Influences On Capital Investment Decision Making
One of the most important things I have learned in my branding career is that decisions are made with the heart and rationalized with the head. That means emotion matters. But, too often the capital investment decision is viewed through a rational lens. To win more deals, you need to speak to the heart and not just the head.
There are any number of top criteria lists used by economic development professionals to help prepare logical, fact based arguments for why their community is the best location option to choose. SiteNet has distilled the criteria to a handy, though extensive, checklist to make it easy to know what data are required to effectively compete for capital investment.
Communities can dogmatically prepare and present the data package for an RFP response, and yet still inexplicably lose the competition. The key reason is the package captured the decision maker’s brain, but missed the heart where the real decision is made.
To better understand the role of the heart in any capital investment, it is important to understand the internal influences that impact decision-making. Some can be effectively addressed and leveraged to secure a favorable capital investment decision. Others are simply out of your control and likely not worth the angst you will experience trying to minimize their impact. When dealing with internal influences, I am often reminded of the Serenity prayer – “God grant me the serenity to accept the things I cannot change; the courage to change the things I can; and the wisdom to know the difference.”
Here is a description of seven primary internal influences outlined by KnowThis.com that impact every capital investment decision:
- Perceptual Filter – There are several steps required to create a perception in a person’s mind. The decision maker must be exposed to your community. Something about your community must capture his/her attention. Then you need to create an awareness of your place promise so it can create an emotional response. And finally, that response must be translated into the person’s unique experience set so it can be retained and recalled in the future. Anywhere along the way, your efforts can be derailed depending on well your message delivery matches the person’s learning style. Effective communication is when a message is sent, successfully translated through the perceptual filter and then received and stored. The more insight you have into the CEO’s personal experience and thought processes, the higher the probability of positive decision for your community.
- Attitude – When people have a preconceived idea about your location, they bring that bias into their decision making. Maybe they view your location as “rust belt”, “fly over”, “blighted” or a “high crime area”. What they think might, or might not, be supported by data. Attitudes are difficult to change. But, it is important to understand what the perception is and work to correct important misperceptions.
- Knowledge – This is the sum of all information about your community known by the decision maker put into the context of their experience. It includes what you’ve shared, what others have shared, and what the person has experienced. Some of the information you can impact, but much is out of your control. The key is to positively impact that which is in your sphere of influence.
- Personality – This includes how others perceive the individual and the person’s self-perception. The fundamental question is whether your location aligns with the decision maker’s personality. If the person sees his/herself as a sophisticated individual who needs to interact with culture and your community is a quiet, family focused location, there may be a mismatch.
- Lifestyle – This is how a person spends time and money. Some people like 5-star restaurants, cutting edge theater, world-class museums, etc. If your community cannot offer these, then that specific decision maker simply may not prefer it.
- Roles – We all play roles in our life that are important to us. Some decision makers prefer being a big fish in a little pond where their leadership is evident. Others prefer to be seen as a member of a world-recognized community of leaders. Some want to be seen as an active parent, a recognized humanitarian, etc. To the extent your location supports the decision maker’s most valued roles, it will be preferred over other choices.
- Involvement – This is the degree of “skin in the game” the decision maker has invested. The more personally involved, the higher perceived risk of making a wrong decision. In my experience, the greater the degree of involvement in any decision, the stronger the role the heart will play.
You might find it interesting that the notion of all decisions being based on emotion has actually been demonstrated medically. Neuroscientist Antonio Damasio studied people with brain injuries that impaired their ability to feel emotion. He found that they also had a difficult time making decisions. There are other studies that confirm Antonio’s findings. Closer to the field of economic development, the role of emotion in economic and policymaking is actually being studied. I can only imagine what the scientists will discover.
In my reading, I found it fascinating that neuroscience research has shown only 2% of our brain is actually used for conscious thought and thee remaining 98% is used for subconscious thought. Yet, in capital attraction, retention and expansion marketing most economic development investment seems to be aimed at influencing the 2%. I believe the remaining 98% may be the more important segment to address because it communicates with the heart.
There is no question, selecting a location for capital investment is always a high-risk decision for a CEO. There are concerns about the perception of the Board of Directors (and/or key financial investors), the perception of Wall Street Analysts, the acceptance of key employees and their family, and the acceptance of the CEO’s significant other. Emotion is at play every step of the evaluation process. It needs to be acknowledged by economic development professionals, and more importantly it needs to be proactively addressed in the community marketing and sales efforts.
My bottom line counsel – Ensure your economic development efforts do more than provide facts and figures. Facts and figures are necessary for the RFP submission, but are not sufficient to successfully close the deal. In addition to winning the brain, focus on winning the CEO’s heart and you will win more of the capital investment decisions your community competes for.
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