While there is a massive amount all of us can learn about business from a MBA program, I have found that two lessons I’ve learned from my exposure to these programs have been incredibly fruitful in helping me manage strategy and tactics while growing a business and navigating through both good and difficult times.
Don’t be Married to Your Business
If you haven’t learned about the Sunk Cost Fallacy , I recommend you read over the linked site. Just open it in a new tab. It’s ok, I’ll be here when you get back.
Basic gist of this fallacy goes as follows “the more you invest in something, the harder it is for you to stop investing in it.” We are all guilty of this. That significant other you spent over a year longer than you should’ve trying to keep the relationship together when you knew it was long over. That degree you finished because “well, I’m already 50% of the way through it,” and then proceeded to follow an entirely different career path in which everything you learned has been tangential to your current life. Even the business you’ve been working on for years, but never got any traction with.
When you are working on a business plan, or developing a business, you will find only after you have invested a lot of time, sweat, money, blood and tears into it that, unfortunately, your original vision was not that good. At which point you have a sticky situation, should you keep investing in the idea, or is it time to spin things down? I have seen many, many people stick to an idea long past it’s sell-by date, and the history of business is littered with business folks who went to the grave still trying to get that “great idea” to start to pay off.
Here’s the thing, sometimes your idea does suck.
Yep, sometimes it just isn’t as great as it felt it would be once it is built, and all the polishing and reconfiguring of the original idea might make no difference at all. It just is not going to take off as it exists.
So what does that mean? Well, luckily there isn’t a holy covenant between you and your company or your business direction. It is not a mortal sin to decide to drop that original business idea. In fact, that is the sign of a good business person.
YouTube, originally started as a dating site. Yep. Their selling point was that you could upload videos of yourself so people could get to meet the “real you,” before deciding to date. At the time, it seemed like a great idea. Dating sites were hot and making money hand over fist. However, in a very short period of time, it was clear that it was not the brilliant idea the original creators thought it was. Now, they could’ve superglued themselves to the original idea and simply tried to polish it further, making the video interface cleaner, making the matching algorithm better, a whole list of minor perfunctory changes. They could’ve decided that they were married to the original idea, ’til death us do part.
But they were good business people, and decided instead to concentrate on what was working and what wasn’t. Don’t get me wrong, they tried almost everything to get stuff working. They even went onto Craigslist and offered women $20 a video to join and upload videos. Still no one came forward. So they said, screw it, let’s let people upload anything they want, forget the dating aspect. The first video ever was this one. YouTube took off and they sold themselves to Google for 1.65bn. If they were married to the dating site idea, they likely would’ve gone out with a puff of smoke, but because they were willing to divorce themselves from that idea and see what else worked, Chen and the other original team are doing quite well for themselves today.
Stick to your Guns
In short, this rule means: Don’t give up so quickly, just change your tactics and keep trying. The fact you built the tech to begin with and the fact that you’ve invested so much in it means that there is something there. However, there are so many external factors that lead to your plan not working. In some cases, the market simply is not ready yet for your product. In other cases, the strategy you are using to sell you product is not properly targeted to the sector in which you would do best. In a surprising number of cases, it’s simply bad luck in finding the right investors, employees and clients. If you stick with it, you are more likely to succeed.
As my father always told me as a kid, “You miss every shot you don’t take.” I hear that some other great hockey player may have said this as well… Might’ve played for the Oilers for a while. Since they haven’t won a Stanley Cup in a long time, I’m guessing that’s why the name evades me, probably Kelly Buchberger. Kellys always have great ideas.
However, I can hear you all screaming at your phone: “Doesn’t this rule fundamentally contradict the previous rule?” Oh, I can see why would think that. The previous rule says that if something isn’t working, you shouldn’t continue to bury money into it. That’s the entire point of the sunk cost fallacy. However, I am not saying you continue doing something that is not working. I am saying you should look at what you have already done, learn from it, and adapt accordingly. Do not give up now that you have learned so much from lack of success. You should look at what you have built and then go, what can I do with what I have built.
You know what doesn’t work.
Which means that the category of possible actions that will work is smaller and easier to choose from. Sometimes the pivot is as major as what happened with YouTube, where the whole model was dropped, but the technology was kept. They stuck to their guns, the technology they had developed that worked and worked well. They got rid of what didn’t work, the original business idea. In the end they were very successful.
Take the chance, invest in the technology, build your ideas, but be willing to fail fast and pivot. If you are not getting traction with your current strategy, there is nothing wrong with changing tact. In fact, that is how most of largest businesses today have got to where they are.