Decision making in an experimental environment - is it possible?
In the next part of our rapid evolution series, Zara Whysall discusses the issue of effective decision making whilst trying to remain experimental as a business.
The third tension we have established as part of rapid evolution is fearless experimentation vs. sharp decisions.
A plaque in Amazon headquarters famously reads: "There's so much stuff that has yet to be invented. There's so much new that's going to happen...this is still Day 1 in such a big way." This statement has fuelled Amazon's long-term focus on invention, even at the expense of short-term profitability. The reason for this was explained in a letter to shareholders, where Jeff Bezos added: "Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1."
How do you fend off Day 2? Bezos emphasises that staying in Day 1 requires you to "experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight." Indeed, research shows that organisations fail when they stick loo long with products or service attributes that are in decline, allowing others to come along and leapfrog them.
Think big, start small. Have an action-led approach to planning, which involves starting small and testing and experimenting with new options regularly, underpinned by the mindset 'the faster we act, the faster we learn, and the faster we succeed,' To encourage an experimental, risk-taking approach throughout the organisation, leaders must reward effort, not just success. Growth leaders are 40% more likely to have explicit incentives to reward risk taking in their teams.
As with all the tensions, however, the divergent and exploratory nature of experimentation must be balanced with sharp decisions. Bezos refers to these as high-quality, high-velocity decisions. A key distinction between Day 1 and Day 2 companies, he argues, is that Day 2 make high-quality decisions, but make them slowly. Letting time slip away through prevarication sets you back. To get, and stay, ahead of the curve, time should be treated with the same amount of respect as capital investments.
In mid to large size organisations a low tolerance of risk is common due to the perception that there's more to lose than there is to gain. Effective growth and transformation leaders, on the other hand, see that potential for evolution and growth is everywhere. They resist the temptation to obsess about protecting current performance, particularly at the expense of new, even potentially threatening, growth opportunities. The focus is on continually moving towards new opportunities as opposed to protecting existing market share. Elimination of existing forms of value through innovating to generate new opportunities is what economist Joseph Schumpeter called "creative destruction."
Our in-built loss aversion also means that leaders must resist the temptation to simply try to do more. As it's impossible to move at pace3 on everything, all at once, sharp decision-making is needed to determine the critical things that will really make a difference.
In our next blog, we'll be taking a look at the fourth tension, enlightened empathy vs. leap of faith.