Posts Tagged ‘high-stake decisions’

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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