How to evaluate your project?
Qualitative Analysis:
Delphi Method, Intuition and more

As every bookie knows instinctively, a number such as reliability – a qualitative rather than a quantitative measure – is needed to make the valuation of information practically useful.
Hans Christian von Baeyer

In this series of articles about investment projects, we have discussed the project finance model and project evaluation. In the previous article, we focused on quantitative analysis techniques. This time we will deal with the qualitative analysis of projects.

This article is related with Behavioral Economics and to give it the rigor of Psychology, in Steering Bird, online advisers in business direction, management and finance, we have worked together with Tu Mejor Tú, metas clatas para el éxito.

Qualitative Analysis

The worse thing that contemporary qualitative research can imply is that, in this post-modern age, anything goes. The trick is to produce intelligent, disciplined work on the very edge of the abyss.
David Silverman

In the Project Evaluation article, we indicate that qualitative analysis, as defined by Investopedia, is one that “uses subjective judgment to analyze the value or prospects of a company based on non-quantifiable information, such as management experience, industry cycles, robust research and development”

In other words, qualitative methods do not focus on the calculation of indicators about the project or investment, but go further and analyze them from the subjective context, using a mixture of experience, knowledge, judgment, etc.

Some of the most common qualitative analysis techniques are:

Panel of  Experts

An expert is a man who has made all the mistakes which can be made, in a narrow field.
Niels Bohr

The panel of experts consists of a group of specialists with extensive knowledge and experience in some aspects of the project to be evaluated. They meet to discuss the project and express a group opinion or judgment regarding the project.

Regarding the above, What is an expert? He/She is a person who knows in depth the field where the project will be developed (market, functional area, specialty, etc). In addition, he/she is a person who must be recognized by others, who can provide judgments, based on his/her knowledge or experiences, to be able to anticipate some, mainly scenarios or risks, that could affect the project.

The panel of experts should be multidisciplinary and have specialists in various matters that affect the project: engineering, construction, legislation, finance, communities, environment, etc. The quality of the final report will be closely associated with the judgments and independence of the experts.

Delphi Method

Over the entrance to the temple at Delphi was a famous inscription: KNOW THYSELF! It reminded visitors that man must never believe himself to be more than mortal – and that no man can escape his destiny.
Jostein Gaarder

The Delphi method is a prospective technique based on the panel of experts. It was developed as a methodology to obtain information (mainly quantitative) about the future.

The Delphi method, named after the Oracle of Delphi (Greece), was developed in the 1950s by the Rand Corporation to forecast the impact of technology on warfare.

The method consists of a group of experts who anonymously respond to questionnaires in several rounds. After each round of questions, a facilitator provides an anonymous summary of the group’s answer. Experts are encouraged to review their previous answers, considering the answers of the rest of the experts. The method is iterated until reaching the criteria defined at the beginning: number of rounds, obtaining consensus, stability of the result, etc.

Delphi method is used for forecasting in general and is widely used for project evaluations.

Delphi Oracle - Source: (Jeff Stapleton)


Intuition does not denote something contrary to reason, but something outside of the province of reason.
Carl Jung

In recent years, special attention is being given to intuition as an element to evaluate a project.

First of all, What is intuition? Gerd Gigerenzer, in his book “Gut Feelings: The Intelligence of the Unconscious” (2007) indicates that intuition refers to “a judgment that appears quickly in consciousness, whose underlying reasons we are not fully aware of, and is strong enough to act upon”

How is it associated with project evaluation? Intuition is the ability to interpret a situation and understand the sensitivities that could affect the outcome of the project. It corresponds to the set of subconscious thoughts that are used in our decision-making process, and that is based on past experiences, knowledge, logic, emotions, intellect, conscience, circumstances, etc.

Intuition can help project evaluation, especially in interpreting quantitative data.

The Outside View

Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.
Daniel Kahneman

Once your financial model is finished, we recommend that you take a break and look at it “from the outside”. This is, with a critical sense and independence, trying to review it without the paradigms and psychological anchors of the person who has made it. In general, whoever makes the project wants the evaluation to be feasible and tends to be too optimistic about their projections.

The Outside View is a concept introduced by Daniel Kahneman to explain certain phenomena that occur when estimating the future of a project. Kahneman indicates in the book “Thinking, Fast and Slow” (2011), that sometimes we adopt a vision from within to estimate the future: “We focused on our specific circumstances and searched for evidence in our own experiences

When you prepare the project, prior to the evaluation, you have more information about your own project than about other similar ones. This inevitably leads you to create a psychological anchor and you think that your project is good… or the best one. Based on the above, Daniel Kahneman and Amos Tversky introduced the term planning fallacy, which consists of the unrealistic tendency of our plans to be in the best possible scenario, even when they can be improved. We talk about this in the article Advices for preparing the budget.

Qualitative Analysis: Synthesis

Truth is found neither in the thesis nor the antithesis, but in an emergent synthesis which reconciles the two.
Georg Wilhelm Friedrich Hegel

What type of analysis to use? Which one is better than the other? There are no golden rules in this. However, as Investopedia points out: “Qualitative analysis contrasts with quantitative analysis, which focuses on the numbers found in reports like balance sheets. However, the two techniques will often be used together to examine a company’s operations and assess its potential as an investment opportunity”

The project evaluation is a complex matter. Behind a project there is a lot of work and expectations about the future. Sometimes, the projections of the project are less than the desire that the entrepreneur has that it can work. There is overconfidence, psychological anchors, illusions, etc.

In every project there will be variables that are excluded from the project evaluation model. For this reason, the results of the quantitative analysis are necessary, but they are not sufficient to make a conclusion. Similarly, the results of the qualitative analysis are useless without a prior numerical analysis.

To illustrate the above, you cannot go to a bank or an investment fund to ask for money only by indicating that your intuition tells you that the project will be profitable. On the other hand, probably the person in charge of financing, once they read your numbers, will rely a lot on their intuition to approve or reject the funds.

The important thing is to define a method that understands both views. Once the financial model is built, you should already know what indicators you are going to calculate and what qualitative analysis you are going to carry out. What we have exposed to you is just a sample, there are many forms of quantitative analysis and qualitative analysis, even lately, narratives have a lot of weight in the perception that we form of the project.

Remember that, at the behavioral level, we are less rational than we think and our judgments and decisions are affected by heuristics and biases. We’ve written about them in other articles.

We suggest that you carry out an evaluation of projects with quantitative and qualitative elements, emphasizing the independence of the evaluation with respect to the previous processes.

We are Steering Bird, online advisers in business direction, management and finance. We specialize in business analysis, control and analysis of investment projects, results analysis, processes of budget and forecast, etc.

Contact us if you need help. We invite you to learn about our services and read our articles.

This article has been written in conjunction with the team of Tu Mejor Tú, Metas claras para el éxito. We invite you to visit their website, know their services, articles and to contact them if you need their help.

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