Jack Nicholson is known for the famous line: “You want the truth? You can’t handle the truth!”
This is often truer in business than we care to admit. We love to hang on to our hunches and beliefs, and we even twist facts and ignore reality to provide continuing support for an argument. Similarly, we invest lots of time and money on an idea, and then refuse to acknowledge alternatives.
I keep running into well-intentioned and well-informed clients who ignore this simple guidance. This is especially true in identifying target markets and pricing. All these exotic new restaurants (that frequently close in a few months) forget hamburgers and pizza dominate restaurant sales. If you aren’t aware of Amazon’s pricing, you are simply missing the lead competitor (like department stores have for years).
There are lots of ways to “handle the truth” and at least consider the unknown. These include: objective third parties, market research, small tests, and analytical thinking. For example, requiring a proposal and reference check for suppliers can provide a balance to the euphoria that frequently follows a great sales pitch.
One of the key issues in facing reality is understanding expectations. We want to believe we can be next billionaire, but ignore some of the barriers to get there. Here are some easy tools to create a balance in your search for truth and help face reality:
1. Beware of confirmation bias
Don’t we want to believe that our ideas are terrific, and thus, focus more on their potential for success? Of course, we do. The challenges associated with the ideas are sometimes given a smaller amount of our attention; it’s just human nature. We bias our analysis towards successes and tend to ignore negatives. One business that has benefited greatly from this concept is the casino business.
Take the time to research and consider alternative solutions and analysis. Consider what could go wrong, what mistakes could occur, and have contingency plans.
2. Develop, test, measure, and adapt
Many plans, forecasts, and proposals are done in a static format, with one-dimensional analysis and results. Often, they are flawed, because we live in a more dynamic and interactive world. For example, branding, marketing, pricing and operations all must be viewed as an integrated program rather than separate and isolated activities. Similarly, businesses need to have alternatives at the ready, and processes in place to adapt. Mistakes will occur. Remember, Thomas Edison tested thousands of light bulbs before succeeding.
3. Understand your goals
Understand your business goals. In particular, really understand your market analysis and competition, as well as how your company is different and why your customers should care. Are you focused on long-term growth or quick profits?
Marketing programs vary in cost and impact. In general, paid searches can have immediate results, while social media is more long-term and branding-orientated. While testing alternatives is a great strategy, ensure that you are focused on priorities that you can execute, and that will have the most potential.
When and how will you be profitable? Only about 10% of startups and small businesses succeed and survive to their fifth year. The ones who did survive developed flexible models to measure and compare alternatives. Startup Connection has developed a very simple model that lets you evaluate alternatives in less than 48 hours.
Consider the following:
- Do you have the expertise and excellence to support your programs?
- Do you have the resources to survive the “slower than expected” phase, or, on the other hand, are you ready to pounce when the business needs to expand?
No matter the size of your business, understand the risk and uncertainty of your decisions. The process needs to be continuous in order to analyze, measure and adapt to changing parameters, programs, markets, and risks.
4. Hire good people and continue to test, measure, and adapt
Make certain the people you hire have real expertise and will do what you require. Hiring with the goal of saving money usually results in mediocre outcomes at best. You get what you pay for.
In summary, the truth should help you make good business decisions. Success can come easier by continuously challenging our assumptions, reviewing alternatives, and evaluating our progress. In particular, don’t be a damn martyr! Encourage different perspectives, outside resources, and constant assessment.
Dr. Bert Shlensky has an MBA and PhD from the Sloan School of Management at M.I.T. He served as the President of WestPoint Pepperell’s apparel fabrics business and CEO of Sure Fit Products. He has provided counseling to over 2,000 clients, and he currently works with select start up and small businesses. Call today for your free 1-hour consulting session (914) 632-6977, or visit www.startupconnection.net.