REPLY Future Development Directions (SD6258)

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Posted by  Richard Stevenson <rstevenson at valculus.com>

John Gunkler says, "Please don't try to tell me that business  
decision making is not about politics."

Actually I didn't say that it wasn't.  I said that business and  
politics are not the same.

I too have been involved in some extremely "political" boardroom  
debates, including one that ignored months of simulation-based  
analysis to build (what was then) the biggest cement plant in the  
world in entirely the wrong location and based on the wrong  
technology.  By the time it was constructed it was already obsolete!   
But that was in the early 1970's.

I have also been involved in some extremely constructive and valuable  
boardroom debates. One study for a major oil company was acted upon  
and retrospectively is estimated to have added over $500 million  
value to an oilfield - needless we we not paid a share of the  
benefit!  We have also recently worked with a major pharmaceutical  
company, during which an SD-supported boardroom discussion totally  
changed the company's future R&D strategy - away from internal  
development towards alliance-based external development.

You can never take the politics completely out of business - after  
all, managers are human beings and companies are social, as well as  
financial machines.

But ultimately companies have to do one thing - create value for all  
their stakeholders.  Companies that don't go broke.  And managers  
that don't get fired - or jailed (see Enron).  This is a wake up call  
for all managers - the regulator's gonna get you!

Increasing regulation (both forward and retrospective) is placing  
huge new burdens on managers to create REAL value - not just  
"shareholder value"  - a euphemism for managers' stock options - and  
making it less likely that "politics" can be the only decision tool  
in any significant organisation in the future.

Managers are increasingly aware that value-influencing decisions now  
need to be rational, and that the audit trail needs to be solid.  
Big  investment decisions need to be justified.

So I don't totally share John Gunckler's cynicism - although I know  
what he means!

The use of better tools to support rational value management is,  
I  suggest, now a significant new opportunity for SD.

Richard Stevenson
Valculus Ltd 
Posted by  Richard Stevenson <rstevenson at valculus.com>
posting date  Mon, 12 Feb 2007 12:44:58 +0000