Spreadsheets don't tell you what you need to know.
And even if they are correct, they are lying.
The trouble is, they are used to take decisions, and this is where they are letting us down, badly.
Every decision is a bet, and what is the first thing you need to know before you place a bet? It's the odds, the probabilities, or the term I prefer, the predictability.
You know very well that it would be a total miracle if the actual number came out to be the same as that in the forecast. So why doesn't the spreadsheet give you information on predictability - the chance that each different possible outcome will come to pass? For example, the chance that the costs will be greater than the benefits.
It really hurts my head that it is taking SO LONG for
businesses to get the capability to manage predictability. The mathematical methods have been around
since the 1950s, and scientists and engineers use them all the time.
Why is this? I can think of several reasons.
First, we don’t tell our children the truth. We teach them that 2 + 2 is always 4. But 2 + 2 = 4 is a special case; it only
holds when the symbols represent definite quantities. When they represent indefinite quantities,
when there are ranges of possible values for each quantity, 4 is the wrong
answer!
Suppose the first “2” in your business case represents
infrastructure costs, and that quantity is in the range 1.9 to 2.4 and the
second “2” represents application costs, and it has a range 1 to 6.
Then the answer 4 is wrong both numerically and
conceptually. Numerically, 4 is not the
most likely sum, and conceptually, it is the range of the sum we need, not just
one value from that range.
The second answer is we let people who don’t know this basic
truth design our IT systems. As a
result, our databases and spreadsheets all have little boxes in them, and those
boxes can only handle definite quantities.
Then to top it all off, we don’t educate our accountants about this. We set them up with bad mathematics, and bad tools, and then we put them
in charge!
So we’re stuffed – there’s no way, with the data we have and
the tools we have, to get the answers we need!
Actually, there are tools out there that can do the job, they are just too hard to use. The good news is this can easily be fixed, using Applied Information Economics. Let me explain how.