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Area Development - Site Selection, Facility Planning and Workforce Development

Last Word: Decision-Making Dynamics in an Uncertain World-Business Despises Uncertainty

Data points are shifting, and location decision-making must change to be evidence-based in approach. Long-term planning is admirable, but short-term incremental gains may be more prudent in the near-term economy.

Q3 2022
In a hot and poorly ventilated room somewhere in Central and Eastern Europe, two sides of the table gather to discuss what could be a seismic giga-factory investment. On one side is a Fortune 100 enterprise, transforming its business model with new electric vehicle (EV) production processes and plants, considering multiple countries and sites. Opposite, representing a strategically located country, are a plethora of public-sector leaders from the ministries of finance and economy, several investment attraction representatives, and additional state and local entities, all nervously focused on pitching for the project. The meeting begins with good intentions, yet 20 minutes in the leader of the private enterprise interrupts and says (I paraphrase), “We cannot proceed with our location decision-making program unless we come away with great confidence in your ability to execute. You must convince us in a time of great uncertainty that this potential investment and private-public partnership will succeed. Can we begin to solve complex problems together, with great speed and creativity? Show me over the next two days that you earn the right to be our partner, and we will do the same.”

The words in this statement are powerful indicators of what is happening up and down the value chain of many companies in today’s tumultuous business environment. Business despises uncertainty, as it breeds lack of confidence and unnecessary probability modeling that will be flawed or ill-informed by misleading data and analytics.

Take, for example, another recent case study: A confidential company hired a prominent consulting firm in Europe to evaluate several location options for a lithium-ion battery plant across six countries, spanning from Sweden to Bulgaria. The firm reported its results to the company’s board of directors and was fired on the spot. Why? A board member had traveled to one of the candidate countries and invested time discussing the market’s cost profiles with a potential joint-venture partner. The consulting firm, in parallel, reported back using industry standard desktop data, surely good enough given a tight timeframe and the difficulties of setting up fieldwork. Wrong! The delta of data presented vs. that already floating around the board was nearly 50 percent. Lack of custom corroboration and intense due diligence set the stage here for failure. Both parties also fell short of discussing ways to address together the current volatility in the supply chain to make their decision-making more certain, if not at least bell-curved in its predictive results and scenarios planned.

Business despises uncertainty, as it breeds lack of confidence and unnecessary probability modeling that will be flawed or ill-informed by misleading data and analytics. Decision-making must change drastically in these uncertain times to be more collaborative, multidisciplinary, and creative in approach; data driven, yes, but also “ground-truthed.” Probability of results must be swiftly discussed as the shelf-life of any element, whether financial, operational, or physical, is radically short now. And where one party in a deal is wildly confident and the other extremely unpredictable, consider doing or not doing a deal based on who develops the most effective due diligence work streams and teams, reporting back on what the best optionality is for the project or task at hand, with transparent pros, cons, and tradeoffs: the gold standard of sound decision-making.

Probability of results must be swiftly discussed as the shelf-life of any element, whether financial, operational, or physical, is radically short now. Back inside the room, the two days concluded, with the enterprise leader saying: “We must have an extraordinary can-do attitude, comprehensive information, and an array of scenarios for our top management to effectively consider. They must see clarity in every option and how the timeline for this investment can be achieved in an accelerated way, not the normal approach. Let’s keep working together to minimize risk, create stability in what could be, create opportunity, and find a partner that wants and needs us, and vice versa. Will you make the shortlist?”

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