When a major business initiative – launching a new product, acquisition/merger, entering a new market, starting a new branding/positioning campaign, mounting a competitive response, etc. – fails it is rarely because the numbers didn’t work or financial risk wasn’t properly assessed.
If education, training and professional certifications are a guide, we can assume that financial analysis is a reasonably robust skill set among all medium-to-large companies (and even a lot of smaller ones). According to the National Center for Education Statistics (NCES), American universities have cranked out well over 100,000 new MBAs per year every year since 2000. Every company of any size has one, two, six, or a hundred MBAs peppered throughout the organization, and each of these MBAs has been thoroughly schooled in basic financial analysis. Add in the accountants, CPAs, business analysts, risk managers and, in some cases, mathematics and statistics specialists and you have a solid base for testing and validating the numbers before any new project, initiative or campaign is launched.
Yet the success rate for new initiatives, across industries and markets, remains between 25% and 35% — only slightly better than random luck. Let’s look at some statistics: Continue reading