Three Strategies For Making Smarter Mistakes
By Gary Kusin
Successful innovation will always have failed ideas along the way. The key is maximize the value of those mistakes, and minimize the risk.
Mike’s note: Gary Kusin is the cofounder of GameStop and Laura Mercier Cosmetics and, as former CEO of Kinko's, led the successful sale of the company to FedEx. I have added some skills you can use to amplify the strategies Gary suggests for making decisions on innovation and avoiding or learning from mistakes. 6 minute read. Let’s gain Gary’s insight first:
The term “smarter mistakes” is an oxymoron at first blush. A mistake is something that is misguided or incorrect, and it is also usually unanticipated. Thus, it feels impossible to plan for making a “smarter mistake.” No company or person ever knowingly plans or wants to make a mistake, but still, mistakes happen.
The role of management is to reduce the likelihood of mistakes through a thoughtfully crafted business plan. An important part of that charge is to evaluate the risk in each course of action and determine which courses of action have the lowest cost of remediation should mistakes occur. I would suggest that for this process, the cost of remediation should have two components: the first would be actual capital cost to reverse the mistake and the second would be an evaluation of how much time the unwind would take, which has a cost of its own.
A management team can evaluate this general cost of remediation at the outset. Making smarter mistakes requires adding an upfront evaluation of the risks of each alternative initiative being discussed and debated. The output of the risk assessment must be added into the calculus for determining whether any company initiative should be approved. Adding risk into the management debate of strategic alternatives might also include an actual scoring of which alternative pursuit has the cheapest and fastest likelihood of remediation should something go wrong.
This is also a critical up-front part of the process. Perhaps there is a 1-5 score for cost of remediation and another 1-5 score for the time it would take to undo the initiative. Scoring ensures the team’s eyes are wide open when accepting an initiative that is, for instance, rated a 5 for remediation cost, and a 5 for time needed to unwind if the initiative fails. While mistakes can’t be avoided altogether the cost of failure can be known in a relative sense and taken into consideration.
How can a healthy and highly functioning senior team easily add into their calculus of alternatives an assessment of the risks inherent in each idea, should it blow up, along with a cost assessment of remediation if the idea fails? Here are 3 actions Gary says that can help companies move towards a more proactive approach to evaluating initiatives based on risk and cost of remediation:
1. Separate ‘One-Door’ and ‘Two-Door’ Decisions.
In order for the senior team not to become bogged down in a big process where each contemplated initiative goes through a robust, time-consuming evaluation, a couple of new vocabulary terms need to be added to the corporate lexicon. The initiatives need to be sorted into one group that are easy to reverse, meaning they are not too costly or time consuming to unwind when it is realized that the initiative will fail. Amazon calls this action the Two-Way Door assessment.
Two-way door decisions can be reversed easily. You can walk through the door, see if you like it, and if not, go back. These decisions can be made fast or even automated. Two-way doors by definition are easier, faster and cheaper to remediate and don’t really require top management involvement. A One-Way Door decision, on the other hand, is a decision that cannot be easily reversed. It will cost an enormous amount to reverse and take a long time to get reversed. These decisions need to be made carefully and should rise to the most senior management levels for discussions and decisions. This group is paid to make the toughest decisions and is the most experienced for just these assessments.
2. Have a Designated Champion.
Every announced initiative should have a champion, an announced owner with accountability for the success or failure of the effort. That person presents and advocates for the business case being discussed. They own the presentations, the alternatives assessment and answering each and every concern expressed by the team. They know they will wear the risk for the initiative so they must be objective as all eyes will be on them if the initiative stumbles. They know the entire team has discussed, rated and debated the initiative from all angles and was satisfied that the owner could follow up and follow through to succeed.
3. Have a Designated Skeptic.
Here is the kicker. As part of the process, there should be a “Designated Skeptic,” another announced member of the team whose role is to be coldly objective about each alternative being presented by the owner and to report the skeptical view of risks of each alternative. This title cycles through the entire senior team so that every member of the team, from time to time is the designated skeptic. Risk of failure is a critical component to evaluate and there needs to be a person who might bring up risks not covered in the champion’s presentation.
Building insurance that creates smarter mistakes into the process indeed is worth the effort to install. It is a win-win-win-win for a company:
The first win is that team members below the most senior level begin to learn the process used for strategic alternatives assessment by the senior team. They get to organize and install the same processes as the most senior team, so when they get promoted, nothing about evaluation of potential initiatives process is new and they settle into new roles more quickly. It is a great addition to leadership growth and development plans.
The second win is that the entire organization begins thinking about plans with a new, important accent on the attendant risks of anything and the formalized approach to bring focus to risk. Throughout the company, all team members begin to understand that risk of failure, while accepted, is weighed carefully.
The third win is that the senior team gets to focus on only the toughest, most intractable and most critical parts of the corporate business plan, leaving precious time for other duties.
The final win is that a new leg of the corporate culture stool is created and implemented. This new leg recognizes that a) mistakes are a part of any business and that b) this company, through smarter processes will end up creating smarter mistakes. Not a bad message for a company to send to its team members.
Mike’s Input: To enhance the success of the process Gary outlines, employ these skills when discussing risk, alternatives, and visioning the future of “one door decisions.”
Set Ground Rules for Discussion. You don’t want the discussion to turn into a personal debate between the champion and the skeptic. Meetings to minimize mistakes and failure of one door decisions should inspire trust and open respectful listening and discussion that leads to collaboration even though there may be differences of opinion.
Employ Good Questioning. Whether you are the champion, skeptic, or on the decision making team, use these three types of questions to stimulate good discussion to make sound decisions. Some examples:
Open Questions. What do you think? How do you see things? What are your thoughts on this project?
Consequence or Impact Questions. What will be the impact/effect/consequence if we move forward? What might be the benefits of this course of action? What roadblocks can you envision?
Lift or Remove Restrictions Questions. If budget is not a constraint, how might this generate successful alternatives? Suppose we must complete this project in less than three months, what must we do to make this happen?
Determine “Must Have” and “Want to Have” Criteria. Setting criteria first before generating alternatives is a powerful tool that can reduce mistakes when moving forward on “one door” decisions. Many times team members rush into suggesting alternatives without first determining the criteria. Have the team do this step first. In your personal life, you have done this when buying a home: you set the criteria first, i.e. number of bedrooms, location, parking, facilities, then go look for the property.
The combination of Gary’s strategies and good communication skills can reduce mistakes and failure of the “one door” decisions you and your team make.
To view the original article by Gary, go to this link.
Michael J Griffin
CEO and Founder of ELAvate
A Leader Who Fails Forward
michael.griffin@elavateglobal.com
+65-91194008 (WhatsApp)