Rarely do companies find themselves with no alternatives. On the contrary, companies have so many choices that it makes it difficult for them to decide. Therefore, most businesses bet on a random initiative and hope that it would yield the desired outcome.
Is there a better way to make decisions?
I don't think that there is one silver bullet to help enterprises make better choices. However, a framework always helps us better the odds. Here is a framework I use.
Here's a way to use this grid.
If we are working on an initiative with a low chance of success but a possibility of a high impact, we are gambling. These outlier opportunities are the Black Swans. They can disrupt an industry and result in exponential growth. But, we need to assess whether we are putting all our eggs in this quadrant. If we are, then we are playing a risky game. You may not get a second chance if you fail in this quadrant.
On the other hand, if you are only investing in initiatives with high success- high probability opportunities, beware. Everyone is aiming for this quadrant. Suddenly, the odds of your success drops down. Think of it as advertising on FB. When someone used it first, they were successful. It was too easy to make money. But then everyone started doing it. It became more and more expensive to acquire qualified leads.
It is best to avoid investing in something having a high chance of success but a low positive outcome. It is not the most optimal use of our resources. But many times, in the initial stages, good initiatives start this way. They then transition to the quadrant of high probability - positive outcome.
Everyone wishes to avoid the fourth quadrant. It's a no-brainer. But, look at all your current initiatives. I guess that most of them would fall in this quadrant. The reason? We want to play is safe, too safe.
Metrics:
List all the initiatives you are working on currently.
Use your judgment and add them to the appropriate quadrant.
If you find initiatives in the fourth quadrant, make appropriate changes to move them to other quadrants.
It is best to have a balanced portfolio of initiatives. You should have a few out-of-the-box high risk/high return initiatives. But the bulk of your initiatives should fall in Quadrant 2 and 3.
Subodh
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