| Optimism about the future certainly has a positive | | | | executives became excited about creating a new |
| place in the overall scheme of things, but it is frequently | | | | piece of equipment that would greatly reduce the cost |
| found to fuel wishful thinking. Consider the typical | | | | for customers. Leading technical consultants from the |
| hockey-stick forecast of the future. | | | | East were brought in to this Mid-western business, and |
| Let's say your operation has been doing poorly. In fact, | | | | the consultants confirmed a rosy technology forecast |
| results as measured by revenues and profits have | | | | and market for the product. |
| been dropping. | | | | The company's chief financial officer was unconvinced, |
| You sit down and plan ways to overcome this | | | | so he decided to monitor the situation closely. What he |
| negative trend. Because the solutions take time and | | | | discovered was that compared to the original business |
| money, you plan for things to get worse in the | | | | plan on which the new product development |
| immediate near term, but you optimistically assume | | | | investment was based, the cost of implementing the |
| that all your new plans will work, causing the | | | | project and time to completion increased regularly |
| organization's results to turn up at some point in the | | | | every six months. |
| future. | | | | At the same time, the estimated future sales and |
| With this viewpoint, a graph of the operation's | | | | profits from the new equipment kept dropping every |
| revenues and profits over time will look like a hockey | | | | six months. He drew a chart showing that if this |
| stick with the past, present, and near-term future going | | | | changing forecast trend continued, the project would |
| down like the length of the stick, and the future turning | | | | be a big money loser. |
| up like its blade as the stick rest on the ice at the point | | | | He got nowhere with his observations. Everyone else |
| where the length and the blade meet. After a few | | | | wanted to believe in the product's success, so the |
| years of implementing this plan, you often find that the | | | | project continued. Sure enough, the project was a big |
| only part of the hockey stick you can see when you | | | | loser in the end. |
| examine the results is a handle still going down. | | | | One way to have overcome this problem would have |
| In the 1980s, a leading business equipment company | | | | been to authorize the project based on the |
| was faced with declining demand for its most | | | | contingency of meeting interim targets for cost, |
| profitable product line. Sales and earnings inched up a | | | | product performance, on-time completion, profit and |
| little based on service revenues for the previously sold | | | | market outlook. Then when those factors weakened, |
| and installed equipment base, but new equipment sales | | | | the plug would have been pulled automatically and |
| were dropping rapidly. Using a technique called "gap | | | | most of the costs could have been avoided. If the |
| planning," the operation looked for ways to fill the "gap" | | | | project had been going well, these interim targets |
| between its current direction and what it wanted to | | | | would not have harmed the project's ultimate success |
| accomplish. | | | | in any way. |
| After rejecting several alternatives, the business | | | | |