Archive for November, 2013

4 Common Mistakes In High-Stakes Decisions

Tuesday, November 26th, 2013

I saw a business owner do and say some things in a meeting today that made me think of an article I’d read recently.4 common mistakes business owners make in high-stakes decisions

The company is developing a product which will be the first of its kind. It’s for a market the company has never played in. And the product will fill a need the users don’t know they have.

Challenges don’t get much more complex or high-stakes.

The owner is a smart, well-educated professional.

She’s also a born entrepreneur. All the signs are there. A vision that, if she’s right, will transform an industry. Passion that is breathtaking and inspiring. An understanding of how to use technology that is unique and innovative.

She has a willingness to take risks that would cause lesser mortals to hesitate. But also an apparent refusal to consider that she could be wrong.

Which brings me to the article. It’s a well-researched piece on why high-stakes decisions go wrong. It describes 5 mistakes that account for the vast majority of poor decisions.

And I saw 4 of them being made this morning.

The first mistake is an inability or failure to understand the complexity of the problem.

This owner has been successful in the past and is convinced her vision is transformational. Perhaps as a result, she seems unable, or unwilling, to grasp that she has to overcome 3 separate marketing challenges – new product, new market, unknown need – each of which is risky and complex. And she’s taking on all 3 at once!

The second is failure to consider alternatives. Her marketing company laid out several different alternatives for getting the message to the target market.

They recommended using social media because the results of a campaign can be measured quickly and accurately. The owner insisted on traditional media because of her conviction it would be most effective.

The third mistake is failure to consider opportunity costs. The marketing communications costs could be covered, the owner said, from an existing revenue stream.

But because that revenue has been flowing into the company for some time, the funds are probably being used to cover existing expenses.

Diverting them to the new opportunity may appear to be a “freebie”. But the company could face additional costs if it has to increase its line of credit to pay existing expenses.

The fourth is underestimating the challenges involved in execution. At least the owner is thinking it will take 6 or more months to launch the new product.

But that’s not going to be enough. And I’m not alone in my estimate. Another experienced supplier told the owner the same thing. She did, however, appear to pay attention to that warning.

Is this project doomed? No it’s not.

The owner has her ego under control, she’s not irrational and is willing to listen. Her enthusiasm is what’s carrying her along for now.

And that’s understandable because she has a great idea!

I’ve changed a few details, by the way, to respect those involved.

You can read the full article here.


If you enjoyed this post you’ll also enjoy A Vision – Is It Worth Investing The Time?

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Playing It Safe – The Enemy Of Business Growth

Tuesday, November 19th, 2013

It’s pretty much universally agreed that taking too much risk is a bad thing.Playing it safe and avoiding risk could impede your company's growth

That doesn’t, however, seem to prevent business owners and their management teams continuing to do it.

When large, publicly-listed companies – e.g. Lehman – do it, the results make headlines. When smaller, privately-owned, companies do it, the results are the same but they’re buried in the business bankruptcy figures.

So you would think that being cautious where risk is concerned must be a good thing.

And it is – but only to a point.

Extremes of anything are bad. And taking too little risk – or avoiding risk completely – is no exception.

Another way to describe taking too little risk is “playing it safe”.

The danger with playing it safe when things are going well is that for a long time – it could be years or even decades – it gives the appearance of being sensible.

The results are good, better still they’re consistently good. It’s human nature to begin to enjoy – and expect – the lifestyle that good results brings. Why would anyone risk losing that?

But taking too little, or no, risk is a slow, steady killer. Ever present but never visible, it’s another example of the boiling frog syndrome. A danger that’s so easy to ignore.

Then, when revenues and the bottom line begin their inevitable decline, owners and management teams often do the wrong things.

They reach for quick fixes to restore the status quo. Let’s train the sales guys. Let’s get a marketing campaign going. But that doesn’t work.

What does work is understanding that the status quo has gone. What does work is challenging what the business does and for whom.

Arguably, leaders are paid to do that on an ongoing basis. Even – in fact particularly – when things are going well.

The company now has to take risks. And, depending on what its financial landscape looks like, it may have to take big risks. It is undoubtedly in for a lengthy period of adjustment during which the results will not be consistently good.

So how do business owners, division heads and their management teams avoid this?

It sounds simple enough. Continuously challenge the temptation to play it safe.

Even when things are going well, ask tough and thoughtful questions. “What will happen if we lose 1 or 2 major customers tomorrow?” or “What if the competition finds a way to reduce costs by 30%?” Just because the likelihood of something happening is low, don’t overlook the impact if it does.

Then encourage everyone else to ask tough and thoughtful questions about how and why they do things.

