Senior business leaders are paid big bucks to make the toughest decisions.
Should we launch product x or y?
Should we focus investment in the east or west?
Should we work with this partner or that one?
But where does the conviction come from to make these million and billion dollar decisions? From a business case? Being in the data business myself, I’m fully aware of the perils of data and how it can be used and abused in a business case to sell any argument, even completely opposing arguments.
Let’s acquire that company as it is 80% incremental to our business.
Let’s pass on that company as we would be paying a 7x multiple, much more than it’s really worth.
Can you relate to being in an organization where decision-making seems to happen with a coin flip?
Sadly, I have seen a lot of seemingly arbitrary decision-making by companies. And when this happens, when decisions are made and reversed as management teams come and go, it signals one thing to me. There is no conviction in the decision-making.
So where does conviction come from? I’d like to make the case it comes from:
- Knowing what business you are in from a consumer lens, and
- Having an aligned view of the future
If a company’s leadership team can answer these two questions in relative unison, sign me up to buy their stock.
Here’s a good example. CVS is a retail pharmacy chain in the U.S.A. They decided they were in the business of ‘helping people on their path to better health.’ They saw a future where wellness is in dire need, and a world where brands need to be authentic and talk the talk. In keeping with this focused mindset, in 2014, they declared they would no longer sell tobacco. This decision essentially forfeited $2 billion in annual sales.
A business case based on carefully curated data could have argued for any range of decisions. CVS could have put forth a case that dropping the tobacco business would be beneficial because companies would consequently switch to them for their corporate health plans. Conversely, the data could have easily been prepared to argue in favour of keeping the $2 billion in sales.
However, through a clear view of what business they were in and an aligned view of the future, there really was one better answer. They made their decision with conviction and opted to ‘help people on their path to better health.’ In 2015, CVS proudly shared data showing that their decision had a positive impact on the health of consumers.
Are these desperate moves in a landscape of disruption? Or instead, do these companies have a clear understanding about the business they are in and an aligned view of the future. Time will tell.