Opportunity costs and "Go/No Go" decisions

In the January-February 2011 issue of Harvard Business Review, there is a Shane Frederick article called, "The Persuasiave Power of Opportunity Costs." He discusses how opportunity costs can (or should) figure into decisions individuals and corporations make about spending.

I'm wondering if "opportunity cost" could also help marketers get technical staff and (more importantly) firm principals to understand the huge downside to insisting on a bad "Go/No Go" decision.

Take, for example, an RFP given a "Go" because the principal wants to do it despite the "Go/No Go" analysis. Everyone (including the principal) agrees that you have no chance of winning the pursuit, and that neither the client nor the specific project has strategic value for your firm. The only thing the RFP has going for it is that the principal wants to pursue it.

You could talk about the financial cost of that guaranteed loser proposal. But if the principal has made an emotional decision, the cost in dollars probably won't be an issue for him or her.

Instead, look at the cost in terms of foregone opportunity:

Your marketing group is working on three proposals, all for current clients and projects you could win, and all due in the next week to 10 days. You have three full-time coordinators and a full-time graphics person, and you consider that all of their time will be taken up by these three pursuits.

Now the principal wants to add a fourth pursuit. Your two most probable alternatives are:

1. Take time away from one, two or all three proposals to do the fourth. This guarantees that some or all of the submittals will be of only average quality or worse. So the opportunity cost is that, to do the pursuit you can't win, you have to risk all three winnable pursuits.

2. Cancel one proposal already in development -- not an easy choice to make. All the time (salary cost) already spent on that pursuit becomes a waste. So the opportunity cost is in giving up a potential win for a guaranteed loser.

My thinking here is that a discussion of opportunity costs could help principals make better choices about bad opportunities.