Is luck really more important than talent when it comes to business success?
Best-selling authors Jim Collins and Morten T. Hansen flip the old cliché in their new book, Great by Choice, which examines the roll luck played in the rise of more than 200 top business leaders. Instead of worrying about ROI, their research suggests focusing on ROL – Return on Luck.
“The crucial question,” they wrote recently in the New York Times, is not, “ ‘Are you lucky?’ but “Do you get a high return on luck?’”
In other words, opportunity needs only knock once if your business is poised to capitalize on it. Those who do best when luck appears, Collins and Hansen found, focus on discipline, hard work and a paranoid concern about their business performance. Risk takers and creative visionaries don’t have the best Return on Luck. Innovation alone guarantees nothing. Focusing on fast – action and decision-making – falls flat, according to the authors.
Meanwhile, Collins and Hansen note, it is possible to turn even the worst luck around. Their Times article used the example of Progressive Insurance, which faced negative customer perception and severe potential profit losses with a new California state law. A confluence of bad luck, indeed. But Progressive’s leadership took the hit as a chance to turn the business around. They focused on reversing customer perception, hoping that would lead to turning around profits. Company leaders invested years in the turnaround. And it paid off.
In the Washington Post this October, Collins added the sometimes, being prepped for the best ROL is a matter of focusing on the right questions. Not “what,” or “how,” but “The most important question is: ‘Who?’” Part of the right prep is having the right team in place, and trusting them to handle luck – and unluckiness – should it arise.
Taking it a step further, one business leader opines that it’s not just about the right team. Part of Collins’ and Hansen’s brilliance, he writes, lies in the paranoia – prepping for every contingency. And being flexible enough to change, to see when you’ve struck out on the wrong path, cautious of the wrong type of perseverance.
But not everyone agrees with the authors’ findings. On the retailing blog for Applied Predictive Technologies, or APT, the writer questions conclusions about slowing down fast-paced actions. Unpredictable market changes can render deliberate decision-making a luxury.
“I fundamentally disagree with the idea that you can’t have both fast decision-making AND data-driven decision-making. It is very hard to predict how the general macro-economic environment will behave,” she writes, citing the fallout from the Greek economic crisis.
The key is to balance reaction times with quality research.
“The solution to ‘fast AND data-driven’ decision making is planning,” she writes.
So, if luck strikes, are you prepared?
Great by Choice publisher page http://www.harpercollins.com/books/Great-Choice/?isbn=9780062121004%27