The Challenge
A major industrial client was facing a complex reorganization: consolidating assets, establishing new process units, and setting up laboratories across multiple facilities. With millions of dollars at stake, they needed to make critical decisions about key equipment and operations.
Our Empirical Operations partners jumped in immediately, managing the entire vendor selection process from developing RFP documents to walking contractors through facilities and evaluating proposals. But then came the real challenge: deciding where to move a critical production asset.
Beyond the Obvious Choice
The client’s initial instinct was straightforward—choose the location with the lowest installation cost. It’s a common approach: when facing capital expenditures, go with the cheapest option and move on.
But our team recognized this strategic decision was far more complex than a simple cost comparison. This asset relocation would impact the company’s operations and long-term growth for decades. The “cheapest” option today could become the most expensive mistake tomorrow, and thus a strategic approach was required.
Introducing the Pugh Matrix Approach
Instead of rushing into a cost-based decision, Empirical recommended a Pugh Matrix analysis—a systematic decision-making tool that evaluates options against multiple weighted criteria, not just price.
Here’s how a Pugh Matrix works:
- Identify critical success factors beyond just cost
- Weight each factor based on strategic importance
- Score each option against every factor
- Calculate total scores to reveal the optimal choice
The Strategic Process in Action
Step 1: Defining Success Criteria
Working with the client’s leadership team, we identified factors crucial to both immediate success and long-term strategic growth. Cost was important, but so were other factors including:
- Proximity to key suppliers and customers
- Access to skilled workforce
- Future expansion potential
- Regulatory environment
- Infrastructure quality
Step 2: Establishing Clear Performance Standards
Each factor required precise definition to ensure consistent evaluation across all options. We established specific performance thresholds that would guide our scoring process. For example, when evaluating “Cost of Capital Installation” for a project, we defined three performance levels:
- Exceeds Expectations: Installation costs come in below $1.5M
- Meets Expectations: Installation costs are between $1.8M and $2.2M
- Below Expectations: Installation costs exceed $2.5M
This same rigorous definition process was applied to every evaluation criterion, creating objective benchmarks that eliminated subjective bias and ensured all team members were evaluating options using the same standards.
Step 3: Comprehensive Site Evaluation
The team conducted detailed site visits, evaluating each potential location through the lens of our defined criteria. This wasn’t just about touring facilities, it was about understanding how each site would support the company’s strategic objectives.
Step 4: Collaborative Scoring
Using structured facilitation, we guided the client team through scoring each site against every criterion. This collaborative approach ensured buy-in while leveraging diverse perspectives and expertise.
The Surprising Results
The analysis revealed something remarkable: while several locations offered solid options, one site scored significantly higher than all others. Most surprisingly, it wasn’t the lowest-cost option.
The winning location excelled in factors critical to long-term success—strategic positioning, growth potential, and operational efficiency. When these factors were properly weighted and scored, one of the “more expensive” options actually delivered the highest strategic value.
The Impact
By moving beyond a simple cost comparison, our client made a decision aligned with their long-term strategic vision rather than short-term budget constraints. The Pugh Matrix process provided:
- Clarity: A systematic way to evaluate complex, multi-faceted decisions
- Alignment: Consensus among leadership on what factors truly matter
- Confidence: Data-driven justification for strategic investments
- Value: A decision that optimizes long-term returns, not just upfront costs
Your Strategic Decisions Matter
Every major business decision involves multiple factors and competing priorities. Whether you’re relocating assets, selecting vendors, choosing markets, or evaluating investment opportunities, the temptation to focus solely on cost can lead to suboptimal outcomes.
At Empirical, we bring experienced facilitation and strategic thinking to your most critical decisions. Our hands-on approach ensures you have the expertise and tools needed to make choices that drive long-term success—exactly when you need them most.
This blog was penned by Irene Legiec, Operations Partner at Empirical.
Are you ready to move beyond gut instinct and simple cost comparisons? Let’s talk about how structured decision-making can transform your next strategic choice. Connect with Chris Lee, Empirical Managing Partner, at clee@thinkempirical.com.
