How to make better business decisions.
Every business owner has to make tough decisions with uncertain outcomes. That is the nature of the job, and it is as true today as it was thirty years ago. But there are two big differences between decision making then and decision making today.
Decisions happen faster and on a larger scale than in the past.
First of all, information flows much faster today. Thanks to Twitter, Facebook, YouTube, and other social media, news that took days or weeks to propagate around the globe thirty years ago, now requires mere minutes. And once that information is released, people come to conclusions and react to it faster than ever before. In addition, the volume of information stored and processed today vastly exceeds anything even imagined thirty years ago. But often that data comes with a price: inaccuracies, inconsistencies, and lots of room for interpretation. More data usually leads to more questions.
Data overload leads to bad decision making.
The overwhelming amount of data — flowing at faster and faster rates from more and more sources — often leads to poor decision making or indecision. The impact of those decisions is, to a certain extent, a function of business size. Large businesses have more checks and balances, and more resources, than small businesses, but they also generally have deeper cash reserves, greater access to capital, and more inertia. The end result is that small businesses are much less resilient than larger businesses. A few moderately bad decisions can easily destroy a small business, whereas giant multi-nationals often withstand billion dollar blunders and still come back.
Examples of making bad business decisions.
Examples aren’t hard to find: Coca Cola’s roll out of “New Coke”, the disastrous BP oil spill in the Gulf, Microsoft’s refusal to believe the Internet was a threat (first with Netscape, then later with Google), GM’s thirty year focus on lobbying and marketing instead of innovation and customer service, etc. Each of these companies came back, sometimes seemingly from the dead.
Tips to improve your decision making skills.
Keep track of what is going on in your industry.
You can’t consistently make good decisions if you don’t know the facts. Subscribe to industry news sources, regularly read the business section of one or two major newspapers, and attend major industry conferences or trade shows.
Expect the unexpected.
No matter how much analysis and planning you do, you cannot predict the future. Things happen. So your plans should be flexible enough that you can adapt to the unexpected, without throwing everything off course.
Focus on what really matters.
Deciding what matters cannot be a casual decision; it has to be thought through carefully, and it should align with your company’s strategy (you do have a strategic plan don’t you? It doesn’t have to be 200 pages, but you do need something.) The design of the new office furniture is probably not critical to your company’s survival, but responding appropriately to your largest customer’s flaming review on Twitter probably is.
Don’t fall into the trap of relying exclusively on a few trusted insiders to get your facts. Talk to customers, vendors, partners, suppliers, and even competitors. Force yourself to get outside your comfort zone once in a while.
Seek out help when you get in over your head.
If you think you know everything, you are doomed to fail. If you don’t have the time or resources to delve into a particular issue, or don’t have the technical background, or just want a second opinion, then by all means bring in outside experts to help you.
Be decisive, but not hyper-reactive.
This is probably the hardest of all. You don’t want to over-react and make a bad situation worse. But then again, you don’t want to hold back and over-analyze every possible contingency to the point that you miss the boat.
Everybody makes mistakes, and no matter how hard you try, you will probably end up doing something over the next year that leaves you scratching your head five years from now. But you might be able to limit the damage by and following some of the suggestions provided here.