Recently I wrote about the many innovation styles that I’ve encountered as a consultant in the world of business strategy. Perhaps the most recognizable is the Cowboy or Cowgirl – those people (or companies) that love coming up with a new idea. The excitement is contagious and often leads to immediate action. Invest! Patent! Hire!
That full-speed ahead mentality can be immensely rewarding. After all, doesn’t society love the first in line? But jumping quickly into a new idea is not always a sound business strategy and it defies the personal style of many very successful business people.
Let’s talk a minute about personal style and your level of confidence when deciding whether or not to implement a new project or start a business.
How much information is sufficient?
Some people with a new idea will jump into implementation when the idea is, well, merely an idea. While this might be brash, is waiting for complete information and 100 percent confidence the best way to go? Surprisingly, no. Attempting to gather every bit of information can be paralyzing for an innovative business.
From a personal style standpoint, I propose most of us fall somewhere in-between the “lunger” who surges forward at the inception of an idea and the “safety netter” who wants months or years of research before executing a major decision.
What is the “correct” amount of information and analysis?
Colin Powell, retired four-star general in the United States Army, says that “every time you face a tough decision you should have no less than forty percent and no more than seventy percent of the information you need to make the decision.” [1] In other words, the 40—70 rule states that you should have enough information that you are not shooting from the hip and not so much information that opportunities have passed you by while you collected minutia.
Have you given any thought to how much and what type of information you will need before moving forward with an innovative idea? Of course, the relevance of the new idea should be weighed and time and money adjusted proportionately.
In another military comparison, Gilles Hilary, INSEAD Professor of Accounting and Control and Paul-Antoine Croizé, former French Army Captain, writes that knowledge is power in Eight Ways the Military Manages Uncertainty. In a world where data is abundant, they write that the military’s first important step is to size up what leaders do and do not know, then filter known information to assess risks and options. The 4-step process is clear: direction, collection, analysis and dissemination.
As someone who provides research services, I was glad to see the emphasis that they placed on gaining knowledge! Certainly, the military is likely to need lots of knowledge before landing a platoon on the beach or sending aircraft over an unfriendly area and I would expect this to be standard operating procedure (SOP) to minimize deadly mistakes.
It was also rewarding to see that the military approach to assessing risk does not stop with simply gathering information. Nor is information withheld. Analysis and dissemination are key steps and should be factored into important business decisions on your agenda, I believe.
Should you hesitate?
Yes! As we can learn from the military process, part of minimizing risk is to know what you don’t know.
For example, how many of you have specifically and systematically sought out the competition and learned how they operate? Sadly, I know that most people I meet have skipped this early and important step.
What kind of analysis makes sense?
What level of uncertainly will you accept before jumping into a new venture? Or, should we ask what level of uncertainly will your financier accept before making a significant investment?
It is never possible to determine with 100 percent confidence that a new venture will succeed, but it is possible to determine what level of information gathering and analysis makes sense for a major business decision.
Some examples:
If you “just want your name on the box” like toy creator Andy Forrest who I wrote about after the Chicago Toy Fair, you don’t need to spend a lot of time or money on research. Simply start something that you enjoy more than whatever you doing right now. Voila!
Oh, did you want to make money? Perhaps you should consider these tools:
• Failure Modes and Effect Analysis (FMEA) is a great way to assess the probability of failure. Usually created in spreadsheet form, it is a great template for analysis. But it is likely to be overkill to take the time to fill it in completely while in the early stages of assessing opportunities for a new product or a new company.
• A better option is Lean Startup, known and trusted by many people to help assess their risk versus reward.
• Stage gate, also known as phase-gate, is a project management approach that involves dividing tasks and decisions into parts, each separated by a “gate.” This approach allows early decisions to be less time and cost-intensive while pushing more complicated decisions down the road. A project won’t move forward until the appropriate manager signs off at the gate.
Of course, there are many more approaches to gathering and evaluating information for informed decision-making. I encourage you to keep these key points in mind:
• Know your and your organization’s decision-making confidence levels.
• Spend the most time and compare notes on largest decisions and scale down for smaller ones. Even better, set up formalized parameters, such as money at risk, to guide everyone’s expectations.
• Find out what you don’t know and base your decision-making criteria on assessing whether more research and analysis is appropriate.
[1] The 40-70 rule, Steven L. Anderson, undated, http://integratedleader.com/articles/40-70rule.pdf
Picture credits:
Omaha Beach Landing Craft, U.S. Army Signal Corps (Wikimedia)
Colin Powell, Russell Roederer (Wikimedia)
Oh my. It may be dangerous to ask “how much information is sufficient” just as the Republican Senate prepares to cram through a healthcare bill that was developed in secret, that seems so far to be worse then the House version, that almost every health organization opposes based on CBO impact analysis of the House version, and that will get no public hearings, no floor debate, and a greatly accelerated period for offering amendments.
The political climate is distorting my view and makes me think the answer to the posed question may depend partly on the decision comfort of those deciding, and the actual end objective. In the case of Congress, is it to fulfill a campaign promise? Is it to shore up a failing healthcare system? Or is it to reward wealthy donors with huge tax cuts? I guess understanding the objective leads to conclusions about how much information is sufficient for changes to 1/6th of the U.S. economy.
Sorry for the rant, but thanks for the article.
Hi Wayne. Yes, the current political climate is a great analogy for this topic. Our political leaders have a tough decision ahead of them as there’s a lot of money riding on getting the answer right, if such a thing actually exists, with little chance for a quick do-over in the near future. Of course, the risk here for our these leaders is distraught voters heckling them in town hall meetings, not reelect them to office, or, worse yet, carrying out violence against them.
Even with all the discussion, statements of facts, and the soon to be announced input of the Congressional Budget Office, the decisions made on this data will certainly be difficult.
Appreciate the article. My decision making mantra is: decisions are part knowledge and part assumption. The less knowledge the higher the assumption and consequently the higher the risk in making a bad decision. I’ve worked with a number of “cowboys” who were not able to grasp the need for the analysis aspect in order to increase the knowledge to assumption ratio. Consequently they end up realizing too late in the process they were missing key information that impacts not only the current effort but detrimentally effects longer term efforts as well. The consequences and cost often far exceed the time and expense it would have taken to simply do the research up front.
Anita, Thanks for your comment! There’re a lot of cowboys (or cowgirls) in the world that overlook some very rudimentary questions, I think their excitement overtakes using common sense.