Innovation

Why spare cash stinks

Written by Cumulo Nimbus

In a way, budget meetings were easier in the recession. When my managers knew Nimbus Co. had no cash, nobody came forward with wild ideas for spending it.

Now, though, for the first time since Knowlton Nash was reading the news, we have spare cash. But spending money requires careful decision-making; it’s not as easy as just cutting the travel budget every year. Whenever I’m not sure what to do, I consult my management team — it makes them feel needed. So, recently, I asked them to explore one or two strategic investments for 2007. New products, new applications, new equipment — I was giving them a licence to dream big.

When you run your own business, you can’t get through a morning without making some mistake, and this time was no exception. First, I had the boardroom painted — causing our controller, Betty Cash, to complain I was spending our surplus before we’d earned it. Error No. 2: I called our project Options ’07, which Kernel, our overeager vice-president, quickly abbreviated to 007. Suddenly, he was bragging to everyone about his licence to kill.

At our strategy meeting, I gave each manager three minutes to pitch their proposals. Error No. 3: we proceeded alphabetically. That meant Betty spoke first. “I’d like to put in a word for buying T-bills,” she said. “Save the money. Keep our powder dry.”

“So, you oppose this whole project,” I said. “Do you have another suggestion?” She proposed a driving range.

Kernel came next. “I suggest we look at new applications for our kitchen-appliance technology. The coatings we use to make our products easy to clean could be of great interest to the fast-food and defence industries.”

“How much money would we have to invest to develop marketable products?” I asked. “For fast food, about $40,000 and six months,” said Kernel. “For defence, it will probably cost half a million, but we’ll get it all back if we sell one case to the U.S. Army. Do you know what they pay for hammers?”

Next came Scanelli, our director of customer alliances, who suggested we invest in an underperforming product line. “If we put more money into design and marketing, I’m sure we can make Component X a winner again,” he declared with confidence. “But every product has a life cycle,” I countered. “How do we know that produc is still viable?”

“‘Cause we’re Nimbus Co.,” said Scanelli. “Nothing’s over till we say it is!” I liked the sound of that. “Plus,” he added, “the market is so small the Chinese will probably never bother to take it over.”

Wanda, our office manager, suggested we invest in a CRM system. “Those never work right,” grumbled Scanelli. “They collect too much of the wrong information.” “Exactly,” said Wanda. “I have a line on a used system from a bankrupt biotech company. They worked all the bugs out.” Wanda paused and sighed. “The poor beggars got too much venture capital. Never had a chance.”

Our last petitioner was Wirtz, our foreman. His idea of strategy is making a lunch before coming to work. But he stunned us with a PowerPoint presentation urging us to move into services. Using our production expertise, he said, we should design more efficient ergonomic workflows for less experienced manufacturers. “We would be leveraging our strengths to move from commodity producer to value-added partner,” he concluded.

That made so much sense, it scared the hell out of us — so we avoided it like laundry. By lunchtime we’d narrowed our options to two: explore non-scratch coatings for the defence industry or reinvest in Component X. “The choice is clear,” said Kernel. “Try to pick a winner or rejuvenate a loser.” “It’s the fundamental challenge of business in one single decision,” said Betty. “This could make a good column,” I thought.

“You know what the Harvard Business Review would suggest?” asked Wanda. “Actually, I’m more of a sports section guy,” I confessed. “Seize the future!” said Wanda.

“I bet they wouldn’t say that,” said Wirtz. We turned to him in surprise. It’s not every day he defies Wanda and Harvard. “I bet they’d tell you to do some market research first.”

“Oh, right,” I said sheepishly. “We could do that,” said Wanda. “We could get an intern,” said Betty.

I realized then that while strategic thinking is vital, people who can just think are best of all.

Originally appeared on PROFITguide.com