The A-Z of Executive Buy-In: Building a Business Case for Multiple Stakeholders

Chronicles – Matheson Session – 4 pm 13 January 2015

Session: The A-Z of Executive Buy-In: Building a Business Case for Multiple Stakeholders  

Presenter: David Matheson, SmartOrg Inc.

Time:           4:00 pm – Tuesday 13 January 2015

Session Abstract:

Thirty-seven executives led by David Matheson, moderator and assisted by thought-leader panelists from DuPont Pioneer, FulFlex, 3M, DIRECTV and Toyota participated in an interactive session to identify ways in which innovators, finance and strategists can effectively work together to achieve buy-in by recognizing and overcoming real or perceived barriers to effective cooperation.

Take Away:

Avoid unfavorable consequences by understanding and dealing with misperceptions among finance, executives, project management, marketing and R&D.

Best Practice(s):

  • Identify counter-productive impact on innovation within each function
  • Build communication and trust across functions
  • Build a partnership based on openness.
  • Focus on the difficult conversations around key decisions

Action Items(s) to Implement:

  • Align the incentive structure to reward risk-taking.
  • Avoid burdening innovative projects with need to justify ROI too early

Notes:

There are many biases among functions. For instance innovators and marketers feel that management places too much overhead and accountability on things beyond their control. Project management, they feel, is more concerned with monitoring vs. helping and that they are frequently looking for predictability when there is a great deal of uncertainty – particularly with truly innovative products.

Take Away:

The world of innovation and product development is fraught with uncertainty and therefore sales, profitability and other financial measures cannot be reliably forecast without dealing explicitly with uncertainty.

Best Practice(s):

  • Teach everyone how to deal with uncertainty around projections about future sales, growth, profitability, etc.,
  • Provide analytic tools to evaluate business model factors when there is uncertainty around such areas as market size, price, market penetration, time and cost.

Action Items(s) to Implement:

  • Provide training in ways to evaluate and deal with uncertainty
  • Develop business plans that include ranges around factors that cannot be forecast with certainty, for instance the size of a new market where the company has little or no experience and marketing research is inadequate or not available.

Notes:

One of the most difficult challenges faced by many, if not most, companies is the need to think about uncertainty. Companies tend to make broad assumptions about the size of a new market, the sales that can be made within a year or so of introduction and other factors that are impossible to forecast with any degree of accuracy. It has been said that “there are no facts about the future,” which is another way of saying that it is important to recognize that vague, often misguided assumptions can lead one into making optimistic projections driven by political or management-imposed numbers. This is one reason a high proportion of new products fail. Better to clearly recognize what one does not know and develop a range of values that indicate downside risk and upside potential.

Take Away:

Decisions are more often than not driven by fear. It is important to recognize that these fears exist and do everything possible to address and minimize the impact of these within each function.

Best Practice(s):

  • Recognize that many, if not most, managers and executives (despite their titles) have fears around their performance. And the consequence of their decisions.
  • Recognize your own fears and how they may impact the decisions you make.

Action Items(s) to Implement:

  • Get to know about the work of other functions, for instance if you are in marketing get to know your counterparts in finance or R&D and their challenges, pressures and fears.
  • Develop relationships across the functions that involve your work, either through approval levels or technical support.

Notes:

The executives in this session reviewed their perceptions of finance, executive management, R&D/technical, marketing and project management, both within and across functions. After identifying counterproductive behavior, participants addressed reasons for counter-productive behavior, finding that a great deal of this behavior derived from fear. Finance people were concerned that they were not highly valued; they were thought of as gatekeepers; they were the front-line of bad news; and were afraid of being fired. Managers were concerned with being held accountable for things they could not control; becoming obsolete; over-running budgets and dealing with the consequences. R&D was afraid of rejection; scope creep; having to perform with lack of resources; changing priorities and lack of recognition. Marketing was afraid of missing targets; pricing too high or too low; of rejection (“losing out if you don’t say YES”) and failure (of all types).

Final Thought:

Innovation in new product development and marketing is a risky business for many of the reasons cited above. The job can be threatening, depressing and full of fear given the uncertainty around producing top- and bottom-line results, making forecasts when the future is extremely uncertain but management is pushing to meet performance goals. Obtaining the green light for new, risky projects is difficult. Unless a company fosters an environment where the risks of innovation are recognized, failure is tolerated and manages a portfolio of innovation to balance risk and reward there will probably be disappointing results.

One executive team pointed to a single word that pretty much says it all: Trust!