What we learned this week
The world’s second-best selling sports car comes with a great example of the business case which lead to its production.
The Mazda MX 5 was launched in 1989 at a time when Mazda was producing mainly unexciting saloons & hatchbacks, including its main model the 323. The basis of the presenting the idea for the MX 5 came from two questions that were put to its management: “Do you want to make a car for 2/3rd the cost of a 323?” Yes, we’re interested, came the response. “Do you want to make the same car and sell it for 1/3 more than a 323?” The rest, in sports car terms, is history.
The story of its development – from which this possibly apocryphal business case tale is built – is told by its developer, who was allowed to work on the car during his “down time”. It includes some interesting figures on selling price too – one of the reasons the MX 5 is still produced 30 years later.
A favourite business case introduction I recall from working with another automobile manufacturer. Its Finance Department were presenting ideas to their Finance Director, and one team came with an idea to improve the speed and efficiency of making payments securely with a different authorisation approach.
Sounds dull but worthy doesn’t it?
Their opening line: “We can save the company around half a million pounds this year and for each of the next 3 years. Can we show you how?”
The answer was a big yes, and they immediately got buy in to get their idea heard – and then implemented.
The secret of the business case is not to say what you propose – but put across the benefits to the people you need to convince. Getting funding for development of a new product inevitably means spending first, and profit in the future – the MX5 story is a great example of how to engage people on their terms.
Business cases on the face of it need logic, numbers and strategy. The Forrester article below gives a good 4 step approach – but the main driver is always emotion, how people feel when you present your idea.
Emotion is motion.
One of the reasons – well, the main reason – I now own a Mazda MX 5.
Buzzwords of the Week – Administration (in the US: Chapter 11)
When a company goes into administration, they have entered a legal process (under the Insolvency Act 1986) with the aim of achieving one of the statutory objectives of an administration. This may be to rescue a viable business that is insolvent due to cashflow problems. An appointment of an administrator (a licensed insolvency practitioner) will be made by directors, a creditor or the court to fulfil the administration process. The administration puts in place a statutory moratorium. This is a ‘breathing space’ that frees a company from creditor enforcement actions, while financial restructuring plans are prepared to rescue the company as a going concern where possible. This may take the form of a sale to an unrelated party. (from Companies House UK) https://companieshouse.blog.gov.uk/2019/02/27/what-does-going-into-administration-mean/
Alternate View – In the UK we are seeing this term more frequently in 2020, especially in retail and hospitality. We also see the “Prepack” administration where a company changes hands/management/creditors but is able to continue in business. Not necessarily a death sentence (business death=liquidation) but a sign that cash flow is insufficient, so take care. If this is your business you have my sympathy, but don’t mis use this just to escape the people and businesses to whom you owe money.