Investing and setting direction.

Waiting is an option, rarely the best one

An investment that commits the company for years is almost always decided with incomplete data. The market is not fully known, the supplier promises, the bank hesitates, the accountant produces a five-year plan everyone knows will not come true as written. Faced with this uncertainty, the executive has three possible reflexes: wait to know more, which often amounts to letting a competitor decide in his place; trust his intuition, which is valuable and insufficient; or commission a study, which produces a figure to three decimal places on a question that did not deserve one.

The firm proposes a fourth way: structuring the decision so that it is made in time, remains correctable, and everyone knows what would lead to reconsidering it. It does not carry out market studies in the sense of research institutes, does not arrange financing and replaces neither the accountant, nor the bank, nor the lawyer who drafts the contract. It instructs the decision: the question asked, the facts established, the comparable options, the choice, and the signals that will say whether to change course.

What makes these decisions hard

The first difficulty is the asymmetry between what can be calculated and what matters. The cost of the investment can be calculated to the franc; its return depends on assumptions about the market, the clients and the competition that no one can verify before investing. The executive ends up with one exact column and one imaginary column, and compares the two as if they were of the same nature.

The second is that every counterpart has an interest in the outcome. The supplier wants to sell the equipment, the architect the building, the banker the loan, the manager the project he will be responsible for, and the competitor selling his business has a reason he does not state. None of these narratives is false; none is disinterested. Deciding on the sum of these narratives is deciding on what others have an interest in making one believe.

The third is irreversibility, which is not the same for every option. A building commits for twenty years; a machine for seven; a partnership for the term of the contract; a hire for three months' notice. Two options at the same cost can have unrelated irreversibilities, and it is often this criterion, not the return, that should decide.

The situations the firm handles

Investing in a site, equipment or a system. The quote is there, the financing is possible, and the question is not only whether the investment pays for itself, but what it does to the company's break-even point, to its dependence on a client, to its capacity to absorb a bad year. The firm instructs the decision with the company's figures, following the reading set out in the firm's handbook on the subject, and compares the investment with the options that were never put on the table: leasing, subcontracting, deferring, sizing differently.

Diversifying or dropping an activity. Adding an activity that seems complementary, or closing the one that no longer pays. The firm establishes what the activity actually brings, in margin and in dependencies, what its disappearance or addition would change in the cost structure, and what the market says when one reads it without wanting a particular answer.

Entering or leaving a market. A neighbouring canton, a country, a client segment. The decision commits sales resources for years before delivering its verdict. The firm sets what must be true for the entry to succeed, what can be verified before investing, and the point at which one gives up.

Concluding a partnership, acquiring or selling. An acquisition, an alliance or a sale puts the company face to face with a partner who negotiates and knows things he does not say. The firm helps read the partner, what he says, what he assumes, what he has an interest in making one believe, to set what is given up and what is kept, and to decide before the negotiation rather than during it. It works with legal counsel and the accountant; it does not replace them.

Make or buy. Bringing a skill in-house or entrusting it to a third party. The question goes beyond cost: it touches dependence, control, and what the company must know how to do itself to remain what it is. The firm instructs these three dimensions before the figure.

How the firm instructs an investment decision

Framing writes the decision in one sentence and sets the real deadline, the one beyond which not deciding becomes a decision. It also writes what one refuses to decide at the same time: an investment in a site is not the occasion to reorganise sales.

Establishing the facts separates what is known from what is assumed and from what is asserted out of interest. The firm reads the company's figures, checks through open sources what the market and competitors are actually doing, conducts the necessary interviews, and writes down in plain terms what remains uncertain and what it would take to know. An unverifiable assumption is named as such; it is not replaced by an estimate to three decimal places.

Building the options proposes two or three, real ones, comparable on the same criteria: cost, effect on the break-even point and the margin of safety, irreversibility, the dependence created, and the signal that would indicate it is time to change. The firm says which one it would choose and why.

The decision sets the option, its conditions for success, its breaking points, and the review schedule: the date on which the executive will look at whether the assumptions hold, with signals defined in advance rather than a feeling. A follow-up conversation at three months is included.

The mistakes the firm sees most often

Comparing an option with nothing. The investment is compared with not investing, never with leasing, subcontracting, deferring or sizing differently. The right decision is often among the options nobody put on the table.

Believing the five-year plan. It is useful for the bank; it says nothing about the decision. What says something is what happens if the expected turnover falls short by twenty per cent in year two, and that question fits on one line.

Confusing cost with commitment. A cheaper but irreversible option can be riskier than a more expensive one you can exit. Irreversibility is compared, like cost.

Deciding on narratives. The supplier, the banker and the manager carrying the project are each right from their point of view. Their sum is not a picture of the situation; it is a picture of their interests.

Not setting the point of renunciation. An investment without an exit signal becomes a commitment by inertia: one continues because one started. The signal is set beforehand, when setting it still costs nothing.

Deliverable and duration

A chosen option, its conditions for success, its breaking points and its review schedule. Two to six weeks depending on the situation, at a fixed fee set in the written proposal. The first thirty-minute conversation is not charged; it serves to say whether the firm can be useful and in which format.

What you can do right now

Write the investment in one sentence, then, below it, three lines: what you know for certain, what you assume, and what you have been told. If the first line contains only the cost, you are in the ordinary case. Then answer two questions: which option you did not consider because it seemed less ambitious, and by what signal you would know you were wrong. If you have no answer to the second, that is the point where a first conversation with the firm begins.