Each day thousands of small and midsize companies make big, one-shot bets–and fail. We don’t hear about most of them, just as we don’t hear about people who lose the lottery; they aren’t front-page news.
News isn’t interested in these “dog bites man,” or common, everyday stories, because they don’t drive ratings or page views. Instead, the press gives us “man bites dog” stories of big bets and immodest success. The constant repetition reinforces the myth of business as a high stakes lottery in which the winners go big or go home.
Peter Sims, best-selling author and venture capitalist, saw the big-bet fairy tale firsthand while attending Stanford Graduate School of Business. “We’ll do something new, start a company or take an unconventional career path,” his fellow MBA students would say to him, “but we need a great [big] idea first.” In other words, they believed billion-dollar ideas were the starting point for entrepreneurs. “But Google started as a small library search project; Starbucks had no chairs and nonstop opera music at the beginning,” Sims says. “Great entrepreneurs didn’t start with big ideas, for the most part.” When business owners, MBAs, and senior executives buy into this fairy tale they often end up with unhappy endings, dashed dreams, careers in ruins, fortunes lost, and unemployed workers.
Every enterprise should be continually making as many small bets as can adequately be handled without disrupting the core business or putting it at risk. A small business with a handful of employees might be able to handle two or three concurrent small bets, while a large company with thousands of employees should probably be considering hundreds of potential small bets and implementing scores of them. Consider the following criteria when making your small bets:
◗ Don’t plan on only hitting home runs. In baseball, the odds of hitting a single are 1 in 6; a double, 1 in 21; while the odds of hitting a homer are 1 in 35. Unless your name is Babe Ruth or Willie Mays, you probably shouldn’t plan on hitting them all out of the park.
◗ Make as many small bets as you have people responsible for making them happen and sufficient financial resources to maximize the odds of success. If there aren’t enough resources to give the small bet a chance, you’ll never know if it might have worked out or been a possible home run.
◗ Make as many small bets as you’re able with enough time available to analyze and learn from each. Baseball players don’t get second chances at the plate–three strikes and they’re out. Businesspeople are given a second or third chance to turn singles and doubles into eventual home runs, if they take the time to learn from each experience.
◗ Have some general backup ideas in mind, but don’t let the backup plan be carved in stone. That will prevent you from learning. The time to begin building formalized backup plans is during the tweaking, changing, and maneuvering that occurs while studying the results of the small bet. Backup plans become vital when a small bet that’s turned out to be successful is about to be scaled in size.
Make enough small bets that everyone knows they’re being made and that doing so becomes a vital part of the culture of the organization. I have a friend, Mike McCallister, who is the CEO of Humana, a large health insurance company in the U.S. He began a long and illustrious career as a CEO of hospitals while still in his early twenties, and each time he took over another hospital he would direct the maintenance department to begin painting something. “Seeing painters at work and smelling fresh paint,” he says, “sent a signal to everyone that change was happening.” Making lots of small bets sends a signal that something is always happening and that there’s always a good reason to show up for work.
KISS A LOT OF FROGS: ACTION PLAN
- Let go of the fairy tale. Remind yourself you have to kiss a lot of frogs to find a prince.
- Make as many small bets as your financial resources allow, with enough time available to analyze and learn from each one. A culture of change gets built by constantly making small bets.
- Admit and learn from the mistakes you make. Mistakes are okay; the cover-up isn’t.
Excerpted from The Reinventors: How Extraordinary Companies Pursue Radical Continuous Change by Jason Jennings, available now from Portfolio.
[Image: Flickr user Will Keightley]