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Make well-founded decisions with the benefit analysis

You have to decide!

And that regularly, quickly - and if possible, of course, too factually founded.

And that's okay not always that easy. Especially when many alternatives exist and different boundary conditions must be taken into account.

Why making decisions is still so important, even though there are uncertainties in the project (which cannot be avoided), you can read again in this article.

A small example:

Imagine a sporting goods company plans to launch a new running shoe. There are two alternatives (we're lucky there are only two!). Management and marketing management disagree:
The running shoes "Nimble Feet" and "Like the Lightning" were designed. Both could bring the company great success. But which one should it be? Opinions in the company are divided.

A list of pros and cons as an aid?

The marketing manager suggests making a list of pros and cons. It should be checked which factors speak for and which against the two products.

Pros and cons lists are great. They at least lead to a problem being viewed and documented in a structured manner. But they have a problem: Do you know the situation in which one side of the list is significantly longer than the other, and the decision should still look different by feeling?

That's because the individual Points are listed but not rated become. But there is a solution for that!

The utility analysis

The utility analysis helps in choosing alternatives! It is particularly suitable for Evaluation of various alternative courses of action and thus serves as a Decision support.

The method can always be used when the evaluation of alternatives is not primarily based on concrete facts and figures, but also subjective influences play a role.

The sequence

The benefit analysis is carried out in the following steps:

  1. Determination of the alternatives or decision options
    The different variants from which one should be selected are collected and recorded. It is helpful if this list is not too long, otherwise the method will be very time-consuming.
  2. Definition of evaluation criteria
    The criteria are defined on the basis of which a decision is to be made. These criteria are often requirements for the product or goals to be achieved. A list of up to 10 criteria is usually created here.
  3. Weighting of the evaluation criteria
    A percentage is stored for each criterion, which proves the importance of the criterion. The sum of the individual weightings must be 100%.
  4. Determination of the evaluation standard
    The individual criteria are assessed with points. In order to ensure clarity here, the evaluation standard must be precisely defined, e.g. 5 points = very good, 1 point = poor.
  5. Evaluation of the alternatives
    This is where the actual evaluation takes place: Points are now awarded for each criterion and alternative and the weighted points are calculated.
  6. Summation and selection
    The weighted number of points per alternative is obtained by adding up the individual weightings. The alternative with the highest score corresponds best to the defined criteria.

The utility value analysis in the example

Running shoe “nimble feet” vs. “like lightning” - which one should it be? The decision alternatives have been made. Based on which criteria should they now be assessed? The following criteria are defined:

  • Production costs
  • Degree of innovation
  • Mass suitability

In consultation with the management, the production costs are given the highest weighting at 45%, followed by suitability for the masses at 35% and the degree of innovation at 20%.

This is followed by the important step: the evaluation! For both running shoes, the points are awarded per criterion:

“Nimble Feet” has low production costs (4 points = good), but has a very low level of innovation (2 = sufficient). It looks different with product B: It is certified as having a higher degree of innovation, higher production costs and greater suitability for the masses.

After determining and adding up the weighted scores, the result is as follows: Running shoe "Nimble Feet" receives the higher value with 3.25 weighted points and, according to this analysis, would be the next product on the market.

From the result it can be deduced that this is probably a rather conservative company. A young and financially well-funded start-up would presumably rate the degree of innovation significantly higher in order to have a unique selling point in the market.

Advantages and disadvantages of the utility analysis

Advantages:

  • Decisions can be made transparently.
  • The decision is made in writing and can also be traced in the future.
  • The benefit analysis can be carried out well in a team and / or by different people and serve as a basis for discussion.

Disadvantage:

  • The rating is quite subjective. The definition of weightings and the allocation of points are not exactly measurable processes.
  • If there are a large number of alternatives and / or evaluation criteria, the method quickly becomes time-consuming.

Curious? The utility analysis is very practical. Not only in the project, but also in everyday decisions such as “What is my next travel destination?”. However, due to the complex creation, especially with many alternatives and criteria, it is not suitable for every tiny project decision. Use the method appropriately and it will surely help you!

Would you like to try out the utility analysis? Then download the free PowerPoint template here:

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