We concluded long ago that all successful businesses are not purposefully planned. Some are, for sure. Others seem to have somehow stumbled upon success, like winning the lottery.
When we looked closer at some of these “lottery wonders”, we noticed something unexpected. Oftentimes it was a stroke of good fortune, or, as some of the owners might boast, a single source of spontaneous brilliance, that eventually led to the company’s overall success. Without that single event, the company likely would not have enjoyed the success it did.
These events often began as an inspiration or a small idea with no defined outcome. Sometimes they worked and sometimes they didn’t.
We are big proponents of encouraging the development of these spontaneous ideas. There are just too many examples, in almost any business, of unforeseen fortune arising from seemingly meager ideas.
The evolution of these ideas into successful business activities mimics Darwin’s theory of evolution. In this case, however, new ideas are vetted by the marketplace, and the “fittest” are the ones that survive.
In other words, we try things out, with no real assurance of success, and then see if the marketplace likes what we did. This is stark contrast to the conventional notion that careful and accurate market research must be done before launching a new product or service (we’re certainly fans of good market research, we just don’t think it’s necessary for every new idea).
This notion is a very useful tool to managers, since it frees them from the perceived requirement that they somehow must anticipate successfully their every business decision. In fact, many managers are intimidated by the idea that they must be highly creative or inventive in order to create the “next big thing” or that they might somehow be punished for making a mistake.
Instead, it is actually useful if you consider your ideas to be “market mutations”. These ideas are untried, outside your normal way of doing business, and perhaps even without any market research to justify them. They are, in essence, simply ideas that you think might work – they’re experiments.
For example, you might like to develop a complimentary product or service to your current offerings, or try to enter a new market with a customized product, or develop a brand new product for use by your current customers. You know, however, that this will require some money, people, and time that could be spent on your current business instead of on this new idea.
Now, here is where some discipline comes into the picture. You know from experience that you don’t want to bet your entire company on some hair-brained new idea (Despite the fact that there may be some rare and legendary companies that did just that).
But you might be willing to incubate these new ideas, as long as you establish some guidelines for success. So here are our guidelines:
- You must be able to manage the activity
- The costs of the activity, if it fails, must be financially digestible
- You must establish budget and schedule guidelines to manage the activity
- You must be comfortable with the risk/reward relationship for the activity
Managing the activity You must have at least a minimum knowledge of how to manage the activity with your existing expertise. If you lack this knowledge and expertise, you must include in your budget and schedule the means of acquiring it – perhaps through an outside hire. You will not allow your core business to suffer while you attempt to learn how to manage an activity that is beyond your capabilities or while you expend excessive time to managing crises and “putting out fires”.
Financially Digestible Costs The activity should be an acknowledged “company experiment”. In the event that the experiment fails (which it will, in many cases), you have the financial robustness to absorb the costs. In such a case, you attempt to learn whatever you can from the experience and ensure that you don’t repeat those mistakes (it’s ok to make mistakes, just ensure that they’re unique).
Budget and Schedule The overall company, or specific departments within the firm, should be given budget authority to conduct their experiments within a specified schedule or deadline (you can’t run the experiment forever). Thus, the firm creates a budget, a plan, designed to absorb these costs. In effect, these activities are internal research and development efforts, and you expect only a percentage of them to become successful.
Risk/Reward A convincing case must be made that the potential rewards associated with this activity are justified by the risks. The person proposing the ideas knows that they don’t know much (that’s why it’s an experiment in the spirit of a Darwinian mutation), but they somehow are able to convince others that the company should proceed and try this. “It’s worth a shot” and here is why.
Your successful experiments may eventually play a significant role in your company. That’s certainly one of your hopes. In fact, as your experiments come to fruition, or not, you will constantly examine and adapt your strategies and your goals.
A Client Story
One our clients was (and still is) a leader in residential mobile storage. They delivered a weatherproof container to the owner’s home, provided the home owner as much time as needed to fill the container with items to be stored, and then returned to pick up the container and store it in their climate controlled and secure warehouse.
Customers loved this service, and the company expanded rapidly nationwide. Then, a curious piece of information surfaced that would change the company’s overall strategy.
Because of the company’s presence in cities across the country, people storing their goods expressed a desire to their local manager to have the company move their possessions to another city to which they were moving. This idea was new to the company, and it was not the initial strategy of the firm.
The company examined the idea and decided that it met the four criteria above. They had the expertise to manage the activity (several executives had moving experience), they could absorb a loss associated with trying this idea between two major cities, they created a budget and schedule for the activity, and they quantified the potential reward (large) and risk (small).
After some initial success, the firm revised its overall strategy and created logistics and financial plans to carry out this strategy. This included creation of a separate division to handle city-to-city moves nationwide and the establishment of monthly goals. That division quickly became the fastest growing and most profitable business unit in the firm, and it also promoted an on-going relationship that enhanced customer loyalty.
The take-home message here is to think strategically all the time. Nurturing Darwinian experiments is just one means of creating and collecting information that can change your strategies and, perhaps, propel your company to success. The source of these new ideas can come from anywhere – employees, vendors, and customers. Your job is to encourage the creation of these ideas, to determine the risks and the likelihood of success, and to decide if you want to commit the idea to an experimental development activity. If you do, manage it wisely using the guidelines offered here.
John Cioffi is the author of 6 Habits of Highly Successful Managers. He received his first business education in his family’s restaurant and lodging business. He later held executive positions in several companies, ranging from start-ups to a Fortune 100. He has been a business coach for more than 15 years, is a frequent business speaker, and is a partner in GoalMakers Management Consultants. He received a BA from Colby College, a master’s degree from Dartmouth, and an MBA from Wharton.