Might the wrong influence on a companies strategy actually come from a strong business case?
Perhaps nothing (and the list is extensive this year) has had more of a negative impact on travel and tourism in 2019 than the dilemma and frustration around the Boeing 737 Max. I hear it brought up at every conference and I see it included as part of the “why” as everyone tries to explain a less than desirable 2019. This week we saw some new articles and updates emerge as to how the board and the company are trying to change things, like this coverage in the New York Times.
Although these articles, look backs and perspectives will no doubt add some understanding and value I had my own assessment (warning may not be the facts) of the issue much earlier. When I first heard about the Boeing issues something in a report jumped out – the software that had been designed to actually prevent the issues that led to the crashes had been marketed as an “option”. Now I ask you was that the idea of the sales or marketing team? No, I don’t think so. What about engineering, would they recommend such a plan? Unlikely. Then who would do this, who would develop a plan that listed something like this software that saves lives as optional? I know the answer, but I doubt anyone will agree. My assumption is that it was finance.
This decision shares all the hallmarks if someone doing an analysis that shows merely including the software would yield Y but by selling this as an option and charging more it could yield X – and for those of you not following me X is a lot more than Y. This is a classic financial analysis that emerges in every company year after year, developed in a vacuum, conceived without considering the customer and worst of all as is evidenced with Boeing, fails to consider ALL the results the potential upside might encourage. I am often reminded of the scene in Jurassic park where Jeff Goldblum schools the excitement around what they have done with the comment “You spent so much time working out if you could do it that you didn’t stop to ask if you should do it”.
Taken to an extreme we could make this point more clearly – a restaurant could charge a fee for plate clearing – should they? A hotel could charge for towels and toilet paper but should they? Ikea could charge for their assembly instructions, but should they? An aircraft manufacturer could charge for software that prevents crashes, but should they?
Now I am guessing that some will deny this is what happened and maybe it didn’t and my hypothesis is wrong. Many will tell me the process was far more complex. Then some will say the board has a responsibility because if companies were not pushed to make ridiculous profits then things like this wouldn’t happen etc etc. All true and maybe I even agree with most of that. However let’s admit that somewhere at some point this analysis took place, conclusions were drawn and then presented. That part was “finance” looking at how to make even more than they thought possible. (Pharma companies are in the same although different tangled web right now as judges are assessing similar choices made around opioids)
Most boards and leadership teams are going to have a difficult time walking away from a financial analysis that shows a company is leaving millions on the table by not raising a price or making something optional, regardless of what that is. Shouldn’t finance teams have to answer some simple strategic questions about these proposals rather than thinking that they can simply be clinical and then bare no responsibility? I propose that responsibility becomes part of the analysis. No analysis should even make it to a boardroom without these moral, ethical, business strategy and partnership questions being asked. Right now I am guessing that there are many shareholders and many investors that wish a little more of that had happened than it did.