(By Mike Michalowicz)
“Gather the information that’s available to you before you make your decision. Trends resurface; history repeats itself; and those who fail to learn from the past end up making the same mistakes all over again. Investigate your competitors and use their successes and failures to inform your decisions. Odds are good that past successes—especially if you add updates, modern improvements—indicate future success.“
Entrepreneurs are famous for making lousy decisions. You know the type—the brilliant guy so wrapped up in his vision that he forges ahead, heedless of the opportunities he misses and unwilling to reflect on his behavior in order to learn from his mistakes. The good news is that we can learn to improve our decision-making skills. We can train ourselves to avoid the obvious pitfalls and improve our businesses’ odds of success with these five tricks:
1. Apply the 10-10-10 rule. Suzy Welch’s rule helps you think through the consequences of your decisions from short term to long term. Ask yourself how you’ll feel about your decision in 10 minutes, in 10 months and in 10 years.
Let’s look at an example: You have an employee who’s called in sick one too many times recently. You’re contemplating letting this employee go. You think it through—in 10 minutes you’ll feel better because you took some action; in 10 months you might have lost the key customer that only this employee could handle properly; in 10 years, you may realize that you eliminated a key member of your team for a momentary frustration. If you find that you’re making most of your decisions for the immediate gratification rather than your long-term business goals, you need to rethink your decisions.
2. Implement a stop-loss plan. Stop-loss is about minimizing risk. The best business decisions frequently involve risk, whether it’s a stock purchase or an advertising choice, and as a business owner, your goal is to limit the losses your decisions can incur. The point is to remove your ego from the decision-making process by establishing your stop-loss provisions at the beginning.
Here’s how it can work: You buy a stock at $20, and you expect that within six months it’ll be trading at $30. You recognize the inherent risk, though, so you commit to sell the stock should its value drop to $18. Or consider the advertising scenario: You’re currently bringing in two new customers per month. You decide to run a print ad, and you figure that if you aren’t bringing in at least five new customers per month (after, say, a three-month trial) that the ad won’t be worth your advertising dollars. Stop-loss forces you to reevaluate your decisions based on concrete data rather than emotions.
3. Run split testing. Split testing is ideal for small-scale, new ideas that you’d like to test before implementing on a larger scale. Take a new print ad campaign. Testing two slightly different versions of the ad offers you the opportunity to evaluate the results and select the best ad for wider distribution.
Split testing works in a multitude of ways—anything that you can test on a limited, trackable basis will work: customer service scripts, email solicitations, even products themselves. If you wonder whether font matters in an ad, test it. Curious about which Web version of a shopping cart is most effective? Take them both for a test drive. The bigger idea here is to make decisions based on the very best information, rather than relying on guesswork.
4. Learn from history. Here, too, the idea is to gather the information that’s available to you before you make your decision. Trends resurface; history repeats itself; and those who fail to learn from the past end up making the same mistakes all over again. Investigate your competitors and use their successes and failures to inform your decisions. Odds are good that past successes—especially if you add updates, modern improvements—indicate future success.
Think about the Ford Mustang. How many years of success has this iconic American automobile enjoyed? I looked it up, and the answer is 49! Nearly half a century of success made possible by learning from what worked and introducing incremental, modern improvements. You can learn a lesson from the Mustang. Look around you, and look behind you—to the successes and failures of history.
5. Sleep on it. Here’s perhaps the simplest lesson of all, and it’s all about separating your decision making from emotion. Assuming that a decision isn’t time sensitive, the right decision today will be the right decision tomorrow—even if it’s missing the emotional charge we derive from making a snap judgment.
Here’s a small-scale example: I want (but know I don’t need) a cookie. I give myself a finite amount of time—say half an hour—before I get to have that cookie. In half an hour, I get caught up in my work, the cookies are cleared from the table, and I don’t ever think about that cookie again. Time inevitably makes us better decision makers. Decisions based purely on emotion are far more likely to be unwise than decisions made with a cool head and plenty of good information.
In short, we’re better business owners if we make the right decisions, and the right decisions are nearly always made with a clear head, using good information and keeping long-term goals in mind.
“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”