How to gain an unreasonable advantage
I was chatting with a football manager the other day and he was explaining to me that there are three key elements to successful players – the first two being fitness and ball skills; both essential, though abundant among so many aspiring stars. However, he paused before discussing the third element. It’s really about the difference between winning and losing, he said. He told me that it’s all very well to be super fit and have great skills, but what a player actually does in any given situation is down to a split second judgement call that will ultimately exploit or waste the collective fitness and ball skills of his colleagues around him.
It struck me that this is directly analogous to business; with fitness and ball skills relating to work ethic and capability in any given field. Apply hard work and skills to the wrong decision and it’s no different than driving a car, very capably, at high speed but in the wrong direction. No matter how great your driving skills and how committed you are, you’ll never get to where you want to go because the decision as to which way to travel, was wrong.
Invariably, within every company I’ve ever been involved, whether operationally or as an investor or advisor, I see that the majority of management focus is on the immediate issues within that business - generally speaking, primarily the ‘fitness’ and the ‘ball skills’, which are of course essential ingredients within any team. However the business scenario is significantly more complicated than that of football (I know that statement will upset a few sporting aficionados, but bear with me). You see, there’s a formula for the shape and size of a football team and while its playing order can be varied slightly, it’s an implicit understanding that it will only be 11 players on the pitch. The decision making on the pitch is still the difference between winning and losing, but it’s all within a given criteria that’s already been decided for all competitors in the same domain.
Whereas in business, the team size and the various positions within it have no specific formula. The arena in which you compete often has no definitive boundaries and winning and losing does not have the luxury of a simple score line. This means that it’s not just decision making when playing the game that’s important. Prior to getting onto the pitch there are myriad decisions as to what game is even being played and how best to approach it.
Effective decision-making, time and again, provides an unreasonable advantage over your competitors; it shouldn’t, but the prevalence of personal agendas, company politics, fear of being wrong means that it really does. It’s implicit that you need a team with hard working, capable individuals, but even starting with the shape of the team, the timing of the recruits, where to focus their skills – their impact is all down to making the right choices and in so many cases, the wrong choices are made.
For me, the ability to make effective decisions comes down to one thing – clarity. It’s the element that I see most people lack, both in their personal and professional lives; the clarity to really know what it is they are aiming for and why. This clarity seems to be lost for the same reason time and again; day-to-day and week-to-week goals, challenges, crises all get in the way. Despite best intentions, we all seem to get sucked into working in the business rather than on it. Yet clarity, through working on the business, leads to confidence and enables progression through decisiveness, as opposed to lack of clarity producing confusion and procrastination as a result.
As any company director knows, leading an organisation involves making judgement calls constantly, both internally and externally. The question should therefore be asked as to whether effective decision-making is something that can be learned or if it is only innate. Is this advantage only afforded by a few? Returning to the football analogy, it’s understood that some players are ‘gifted’ with flair and an intuition that is inexplicable – they just ‘know’. This doesn’t mean they have to work any less hard, as they have to maintain exceptional fitness and ball skills, but they do start with an advantage over others who have to learn through experience and practice, how to make the best choices in any given situation. But by no means are most players gifted; the majority have to learn to excel when it comes to making the right decision.
This is no different than the business scenario. Making effective choices is a natural talent for some and for others is something that has to be learned. Unlike on the pitch though, in the business context there is nearly always the opportunity to discuss the next move, seek advice and contemplate outcomes. If you don’t have sufficient experience in any given scenario, you can interrogate someone who does. And every time you do this, you add to your own repertoire of responses to a given scenario. The greater your experience, or access to experience, the greater your clarity, the more effective your decision
Context is also another fundamental ingredient when considering what is the most appropriate next move. But directors often only consider the tactical situation in hand in terms of their need to deliver month-end and quarter-end performance, as opposed to making the ‘right’ decision irrespective of short-term pain. Context can only really be appreciated if there is a clear business strategy and direction in which the business is heading – not just sales growth, but real direction. For those few with the discipline to work ‘on the business’ as well as ‘in the business’ and who have the luxury of a clear vision, the context may be clearer, though there still needs to be a level of courage applied to make a choice that’s effective for a ‘bigger picture’ even though it may cause difficulty in the near term.
