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.”  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 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.
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 the base your decision-making criteria on assessing whether more research and analysis is appropriate.
 The 40-70 rule, Steven L. Anderson, undated, http://integratedleader.com/articles/40-70rule.pdf