Have you ever made calculations in Excel to help convince a prospect to invest in your solution, only to find that a simple data-entry error foiled your analysis?
If so, you’ve got something in common with two economic professors, Carmen Reinhart and Ken Rogoff. In 2010, they published a paper, “Growth in a Time of Debt,” in the American Economic Review. Based on their data, which they stored in an Excel spreadsheet, they estimated that countries with 90% debt levels experience negative economic growth. Their findings had an enormous influence on the economic community; their data was used widely in economic analysis, particularly during the height of the Greek banking crisis.
Along with the attention, however, came a backlash. And last week, a group of University of Massachusetts economists tried to run the same numbers and ended up exposing the fact that Reinhart and Rogoff made an error in Excel that essentially “caused an entire subset of countries to be excluded from their data set.” Reinhart and Rogoff have since come forward to acknowledge the data-entry error.
In my view, this mishap is a great example of how quickly your credibility can circle the drain with customers and prospects. As Paul Krugman pointed out in his New York Times column last week, Reinhart and Rogoff had already established their credibility with the economic community based on a widely admired book they wrote on the history of financial crises. But what happens to that credibility now that this simple (and avoidable) error has come to light?
In my mind, the use of Excel in this case is a cautionary tale for sales and marketing professionals. Any company trying to convince customers that its service or product is a sound investment cannot afford to base its business case on numbers generated in a manual spreadsheet. According to a 2008 analysis of multiple studies on spreadsheets finds that “88% of spreadsheets have errors,” and that “Spreadsheets, even after careful development, contain errors in 1% or more of all formula cells.” A simple mathematical mistake is easy to make, and even a small mistake in a complex financial analysis can throw your analysis off wildly and undermine your credibility.
The fact is, a complex sale typically involves complex calculations. The more faith you put in manual data-entry into spreadsheets, the more you risk making a simple error that could potentially result in a mistaken conclusion. This is exactly why we’re strong advocates for automating calculations in an ROI calculator. Not only will an ROI calculator prevent data-entry errors, many prospects are more inclined to put their faith in numbers generated by a calculator that’s been created by a third-party vendor. The end result? Your credibility stays intact.
For more information on how to build a quantifiable business case with value calculators and ROI tools and to see examples of value calculators, visit www.stratavant.com.