The Opportunity Mirage: How to Spot When A Rose Is Not A Rose.

Is that great looking opportunity a mirage?

Sometime last year I had a conversation with a CEO who was frustrated by the poor performance of his company’s U.S. subsidiary. Sales were down and the management was disappointing. None of this was surprising since they were in a highly competitive market and offering little unique value.

After some discussion, I suggested that it might be time to shut down the subsidiary and focus elsewhere where the company was stronger. The CEO hemmed and hawed and finally confessed. “You know, the United States is such a huge market. I just can’t believe that there’s no room for us there.”

A few months later I read in the papers that the U.S. subsidiary had defaulted on its loan terms and their bank was freezing their credit line.

This CEO was no dummy. The parent company was a shambles when he arrived and he was responsible for huge improvements. He trimmed the labor force and outsourced manufacturing. And he opened this U.S. subsidiary.

But when it wasn’t working, why couldn’t he see that the opportunity was a mirage? Why couldn’t he see that this rose wasn’t a rose?

More below…

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Why Defining Strategy Is A Waste of Time – and What to Do Instead.
By Dov Gordon
http://tinyurl.com/qpegn
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Continued…

The field of behavioral economics offers some explanations for why the best and brightest amongst us are liable to trip over the wires in our own brains. Here is a brief overview of just three of our tendencies.


1. Overconfidence and over-optimism. Confidence and optimism give us the gall to venture out and start a business in the first place. But they can also drive us to base our plans on unrealistic assumptions about the marketplace or our own capabilities.

2. The status quo bias – or the “endowment effect”: According to Charles Roxburgh in The McKinsey Quarterly*, this tendency gives people a strong desire to hang on to what we already own. The very fact that I already own it leads me to perceive it as more valuable. “Richard Thaler tested this effect with coffee mugs imprinted with the Cornell University logo. Students given one of them wouldn’t part with it for less than $5.25, on average, but students without a mug wouldn’t pay more than $2.75 to acquire it. The gap implies an incremental value of $2.50 from owning the mug.”

This bias, according to McKinsey research, makes CEO’s reluctant to sell businesses, amongst other things.


3. Misestimating future hedonic states. We are bad at estimating how good or bad we will feel if our situation changes. We tend to expect it will be worse or better than it usually turns out to be. In truth, “People adjust surprisingly quickly and their level of pleasure (hedonic state) ends up, broadly, where it was before.”


Dov Gordon’s CEO Thought-Provoker™ Questions:

i. Have you or anyone on your team recently expressed strong confidence in something when the evidence is in fact inconclusive, neutral or indicative at best? If you’ve decided to act on this confidence, have you at least prepared thorough contingency plans should your assumptions be proven wrong? (Perhaps go back to basics?)

ii. Has your organization resisted making changes that must be made – perhaps due to fuzzy fears or excessive concern for what might be? (Status quo bias. Misestimating future hedonic states.)

iii. Do these first two questions, when taken together, strike you as something of a paradox?

*Read more about these and other ‘flaws’ in our brains and how they affect our strategic thinking at The McKinsey Quarterly. “Hidden Flaws In Strategy” by Charles Roxburgh. Registration is required, although at no charge.
http://www.mckinseyquarterly.com/article_page.aspx?ar=1288&L2=21&L3=37&srid=253&gp=0#foot9

Quick Decisions: A Sign of Good Leadership?

A good leader makes quick decisions, right?

It depends. In a crisis, decide fast. Otherwise decide more slowly, utilizing all the time available.

Rudy Giuliani, in his book “Leadership” writes that “Even though leaders should take as much time as available to make decisions, the process of making the decision should begin immediately. If a decision is due in five days, the time to start researching and considering the matter is now, not four days on.”

As soon as you realize a decision must be made:

a. Determine the window of opportunity. “By when does this decision need to be made?” You will often find that you have more time than you thought. Ensuring that the decision is made within this timeframe helps avoid the opposite problem: ‘analysis paralysis.’

b. Begin immediately to clarify 1) your objectives and 2) the options and alternatives that can help you reach your objectives. 3) the risks associated with each alternative.

c. Encourage debate amongst your team. Ask tough questions and challenge them. Don’t take sides until the last minute when you are ready to decide.



Story: Colman Mockler and the Gillette Razor: Plastic or Steel?

In the early 1980’s Gillette was losing market share to Bic’s plastic throwaway razors and the company needed to decide how to compete.

Many in the organization believed that Gillette should compete head-to-head with their own lines of disposable razors. Others felt the company should invest millions of dollars to develop superior metal razors.

For nearly two years CEO Colman Mockler let his people argue their positions. They debated the facts, the trends and other information. Mockler refused to take sides.

Finally, he decided: Gillette would invest in the development of sophisticated metal razors. Taking all the time available helped him deeply understand the dynamics. Mockler’s decision led directly to the development and legendary success of Gillette’s “shaving systems” like the spring-mounted sensor and the Mach 3.


Dov Gordon’s CEO Thought-Provoker Questions:

i. Does decision-making take too long in your organization? Or, conversely, do people fail to utilize all the time they really have available for decision making?

ii. Do you ever fall into the trap of listening to the last or loudest voices, placing too much weight on individual factors or making “decisions” that people aren’t really committed to acting on?

iii. Do team members openly debate the facts and the factors – or are people afraid of stepping on someone’s toes?

xxx