Make thinking critically and taking risks the norm. It’s better for companies to take well-considered, relatively small risks, which go wrong than to become, and remain, complacent.

Read about how one CEO went about it here.


If you enjoyed this post you’ll also enjoy Strategy, Productive Paranoia and Boiling Frogs.

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6 Things That Get In The Way Of Results

Tuesday, November 12th, 2013

Recognize any of these?6 things preventing the business owner from achieving their desired results

1.  The business owner, or division head, and his/her team are fully occupied dealing with day-to-day problems. So, even if there is a plan for growth, no one makes sure it’s followed.

2.  A meeting is held every year and a really good plan is developed. But just doing that takes forever and exhausts everyone. So there’s no time or energy left to figure out how to turn the plan into results.

3.  Money and people are allocated to projects which, it is believed, will deliver short-term benefits. But those benefits, if they occur, may not support long-term growth.

4.  Personalities get in the way. The stronger ones make most noise. Their opinions dominate the company’s direction and their areas get the most resources.

5.  “It’s just a job.” The employees don’t know how, or if, the business will grow. So they’re not committed, long term, to the company. And probably wouldn’t help – even if they knew how.

6.  It’s important our area (e.g. finance) looks good. So there’s no reason to share information with, or help, other areas (e.g. sales).  Anyway, if the company doesn’t achieve its results we don’t want to be blamed.

Apparently, recent studies have revealed these 6 things are still preventing companies delivering the results their owners want. I say “still” because they’re not exactly new.

One reason that they still exist is that they’re invisible. Or, if not quite invisible, they are at least hard to see – if they’re occurring in your company.

It’s unlikely that all 6 are present, although some are related to, or caused by, others. For example #1 could result in the short-term focus in #3 or the disengagement, caused by poor communication, in #5. And #’s 4 and 6 are both the result of a poor culture.

We see them often. This, despite the fact that countless blogs, articles and books have been written and webinars, podcasts and seminars delivered about them.


Because they really are hard to see, even invisible, if you live with them every day. The good news, however, is that they, like a broken bone, can be fixed.

Sometimes it takes an outsider’s pair of eyes to spot them. And a willingness on the part of the insiders – the owner/division head – to believe what the outsider is saying and to do something about it.

But, until that happens any, or all, of those 6 things could come between you and the results you want.

You can find a more academic description of the barriers here.


If you enjoyed this post you’ll also enjoy More Heat Less Chill.

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6 Tips For A Better Planning Meeting

Tuesday, November 5th, 2013

We’re well into the fourth quarter, and many business owners are either arranging, or already holding, their annual planning meetings.For better planning meetings, implement these 6 tips

The web is buzzing with blog posts and articles offering timely advice.

One post has a list of questions that simply must be asked. Another talks about ways to make strategic planning relevant. And a third offers tips for better strategic planning.

Who has time to read them all?

So let me summarize what I think are some useful, practical points.

1.  Ask your team 2 questions:

o  First ask why your customers choose to do business with you. Listen to the answers. Are they all the same? If not, what does that suggest?

o  Then ask how you differ from your top 3 competitors. Follow up by asking if you are recognized for it. If yes, how? If no, why not?

2.  Initiate creative discontent. Even when things are going well – particularly when things are going well – you should create discomfort with the status quo. Ask questions that shake up the existing order. For example, what will we do if we lose 3 key employees tomorrow?

3.  Challenge orthodoxies – the things we’ve always believed to be true. If Howard Schultz hadn’t challenged the conventional wisdom that consumers wouldn’t pay more than $2 for a cup of coffee, Starbucks wouldn’t exist.

4.  Use controlled tests to validate assumptions. Most assumptions are based on things we’ve read or heard. At best they’re an informed guess. So, rather than bet the farm on that, appoint someone to run a limited scale field test to check the assumption out in the real world.

5.  Ban fuzzy language. Here are some examples of “planning speak”. Phrases like “Leverage our World Class Operating Capabilities” or “Reshape Our Pricing Strategy to Effectively Drive Demand” are completely meaningless.  As are words like “leverage”, “synergy” and “robust”. Ban them all.

6.  Ask other provocative questions. The point of a planning session is to get different points of view out in the open so that they can be vigorously discussed. So ask, for example, “What are the top 2 or 3 things that must go right for this strategy to work?” and “If we pursue this strategy, what are we deciding not to do?”

A final thought. If you intend to really challenge your team you have to listen carefully to what is being said and respond quickly. You can’t do that while worrying about the next step in the process; whether or not you’re running on time; and if all of the participants are engaged and participating.

Use a trained facilitator to do that for you. It’s what we do.

You can find the full posts from which I extracted these points here, here and here.


If you enjoyed this post you’ll also enjoy It’s THAT Time of Year Again…….

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