Two frequent examples of this type of dilemma are choosing to lose certain members of staff or even customers. Making tough decisions with resources and clients that are holding your business back is often something that many shy away from, particularly when they are performing to some degree. Those directors with clarity, from both experience and a good understanding of context against a given plan, will be able to make bolder decisions and progress in a way that others can’t. How often have you finally removed a partially performing employee, only to realise that the resulting solution and success should have been something that had been implemented many months sooner?
‘Grasping the nettle’ is key to growth and success. And looking back, no matter how hard I worked at building a company and no matter how good I was at my job, the pivotal moments were based entirely on key decisions that materially affected our journey. I also remember struggling at several important ‘junctions’ on the company journey. These included the buy-out of our partnership with joint venture partners, moving our headquarters (1500 miles away) to access a higher calibre talent pool and be in better proximity to strategic customers, and raising $5million from a private equity partner. Although I was a driven and passionate leader, these decisions not only required the clarity that I have been talking about regarding our direction but they also required a broader level of experience and a courage that was hard to muster alone. These were decisions that could prove catastrophic, yet they would also be the key to success if the decision logic proved true.
My advantage in these scenarios was borne out of a totally clarity of what I and the company needed to achieve, coupled with the knowledge of my limitations and access to the experience of a non-exec/mentor who could validate my thinking to enable bold and decisive decisions to be made.
Unlike the football analogy where the decisions are made in isolation, ours was a management team that could outsmart competitors and engage clients through making the right decisions based upon a collective clarity and team spirit that is often missing in many businesses small to large. Understanding my own limitations enabled me to arrive at the right decision each time, which would have been thwarted if I’d felt the pressure (within my management team) to innately know the answer at each juncture.
In two other businesses in which I was involved, an early decision had to be made regarding the MD and his focus. In both situations, the MD was effectively the lead salesman responsible for generating the ‘lion’s share’ of the company revenue – often the way with companies with twenty or thirty staff. Yet building an effective organisational structure into which we could grow (for both businesses), would require a greater definition as to the MD’s focus. One MD felt that he was the only resource that could sell such a complex proposition and therefore a day-to-day general manager should be recruited in order to enable him to focus primarily on sales. And the other felt that he should return to general management and recruit a proper sales person.
Ironically, I felt they were both incorrect in their judgement, because in both cases, neither could see with any real clarity. The first MD who felt he was the only one who could sell was only saying this because he had no experience of building a proper sales team that could generate leads, fill the pipeline and ‘tee up’ a corporate opportunity for a senior level resource to then make an appearance. He couldn’t see that in fact, 70% of his sales function was not only work that could be done by a resource on half his pay or less, but it was work that someone on less than half his pay would undertake more effectively! Another benefit of removing him from the early sales cycle was to see a massive simplification in the sales messaging; as an engineer by trade, it was in his nature to make this complicated sale even more so. His belief that a salesman couldn’t sell the offering was increasingly self-perpetuating.
Whereas the other leader, looking to step back, had underestimated the level of seniority required at an early stage in the sales cycle for his particular offering (given virtually all the enquiries were ‘warm’ referrals) along with the need to be able to train other sales people as they were recruited. In addition, he was a poor general manager!
Making the right decision for both, by stepping back to establish with clarity, the most effective structure with which to progress, is the difference between winning and losing.
Ensuring that you are in a position to constantly make effective decisions is without a doubt, a key contributor to success or failure. I meet too many people who seem to have all the right ingredients for success, yet the ‘noise’ is significant and the ‘signal’ seems to get lost. Putting yourself in a position to have clarity, to find that signal, dispense with the noise, and to act with the right decision logic – that’s going to gain you an unreasonable advantage over most.
This article was published in Issue 68 of Decision Magazine