Develop Your Critical Thinking

We're going to look at a practical work situation. An issue has come up, and you will need to avoid the traps that appear if you are to get the company out of this difficulty.

Are you ready to apply some critical thinking? Let's go!

Step 1 - The Company Situation

LOKONNECT is an alternative telecommunications operator that provides a type of long-range 4G Wi-Fi access. They work exclusively with corporate clients (B2B) who must be within a LOKONNECT transmitter range. The clients must also install an antenna. 

The technology is not as good as a fiber optics connection: it is slower and cannot offer the same guarantees. However, the clients are trapped until fiber optics becomes available.

A balance sheet for the last 12 months has been drawn up; here are the numbers (in thousands of dollars) that have been released in-house to the company's staff:

LOKONNECT plans to roll out its solution in two new rural locations in the United States. Delivery times for fiber optics are a long way off – between two and eight years, giving LOKONNECT real opportunities.

It's Your Turn

You will act as an independent auditor working for a client looking to buy the company out. You need to demonstrate critical thinking to assess the company’s worth accurately. 

What is your first impression of the information you have received so far? What do you think of the LOKONNECT situation? How do you interpret these numbers?

Step 2 - Analyze the Situation

The Sales Manager's Testimony

"After 13 years in the company, I've seen lots of change. A buyout could bring new blood into this company, and it would also mean me making way for the younger generation. Between you and me, I like the idea of waltzing off with a check too, and I can also see challenges! You have seen the figures; the falling charts don't bode well. Frankly, the time to sell is now or never."

The Technical Manager's Testimony

“After several deployment issues in the last few weeks (a bug meant we had to go back to recent installations on customer sites), it’s going to be FAN-TA-STIC after the vacation. The infrastructure in one of the regions uses the latest generation of transmitters. My stores are full of antennae waiting to be installed, and my supplier has promised regular bug fixes. The new customers are going to love it! They won’t have to wait to be connected, and above all, there is no real alternative on the market. We’ll be the only fast internet provider in the area. The last salesperson just waited for calls from people wanting to sign up with us. We’re going to hit the jackpot!”

The Financial Manager's Testimony

"Our work last year on cash flow allowed us to make major investments for the neighboring regions. We are planning for constant growth in TO in the next four years. At least, as long as the area doesn't decide to speed up fiber optics' rollout. We need to hire a sales representative as soon as possible. But to get someone as good as our old one, who went over to our competitor, we'll have to headhunt a talented candidate, and it won't be cheap.
I don't see the benefit of a buyout; we don't need any additional financial backing. I believe that innovative companies like us most often are bought and stripped from their assets, technologies, and skills. This worries me."

The HR Manager's Testimony

"Our payroll hasn’t changed much, which is good. We’ve saved a bunch of money every month since the sales rep quit. We’ve increased the technical team, which is good since several sites run at once in two different regions. The technical department has dug in its heels, but one team with travel expenses would be easier to manage, but hey, that’s just me. Apart from that, a buyout wouldn’t bother me. It wouldn’t be the first time the company had a shakeup. I was in charge of HR during the company bailout. I don’t see why it will be any different in the future.”

It's Your Turn

Now it's your turn to give your view of the situation. Look back at your notes and compare them to your new analysis.

• Has your point of view changed? What particular factors have contributed to that change? 

• Which testimony or testimonies provide(s) the most objective information? How much influence do they have in your view of the situation?  

 My Analysis

Let me give you my analysis of the situation and the preliminary findings of my audit.

Step 1 - Find out about the company situation.

• The turnover: This has been in sharp decline since their only sales representative left the organization, which seems logical. Despite this departure, sales have held steady at over €100,000 a month. So, where are these sales coming from? 🤔 It doesn't make sense to attribute them just to the accounts manager. Note: this company seems to have cornered the market!

• The profit: This ought to have increased, given there's no sales representative to pay (salary + commissions + expenses). But it's stagnating and declining. Why? 🤔 Presumably because of the bug the manager mentioned. It's also certainly linked to the halt in additional high-margin sales that the sales representative made. Just processing incoming orders makes these sales less likely.

• The cashflow: This has been in a downward curve since March, which makes sense on the face of it. Aside from costs built into the sale of products and services, it includes fixed costs that are largely irreducible (rents, salaries, expenses, etc.). Remember that a large amount of equipment has been stockpiled, according to the technical manager. With a functioning sales representative, the chances are that LOKONNECT reserves will be back to normal within a year. 

Step 2 - Analyze the situation. 

What can you conclude?

Each character represents a partial and biased view of the reality of the situation. From this observation, I have two theories: 

1. The characters have not had all the information to offer an objective view of the problem.

2. There's been a lack of cooperation and communication between the department managers, which can be blamed on the LOKONNECT management.

Each lacks knowledge from outside their own skills domain to make a rational decision. A holistic view without agendas will certainly help them take part in good decision-making.

The absence of a sales representative is disastrous for LOKONNECT, and this is affecting the monthly turnover. But given the customer potential and the technology's exclusivity, it's quite possible that hiring a sales representative and some good outreach will grow the customer base.

At this stage, my analysis would lead me to advise them in favor of purchase with the caveat of future recruitments, further management training, and a reorganization to favor more collaboration.

The information remains incomplete, though, so if the client can wait for a little, I could gather more information about the competition and future investments in optical fiber in the regions targeted by LOKONNECT.

Do you share this analysis? What would you recommend they do?

Thanks to your critical thinking skills, you can help them make a better decision.

Let's Recap!

What do you take away from this simulation?

• For a rational analysis, follow these two steps: 

  • Start by noting your initial reactions and impressions. 

  • Then do a detailed analysis using the available resources, and scrutinize your first impressions. Remember that information that seems obvious should always be treated with caution, and always keep in mind that our brains hate dissonances!

• One-to-one discussion is a powerful tool to avoid getting stuck in an information bubble. There's a risk of not seeing the whole story, even though the information is sometimes there if you just stand back a little.

• People make judgments based on who they are as individuals and on values. So, objectivity is never a given!

In this scenario, you saw that the speakers could be out of their depth from lack of knowledge. Given that, what tool can you use to avoid getting things wrong when you're not sure about the subject? Find out in the next chapter!