The capital letters in MoSCoW stand for: M - MUST have this. S - SHOULD have this if at all possible. C - COULD have this if it does not affect anything else. W - WON'T have this time but WOULD like in the future. The o's in MoSCoW are added simply to make the word pronounceable. A numeric weighting would still be applied using MoSCoW, but it can be done behind the scenes in a spreadsheet in order to focus the process on making rational decisions about each choice. What we are trying to avoid is having someone assigning 5s to everything out of fear that something wi ll be forever left off the list if it is eliminated now. Lets next explore the variables we would use in our evaluation. We need a variable representing importance and another representing satisfaction. Likewise, we will also need variables representing expense and time respectively. To add the dimension of utility and feasibility, we would also need a last variable, perhaps labeling it viability. Other variables could certainly be added, such as market data, industry trends and competitive considerations - but these represent a strong "core" to build from and support a non-bias evaluation. Now we should define the variables with a bit more description. Lets assume that a relative scale will be selected, either (low-1 - high-5) or using a MoSCoW prioritization with associated weights. For instance, the following scale could be used: 1 - No discernible value 2 - Low 3 - Medium 4 - High 5 - A value that is beyond high or off-the-chart Some Terms:

Relative importance to the organization: Being completely objective, how critical is it to the organization? Relative satisfaction with the existing state or condition: Again, being objective, how satisfied are we (the organization) without it? Approximate relative time to implement or complete: If we do it, how long will it take to have it? The relative scale is used of course instead on an actual estimate. Approximate relative expense: Is it expensive? Applying a relative scale of expense, would it be a 1, a 5 or somewhere in between? Relative viability (taking into account the short and long-term usefulness): How long will the utility of it last? Applying a Prioritization System Approach Now that we have some variables to work with, well need a formula to use in calculating a score for each decision alternative we want to consider. The following formula yields a final score that can be used to sort alternatives from highest or lowest (or vice versa): (Relative Importance to the Organization) minus minus minus plus Equals (Relative Satisfaction with the Existing State) (Approximate Time in Relative Scale to Implement or Complete) (Approximate Expense In Relative Scale) (Relative Viability (taking into account short & long-term usefulness)) Final Score

The resulting scores, when calculated on a spreadsheet, yield a sortable table that becomes a prioritized list of wants and needs. While this data may not be enough to fully base decisions upon, it serves as a rational analysis of available options and the process itself is a huge improvement over decisions made on emotionally-based reactions. An Example As an example to illustrate this decision-making process, what if we were a small start-up business selling a consumer product that were a combination floor polish / dessert topping? Lets define a few fictitious but pertinent background details to round-out the example. The situation: We have determined through some preliminary research that such a product will sell relatively well over the Internet (okay, just bear with us for the sake of an example). Our analysis also suggests that wed need approximately 2,000 units of our product in inventory to begin operations. Our manufacturer requires a minimum order of 5,000 units unless we pay a 10% penalty fee, but provides a substantial 20% price break if we order in quantities over 10,000 units. The product appears to have a shelf-life of over 20 years, so there is no danger of the stuff going bad.

There are store-front locations available to lease, but require a minimum three-year term and first and last months rent paid in advance. Were not sure if that is the better option, or if we should look at using the Internet as our primary channel initially. Our research has determined that this niche does well as a specialty store model, but the monthly lease would be $2,500 and that might exceed our ability to pay in the early months until the business is better established. Our capital is limited to $100,000 and our target to launch our business is 12 weeks from now. We talked to an advertising agency and were quoted $15,000 for a package that would give us a combination of print advertising in the local paper and several radio spots a day. Alternatively, we could buy print-only advertising for $6,500 or radio-only ads for $8,000. We would have to pay an additional $3,000 for logo design and ad layout and copy development if we want help on that aspect. A local web-marketing company offers out-of-the-box B-2-C websites for $5,000 that can be ready in a weeks time, but the design is very generic. Alternatively, they offer a custom-built site for $25,000, but this requires approximately 90 days to complete. To summarize, here are the major decisions to be made:

Sell through the Internet only Sell through a store-front only Use Internet and Store-front Order the 2,000 units of product estimated as our initial need Order > 5,000 units of product to avoid the penalty Order > 10,000 units of product get the price break Pay for logo and ad development Buy the full advertising package Buy no advertising Buy the print-only advertising package Buy the radio-only advertising package If the Internet is selected as a channel, build your own website If the Internet is selected as a channel, have someone custom build your website If the Internet is selected as a channel, buy a generic out-of-the-box pre-designed website Buy a professionally designed logo Use a self-designed logo Of course in a real-life situation, there would be millions of other decisions to be made, but lets keep this simple for the sake of this example. Below is the table of results, based on scoring each alternative with a relative score and using the following as the scoring index: 1 - No discernible value 2 - Low 3 - Medium 4 - High 5 - A value that is beyond high or off-the-chart As you can see in the table below, some scores come out as negative numbers, but that is okay. The relative ranking is what we are looking for. In some cases, judgment must be used on deciding the score. For example, the Expense of not buying any advertising is a 4, the same as the value for Expense if we bought the full advertising package. The reason why is the trade off on the cost of personal time to sell and attract business is high if there is no advertising used to drive traffic to a store or website.

With the raw data now captured, the next step is to sort the table, based on ascending order of the Score columns. The table below shows that result with the shaded portion representing the choices eliminated and the top scored items indicating the optimal choices. In some cases, the negative score might still represent good options to consider, but for simplicity sake - only the positive scores were selected as top-priority options in this example.

Were still not quite done though. Remember the Dependency column? We need to account for those in our final score tabulation. For the sake of demonstrating a stepwise example, the calculations of the dependencies are shown below to explain the calculation: Item 14 Adjusted Score = (Item 14 Score + Item 1 Score + Item 3 Score) or (2 + 1 -2) = 1 Item 7 Adjusted Score = (1 + (-3)) = -2 Item 13 Adjusted Score = (1 + (+1) + (-2) = 0 Item 12 Adjusted Score = ((-2) + 1 + (-2) = -3 If we resort the table once more on the adjusted scores, the final table yields our final best choices.

Heres the final table:

Selecting the top four options, are initial choices would be to do the following:

Order > 5,000 units of product to avoid the penalty Buy a professionally designed logo Sell initially through the Internet only Buy a generic out-of-the-box pre-designed website Of course this is a greatly simplified example of applying such a decision process, but it effectively demonstrates the power of critical analysis tools in strategic planning. Benefits Prioritization is a fundamental component of the cognitive decision-making process. It is essential to have such tools to draw upon in strategic planning or to have at our disposal for making routine

business decisions. Ranking wants versus needs is important to planning so that we eliminate extraneous factors in our decision process and make choices that are right for our business. The applicability of such tools is far broader than just the executive team. Organizations should bring in people from outside the executive circle for fresh ideas and different perspectives. Most importantly, the point of decision tools is not the model itself and certainly not to add bureaucracy or undue process. The importance is in having a framework to leverage throughout the organization.

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