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Stick, twist, or bust.
I am fascinated by decision making. As a founder with everything on the line, I was once impulsive and impatient to drive momentum. After getting punched in the face enough times, I became more thoughtful about how I decided things. And got a little better. I’m still impatient but have methods of decision making I now follow. I’ll share them here then talk about three key market entry decisions:
My Decision-Making Process
When do I need to make the decision? The answer to this question often gives more time, allowing me to further de-risk a decision by finding out more information that can be useful.
Decide by Doing
I start things to observe how they would unfold. If you have an idea your company should be doing something different, then start doing it. Get some data, improve your view of the problem. Then throw a fake finished version of the story at the smartest people you know and see how they break it. E.g. You think your company should charge monthly rather than annual revenues. Just try it on a few customers, or via test pages and collect some data. Don’t ask permission. Then model a full solution with some assumptions and present it to your smarter colleagues, mentors, peers. Have them break it, disagree, find its holes. Don’t do it in a way you overcommit. But in a way that gets you some data. Writing press releases on a potential product/service with a partner is another good way. Present it internally and to the partner and see reactions. Work out what it would take to do it, and the size of the prize, and how you could execute it successfully. Test your hunches.
How Big is It
Ask early in the process how much money can be made, how big is the issue. Have seen countless conversations that end very quickly once we ask: How big is it?
Whatever you want to decide, flip the question on its head and argue both sides. This helps you navigate the problems as you will spot issues and move ahead knowing key points to manage. For example, I should enter the US market vs I should not enter!
Thinking in Grey
Thinking in grey works well with inverse thinking. We often feel decisions are binary, black or white. But there may be options we haven’t considered and other options along a scale. E.g. Could we hire someone part-time, or a sales agent, or send one of our team along for a month to the US before entry to gather information. There are normally more options than we initially think of.
Inverse Upside vs Downside Risk
The upside is 100 x the downside, and the downside can be managed. Even if the probability is relatively low of success, I like these options and look for them. One of our CEO’s recently did exactly this in trying a new type of partnership that didn’t quite deliver. However, the tech work put in can be reused. And the deal would have rocketed new revenues. Worth a shot.
Work out the value ( $ or time saving) of a good result and the probability of success. This is your expected value. It brings a lot of clarity on whether something is worthwhile.
Here is an example: What sales resource should I hire to achieve $1M of sales?
Senior Exec. | $200K salary | 40% probability of hitting target | $1M target | $400K EV
Junior Sales Exec. | $50K salary | 50% probability of hitting target | $400K target | $200K EV
We can hire 3 senior sales exec for $600K cost and an expected value of $1.2M (3 x $400K)
Alternatively, we can hire 5 junior execs for $250K cost with an expected value of $1M (5 x $200K EV each)
Both solutions allow us to answer the question. One has a higher cost but more potential upside. Obviously, sales price, the complexity of the process, target customer type, and other criteria affect the decision. Expected value helps inform the bets clearly. But it only informs a decision in isolation. We also need to think about our future timeline and overall strategy.
How much time should we spend exploiting our current assets such as products and customers vs. exploring new areas and opportunities? Time available, competition, and where the business/product is on its growth curve dictates the activity for each. This helps me decide to focus on our core products and allow them to drive growth vs. innovating to grow. It’s a good thinking frame for CEOs.
Thinking deeply about the core problem I am making a decision on gives me clarity. It makes sure I am solving the right problem.
For example: Why do we need to hit $1M in sales? A: To show our product has demand in the US market. Why does $1M show that? A: We need to show growth potential for our next round? Why can’t you do that in your home market? etc. You can see how thinking about a problem from first principles, trying to find the core truths, can change the decision landscape and move the decision to something more useful for the business to solve.
We are never acting on perfect information when we make a decision. Within the time I am making a decision, how can I get more information to move the decision to an 80% probability of success vs 50%? Goes hand in hand with the decision timing above.
I love thinking about does a decision gives me a different set of options that improve my overall position. I think of it as moving to a higher vantage point, where I can then see more paths ahead. And I add that to the value of making a decision.
Is it a decision I can pull back from vs. one that involves irreversible commitment? The answer changes how quickly I move forward and test ideas. Large companies become slow because they start to treat every decision like it’s a long-term commitment.
I am a very visual thinker. So drawing out the options around a problem, together with expected values, helps me gain clarity on choices.
See source by clicking picture
What to Spend Time On vs. What to Work On
I think about how my time can create the most impact, then let that prioritize my work for the day/week. Not what work must I get done. It means I ignore a lot of smaller admin stuff and focus on work that has a bigger upside.
Go with the Flow
I think how a business/product lives within a wider system, with multiple influences, across customers, competitors, partners, regulation, etc. Do the trends in that system support your decision? Where is the world moving to? This is useful for example in deciding to partner in a new channel. I expect virtual worlds to be a big part of online in the coming years. So if opportunities come up to distribute products in this area, I will probably move earlier than most. As I recognize the flow to this area and can stand out by being on a new channel early.
Success is Living to Fight Another Day
Never bet the farm. I think of success as buried in a large stone, I have to sculpt by chipping away at all the things that don’t work without risking the whole thing breaking. A big part of growing businesses is finding all the dead ends as quickly as possible. Success is then the only thing left.
