System Evaluation Series, Part 5: The Decision Matrix
In our continuing series on the business system evaluation process, we are following a 200-person specialty equipment manufacturing company as it looks at new systems to support growth and international expansion. The company's head of operations, "Dave," has been gathering information from potential vendors and their existing solution partner. Now, the decisions get interesting.
The Decision Matrix
Dave created a Decision Matrix to guide the selection process for each of the options the company will evaluate. He considers this the first draft that will evolve as his team goes through the process.
"The questions themselves in the Decision Matrix are simplistic on the one hand, but they all support the three main economic drivers of our business," Dave explained. "The three criteria include...can we increase revenue, can we reduce operating costs and can we manage inventory more effectively."
Evaluating each of the solutions on the basis of those three primary business drivers will allow the company to quantify a return on the investment. For each business driver, Dave formulated underlying questions that address the specific components of the business.
In regard to the importance of user interface, Dave noted, "The user experience is part of it, but it is hard to quantify and could be a tie-breaker at the end. We want to be objective about the decision in terms of the business case."
Dave's Decision Matrix is a four column table with column the headers "Category," "Question," "Answer" and "How and How Much." The categories are the critical business drivers identified by Dave and the related questions address business units and processes. The task of the evaluation team will be to fill in the "Answers" and the "How and How Much" columns for each of the solutions it considers.
Category 1: Can this increase revenue?
- Can this increase equipment sales?
- Can this increase parts sales?
- Can this increase service sales?
- Can this increase dealer equipment sales?
- Can this lead to better marketing decisions that lead to increases in sales?
Category 2: Can this reduce operating costs/cost of goods sold?
- Can this reduce freight costs?
- Can this reduce training costs?
- Can this reduce labor hours per machine built?
- Can this reduce labor for manufacturing parts?
- Can this support growth without more people?
- Can this lead to fewer stock-outs of parts in both production and parts sales?
- Can this lead to fewer shipping errors?
- Can this lead to fewer production errors?
- Can this lead to less employee turnover?
- Can this lead to improved employee productivity?
Category 3: Can this reduce or manage inventory more effectively?
- Can this safely reduce parts inventories required to support sales while maintaining service levels?
- Can this reduce the number of stock-out situations?
- Can this streamline branch resupply processes?
- Can this improve the effectiveness of purchasing activities?
- Can this improve customer service with improved inventory information?
Over the coming weeks, the evaluation team will work through its options and the answers to the questions. Dave points out the questions will help keep the team focused on the objective measurement of the solutions.
The Decision Matrix offers many practical lessons for sales and marketing professionals to make your marketing more effective, including:
- Web site text guidance: For those partners targeting the distribution, manufacturing or rental market, compare your Web site text to the Decision Matrix questions. Do you answer all of them?
- Prospect perspective: No matter what market you serve, the list of questions is a great primer for any sales or marketing person on the client perspective. When you are communicating with your prospects, think about the questions that are on their list. First, try to find out what those questions are. Second, be ready to answer.
- Content targeting decision driver: For each market you target, create a list of the primary business drivers for that industry. Focus the content of your Web site, blog posts, whitepapers and infographics on those drivers. Explain in simple, non-technical terms how you can improve business outcomes based on those drivers.
How have you defined your target market business drivers? Add a comment below or send me a note and let's share the knowledge.
Next Installment: Threats, Costs and Pyramids
More from This Series:
Posted by Barb Levisay on June 07, 2012 at 11:31 AM