The phrase “smart mistake” is a contradiction in terms at first glance. A mistake is something that is misguided or wrong, and usually unexpected. Therefore, it feels impossible to plan for making smarter mistakes. No company or individual intentionally plans or tries to make mistakes, but mistakes still happen.
The role of management is to reduce the possibility of mistakes through a carefully crafted business plan. A key part of this responsibility is assessing the risk of each action and determining which action has the lowest cost to correct if a mistake occurs. I suggest that there should be two components to the repair cost of this process. The first is the actual cost of capital to undo the mistake, and the second is an estimate of how long it will take to unwind. Own.
management team can Evaluate this common repair cost first. To make smarter mistakes, you need to evaluate the risks of each discussed alternative in advance. The results of the risk assessment must be added to the calculations to determine whether a company's initiative should be approved. Add risk to business discussions about strategic alternatives by actually scoring which alternative to pursue has the cheapest and fastest chance of remediation if something goes wrong. It may also include doing.
This is also an important preliminary part of the process. You probably have a score of 1 to 5 for the cost of remediation, and a score of 1 to 5 for the time it takes to cancel the initiative. Scoring ensures that your team keeps its eyes open when, for example, accepting an initiative that is rated 5 for cost of remediation and 5 for time required to resolve if the initiative fails. Masu. Mistakes cannot be completely avoided, but the relative cost of failure can be known and taken into account.
A healthy, high-functioning senior team can easily add to its calculations of alternatives an assessment of the risks inherent in each idea if it blows up, along with an assessment of the cost of repair if the idea fails. What can you do? Here are three actions that can help companies move to a more proactive approach that evaluates efforts based on risk and cost of remediation.
1. Separate “one-door” and “two-door” decisions.
Some new vocabulary needs to be added to the corporate lexicon so that senior teams don't get bogged down in the huge process of having each initiative under consideration go through a robust and time-consuming evaluation. Initiatives should be grouped into groups that can be easily reversed. This means it won't be too costly or time-consuming to undo an initiative if it proves to fail. Amazon calls this action two-way door evaluation.
Two-way door decisions can be easily reversed. Walk through the door to see if you like it, and if you don't, come back. These decisions can be made quickly and even automated. Two-way doors, by definition, are easy, quick, and inexpensive to repair and require little management involvement. On the other hand, the one-way door decision is a decision that cannot easily be reversed. It costs a lot of money to cancel, and it takes a long time to cancel. These decisions must be made carefully and must rise to the most senior management level for discussion and decision. This group is paid to make the most difficult decisions and is the most experienced when it comes to these evaluations.
2. There is a designated champion.
Every announced initiative needs a champion, an announced owner, who is responsible for the success or failure of the initiative. That person presents and defends the business case being discussed. They manage the presentation, evaluation of alternatives, and respond to any concerns expressed by the team. They must be objective because they know they are taking risks for the initiative and all eyes will be on them if the initiative stumbles. They know that the entire team will discuss, evaluate, and discuss every aspect of this initiative and that the owners will be happy to follow up and see it through to success.
3. Have a designated skeptic.
Here's the kicker. As part of the process, there should be a “designated skeptic.” This is another announced member of the team who will be responsible for making a calm and objective judgment about each option presented by the owner and reporting any skepticism about the risks of each option. This title circulates throughout the senior team, so every member of the team becomes a designated skeptic from time to time. Risk of failure is an important factor to assess, and you need someone who can raise risks not covered in the champion's presentation.
Building insurance against smarter mistakes into the process is really worth implementing. It's win-win-win-win for companies.
1. The first outcome is that team members below the most senior level begin to learn the process used to evaluate strategic alternatives by the senior team. They are able to organize and implement the same processes as the top-level team, so even if they are promoted, there is nothing new in evaluating processes for potential initiatives and they can quickly adapt to their new role. Masu. This is a great addition to your leadership growth and development plan.
2. The second benefit is that the entire organization begins to consider the risks associated with everything and plans that add significant new accents to the formal approach to focusing on risk. Across the company, all team members are beginning to understand that the risk of failure is acceptable but will be carefully considered.
3. A third benefit is that it allows the senior team to focus only on the most difficult, most intractable, and most important parts of the company's business plan, freeing up valuable time for other tasks. .
4. The ultimate victory is that a new part of the company's culture foundation is created and implemented. This new location recognizes that a) mistakes are part of any business, and b) the company will ultimately make smarter mistakes through smarter processes. Masu. Not a bad message for a company to send to its team members.