How to make business decisions using the PrOACT model
Image Credit: Jens Lelie
PrOACT is a decision-making model that stands for:
Pr – Problem
Objectives
Alternatives
Consequences
Trade-offs
Problem – Define your business problem. Business Owners sometimes do not have a thorough understanding of the problem to be solved, leading them to solve the wrong problem. Good judgment is required to identify and define the problem. Entrepreneurs make a common mistake of defining the problem in terms of a proposed solution or missing a bigger problem, or even addressing the symptoms and not the root problem.
Objective – Your objective is a description of what life would look like when your problem has been solved. Your objective should have several criteria or considerations that will help you evaluate your alternatives and select the one that best solves your problem.
Weight the Criteria. Different criteria will vary in importance to a decision maker. A good entrepreneur will know the relative value to place on each of the criteria identified. The value may be specified in points as a weighting system.
Alternatives - To make a decision you need to have alternatives (choices) to select from. You need to come up with as many alternatives as possible, you need to be creative and consult friends and mentors. Remember "You can never choose an alternative you haven't considered."
Consequences – Consequences are the results or attributes of the alternatives that you have come up with. Each alternative will have its own consequences which you must compare against your criteria. You need to create a consequence table to see how the alternatives compare to each other
Trade-offs - Most times, the consequences of each alternative will conflict with each other and with the criteria. i.e., no single alternative may meet all the criteria that you have set for your objective to be met.
Therefore, you will need to make some trade-offs (to forgo something in favour of another). You will need to sacrifice something from one criterion to gain something from another criterion. To achieve this, you will need to rank the consequences amongst each other for each criterion and assign scores before selecting the alternative that gives you the highest score.
Let us explore a Case Study to illustrate the PrOACT model in action.
CASE STUDY: ROBERT THE INTERIOR DESIGNER
Robert is a talented interior designer who lives in Abule Egba, Lagos and makes bespoke furniture pieces that custom fit your home space. He completed his apprenticeship 6 months ago after spending 2 years under the tutelage of a well-known interior designer in Lekki, Lagos. Robert identified Instagram as a channel to reach his prospective customers, who are mostly high net worth individuals, and so started posting images of projects that he executed during his apprenticeship days. Within a space of 3 months, he had gained about 5,000 followers and each of his posts generated hundreds of likes and tens of comments but his conversion rate from followers to paying customers was less than 0.5%. His new business was struggling to take off.
Initially he sought to solve his poor sales by offering free consultations on home design to his followers, but this did not translate to sales. He then ran adverts on Instagram, and he got hundreds of inquiries but very few sales. He thought the problem was the cost of his services, so he offered a massive discount on his professional fees but still his sales did not improve.
Robert was on the verge of quitting when he decided to seek help from a business mentor who engaged him in a brainstorming session for several hours until they arrived at the core problem that Robert was facing - Lack of Trust. Robert’s followers did not trust him enough to make a purchase. They saw the beautiful images on Instagram but could not be certain that Robert could indeed deliver the quality of products and services as advertised.
Upon many reflections on his numerous past conversations with potential customers, Robert realized that his transactions usually failed at the point where inquirers asked him if they could see a physical sample of the products. Robert usually countered by naming his clients and showing them more pictures but the inquires never moved further when he could not take them to his clients’ homes or the places where he made or sourced furniture pieces from.
Let us see how Robert used the PrOACT model to make a decision to solve his problem.
Problem Definition
Low conversion of followers to customers due to a lack of trust associated with selling physical furniture and interior design services online as an unknown brand.
Objective
Robert described his objective as “I want my potential customers to be able to see, touch and feel my physical products and services anytime they desire and provide them with the assurance that they are dealing with an established business. I will have a showroom office for this purpose”.
The criteria that Robert set for his showroom with the associated weights is below:
Large Space to showcase design ideas for every area of the home (5 points)
Easily accessible to my target customers (10 points)
Easily accessible to me (1 point)
Affordable for me to pay the rent (5 points)
Alternatives
Robert engaged a real estate agent who came up with 4 alternatives, he found 4 potential showroom locations in Lagos. They were in Lekki, Surulere, Ikeja and Abule Egba.
Consequences
Each alternative came with its own set of consequences, and these are indicated against the criteria in the consequences table below:
Based on the above Consequences table, Robert ranked the Alternatives against each other, in terms of how best they met the criterion on each row of the table.
Trade-offs
To make a decision Robert will need to create a scoring system using the ranking of the consequences amongst each other and multiplying against the weighting of each criterion. See the table below:
Based on the results of the scoring system, Ikeja appears to be the best alternative for Robert even though he will have to make compromises on some of his criteria like Large Space and Affordability which both rank lower than Abule Egba.
If you were Robert, what alternative would you pick for the location of the Showroom?