Joseph L. Bower and Clark G. Gilbert

Almost always, requests for resources require making two decisions: Should we support this business idea? and Is this proposal the right way to go about it? Most capital budgeting processes are set up to vet projects (in other words, they’re aimed at the second question, not the first). It is usually possible to carry out fairly rigorous quantitative analysis comparing the plan of action in a proposal with alternatives. It is important that this analysis be done-and it is often done ad nauseam. But our research shows that the first question, the business question, is more important and far more difficult to answer-and it is often ignored.

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