Choices. As the economy steps into recession, we all begin to adjust to the choices we need to make. Some have already acted, but many of us are still trying to define the wisest course. Whether you’re a global powerhouse or a main street retail shop, the shifting landscape offers both opportunity and risk. The choices we make will determine whether we thrive, survive, or see our fortunes dive.
How do you make the right choice? Here are five tips.
- Don’t worry about making the perfect choice. We can struggle for weeks or months between similar choices. The truth is, many different choices can be successful. As management guru Peter Drucker said, about 10% of what you do leads to 90% of your results. Focus on defining that 10%.
- Play out the scenario. Considering choices in the abstract makes it easy to overlook concerns that may be obvious in retrospect. Instead, make your choices real. Even if you don’t build a model, you can use your imagination. Ask yourself:
- If I do this, what will my team do?
- How will my customers respond — next month but also next year?
- In what areas will my leadership be most influential?
- How will my competitors react if they see us as successful, or vulnerable?
- What could happen that would make this plan fail, and what might I do to counteract that before it’s too late? For example, have I considered cash flow, not just profit?
Playing out a few likely scenarios for your top options will make you more comfortable with your choices, and better at getting the most out of them when you finally implement your decisions.
- Gather input from multiple sources. The greater the diversity of input in your thought process, the more you’ll be able to integrate options into a cohesive whole. Having a greater variety can also help you improve the realism of your scenarios and risk analysis.
- Be conscious of information trade-offs.
- How much? Deciding how much information you need before choosing is a delicate dance. Information and data can make choices easier and more successful. But just how much better will your decision actually be?
- How good is it?Information, even from reputable and respected sources, won’t improve your decision if it’s not answering the right question. Consider whether your information may be flawed or misleading given the question you’re answering.
Thinking About Information Differently
If Apple had chosen whether to develop the iPod based on consumer surveys, where they probably would have heard we wouldn’t buy one, or had estimated the potential size of its market based on the popularity of other products serving a similar function, like the Sony Walkman and other me-too portable music players, it’s unlikely I’d have an iPod at my desk today.
But Apple realized that consumers are notoriously poor at accurately predicting whether or not they’ll buy something. The company also recognized that consumers wanted things the Sony Walkman couldn’t deliver, so “stealing” the current Walkman market wasn’t an appropriate comparison. Instead Apple looked at its information differently, ultimately making a very successful choice to single-handedly create a new market of iTunes and iPods to drive industry sales, convert PC users to Apple lovers, and become the wolrd’s second largest retailer behind Wal-Mart.
- Consider your options, but then choose. In this environment, this tough choice may be the most important tip, and the most difficult to practice. In our dithering over which is the best decision, or how we can we improve it, we can lose our opportunity to make any good choices at all. The 14th century philosopher Jean Buridan described this common dilemma as a hungry donkey that perishes from starvation while trying to choose between two equidistant but similar piles of hay. Don’t let your wealth of choices paralyze you.
Close That Door Before It Shuts Itself
We all have a compulsion to leave the doors of opportunity open, even when we know we’re damaging our overall success. This desire doesn’t seem to change, regardless of how many other doors are there or how valuable the current opportunity we’re pursuing. In 2004, researchers at MIT decided to see just how strong this compulsion is.
They devised a computer game with, literally, doors of opportunity. Players chose to enter through any of three major doors on the screen. Each knock on a subsequent door rewarded the player with a pay-off: 5.8 cents, 6.5 cents, 3.5 cents, etc. Players’ earnings grew with each knock. When players could knock on whatever door they wanted, their earnings were pretty substantial, at least for college students.
But then the game was changed. Each time a knock was made on another door, the neglected doors would shrink, disappearing altogether after twelve knocks elsewhere.
Players became obsessed with not allowing any door of opportunity to disappear. No matter how successful they were with Door #1, they would frantically shift back to knock on Door #2 or Door #3 before it disappeared.
Realizing that knocking on those doors rewarded them with substantially less money did not stop their compulsion to keep the doors on the screen. Even when the game was changed so that a vanished door would reappear on command, players continued to knock on the less profitable doors to keep them from disappearing — to the tune of about 15% lower earnings. They just couldn’t stand to lose the opportunity of being able to knock on those doors later.
We all want to make the right choices, and as Areily and his researchers at MIT proved, we’re compulsive about not losing out on opportunities, lucrative or otherwise. But these good intentions don’t always lead to good choices. After all, good choices do require good analysis, but they also require the action to make them real.
You’ll never know whether you really made the right choice at the right time, except perhaps in retrospect. By being conscious of your natural tendencies and how they affect your organization, however, can lead you to a more successful determination of when you have all the information you need to act.
Just as Buridan’s donkey didn’t know the piles of hay were equal until he got within sight of them, you won’t understand your choices until you considered the options. Being smart about how you consider them is important. But once that’s done, don’t starve your business with debate over which pile of profit may be incrementally better. Choose one, and make it yours.