I don’t have to think about this as it’s embedded in my personal identity. I hold myself to a higher account on all things than anyone else can. No one can touch me. Honesty, integrity, good intentions. This shapes every decision and removes any chance of being grey that could cause regret. This level of clarity on values improves every decision. My mother, a fiery Irish Italian, embedded it in me too:
“We take no sh*t Lee, and we never lower ourself in this family.”
Ok some market entry thinking now!
CEO Market Entry Decisions
As a CEO deciding how to enter & grow in the US you have some big decisions to make. Every future possibility is uncertain, with varying chances of success, value, and importance. How you decide is a good indicator of your ability to succeed in the long term. Even good decisions, with a 95% probability of success, sometimes miss. Instead, the 5% failure risk hits you, and you don’t get the result. Sh*t happens.
Should You Enter the US Market?
Different, Relevant & Sustainable
You need to be different, relevant, and sustainable. I can’t say it better than Prof G (take a listen here). You need to be 10 X different ( faster, better, cheaper) than competitors, and your product relevant to the market and world as it works today, the world should be moving your way, and you have some sustainable advantages (cumulating advantage, network effects, IP, long term contracts, etc). If you don’t, then the answer is no.
If you can’t commit enough resources to get the job done, taking on local well-funded incumbents in their backyard, the answer is no. A rule of thumb, if you can’t sustain the US operations for three years if it only delivers 50% of its plan, the answer is no. If it’s going to be last in line vs. your home market for central resources the answer is no. If you can’t make it self-sustainable within two years, where it’s not reliant on home country management time to make important decisions, the answer is no. Don’t turn up to a gunfight with a toothpick. This shouldn’t stop you from exploring, kicking the tires, sending explorers in your team to size and understand the opportunity, experiment, or try low-risk options. But for these remember you are in research mode. Your not full guns blazing. And at some point, you will have to commit.
Should I hire local talent, export homegrown talent, or acquire a company? Yes to all three. Depending on the size and scope of your company and its ambition and market timing. If organic growth is your method. Then treat the US as an important part of your business. Send key senior team members. Support them quickly with local talent. You need people who understand the market to synthesize with people who understand your culture and unique approach. Either option on their own is not as strong, so do both. If you can’t commit key team members, you are better looking at licensing or acquisition. If you have more resources and can afford an acquisition, this makes a lot of sense as you start your entry with some existing momentum.
Competitive uniqueness, talent, and resources are your three key considerations for entry. Question the Questions from Octopus Ventures breaks those decisions down in great detail. You can read it here.
Some great quotes I like, that have shaped my own thinking on decision making:
Every time you make the hard, correct decision you become a bit more courageous and every time you make the easy, wrong decision you become a bit more cowardly. If you are CEO, these choices will lead to a courageous or cowardly company.
While you don’t want to punish people for taking good risks, not all risks are good. While there is no reward without risk, there is certainly risk with little or no chance of corresponding reward. Drinking a bottle of Jack Daniel’s then getting behind the wheel of a car is plenty risky, but there’s not much reward if you succeed. If someone missed a result, did she take obviously stupid risks that she just neglected to consider, or were they excellent risks that just did not pan out?
The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers
The right decision made in the wrong time frame is a bad decision. Here, then, is a basic architecture of executive decision making we found in our research: Determine how much time you have to decide, whether minutes, hours, days, months, or even years. Stimulate dialogue and debate—guided by facts and evidence—to determine the best options.
“How much time do we have before our risks change?”
BE 2.0 (Beyond Entrepreneurship 2.0): Turning Your Business into an Enduring Great Company
Mathematics is the extension of common sense by other means.
A basic rule of mathematical life: if the universe hands you a hard problem, try to solve an easier one instead, and hope the simple version is close enough to the original problem that the universe doesn’t object.
How Not to Be Wrong: The Power of Mathematical Thinking
First principles is kind of a physics way of looking at the world. . . . You kind of boil things down to the most fundamental truths and say, “What are we sure is true?” . . . and then reason up from there. . . .
the most important assumptions to de-risk first are the ones that are necessary conditions for success and that you are most uncertain about.
If you’re trying to be as objective as possible when making a decision or solving a problem, you always want to account for your frame of reference.
Super Thinking: The Big Book of Mental Models
Gabriel Weinberg and Lauren McCann
Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out: the quality of our decisions and luck.
It doesn’t take much for any of us to believe something. And once we believe it, protecting that belief guides how we treat further information relevant to the belief…. the smarter you are, the better you are at constructing a narrative that supports your beliefs, rationalizing and framing the data to fit your argument or point of view.
All decisions are bets.
Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts
Look-Then-Leap Rule: You set a predetermined amount of time for “looking”—that is, exploring your options, gathering data—in which you categorically don’t choose anyone, no matter how impressive. After that point, you enter the “leap” phase, prepared to instantly commit to anyone who outshines the best applicant you saw in the look phase.
People tend to treat decisions in isolation, to focus on finding each time the outcome with the highest expected value. But decisions are almost never isolated, and expected value isn’t the end of the story.
Upper Confidence Bound algorithms implement a principle that has been dubbed “optimism in the face of uncertainty.” Optimism, they show, can be perfectly rational.
Algorithms to Live By: The Computer Science of Human Decisions
Brian Christian and Tom Griffiths