Stats & Strats

Return on Luck

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?

 

 

Material Cited:

Great by Choice publisher page http://www.harpercollins.com/books/Great-Choice/?isbn=9780062121004%27

NYT http://www.nytimes.com/2011/10/30/business/luck-is-just-the-spark-for-business-giants.html?pagewanted=all

Washington Post http://www.washingtonpost.com/national/on-leadership/is-jim-collins-just-lucky/2011/10/27/gIQA7NysMM_story.html

Paranoid Leaders http://leadershipfreak.wordpress.com/2011/11/08/jim-collins-on-paranoid-leaders/

APT http://retailingwithconfidence.com/what-retailers-can-learn-from-jim-collins-the-genius-of-and-over-the-tyranny-of-or/ 

Managing Luck http://blogs.hbr.org/cs/2011/11/three_ways_to_manage_good_or_b.html

 

Keeping the Flame Alight

Passion and inspiration set your big ideas alight. Emotions can wane, though, as new business stagnates, the recession lingers, and frustrations arise. How do you keep the spark alive?

Remember that rejection isn’t personal. We all have growing pains, in life as in business. A potential client has a hundred reasons to reject your proposal: budget changes, internal politics, indecisive leadership, etc. None of those reasons are a reflection on your business. All you need is one client to say yes. And then another one.

Take one small step every day. Schedule 10 minutes to brainstorm new leads. Write a networking email. Read an article about the latest news in your industry. Taking a few minutes to educate yourself and perform one new task daily for your business will help your bottom line grow in creative new ways. Just as importantly, it will make you feel like you are in control and taking charge.

Invest in your business. You know you have to spend some money to make some. Frugality is important, but so is making sure you don’t suffocate your business.

BUT watch the return. Are you tracking which dollars are working hard, and which are wasteful? Examine the click returns on your online advertising. Tally paid leads that result in business earned. Pay attention to customer feedback.

Fine-tune your market understanding. Check out your competitors. Track what the public is saying about you and your industry. Survey your customer base to ensure you are meeting their needs. Your customers may not have the cash to spend on faith today, but taking the time to understand exactly what the market needs gives you a competitive advantage.

Focus on what makes you special. What do you do better than anyone? What do you offer that no one else can? Every person, and every business, has a unique perspective that sets them apart – and that no one else can provide. Therein lies success.

Stay passionate. Frame an inspirational saying or your first dollar. Post sticky notes with reminders about how far you’ve come. Keep a photo of your family nearby. Remember why you’re doing this, why you started, and how there’s no other job you’d rather be doing.

 

Looking for even more inspiration?

Learn to bounce back http://www.forbes.com/2009/08/19/recover-from-failure-entrepreneurs-management-failure.html

Set successful business goals http://finance.ninemsn.com.au/smallbusiness/planning/8368177/are-you-setting-successful-business-goals

End the motivational struggle http://www.lifehack.org/articles/management/how-to-stay-motivated-and-on-track-when-you%E2%80%99re-struggling.html

Find your energy http://www.business.com/guides/staying-motivated-1359/

Business Lessons from the late Steve Jobs

Steve Jobs, the brilliant mind behind Apple and so many of the consumer tech advances of our time, wasn’t just a computer genius. He was also, by all accounts, a brilliant marketing strategist whose business acumen helped catapult his creations into the profit-making stratosphere.

The majority of us may not be century-defining visionaries. But there are still plenty of marketing lessons to be learned from Jobs, who died on Oct. 5.

Jobs famously eschewed traditional marketing research. As noted in the Los Angeles Times http://latimesblogs.latimes.com/movies/2011/10/steve-jobs-other-lasting-legacy-his-great-apple-ads.html recently,

When he was once asked about how much market research went into the iPad, Steve Jobs famously said "None. It's not the customers' jobs to know what they want." 

Of course, the iPad release came toward the end of Jobs’ career, when he had a long-established track record – years after suffering early failures and setbacks. In the early days of personal computing, Macintosh and Apple machines retained small market shares, despite critical consensus that the latter were more technically advanced and user-friendly. But it was a consistent belief in his core vision that kept Jobs on his singular path, despite the setbacks. A lesson for any business – there will be setbacks, but belief and perseverance can prevail.

Staying focused on a business’ vision is closely tied to focusing on the consumer. Jobs may have ignored some market research, in the sense that Apple gained a reputation (accurate or not, we may never completely know) for rejecting focus group testing. But he, and the company, also kept their customer base in mind when designing new products. They weren’t inventing just for the sake of invention, but seeing holes in the market and creating products to fill them – to meet a need before consumers even realized it was going unmet.

As Farhad Manjoo wrote in Slate.com http://www.slate.com/articles/technology/technology/2011/10/steve_jobs_dead_how_the_apple_founder_changed_the_world_.html:

While every other company in tech has been shaped by the forces of technological evolution, with their products getting better as chips got faster and cheaper, Jobs had no patience for evolution. He was the intelligent designer.

Jobs’ best talent was his ability to spot the pain points in every technology he touched. He could look at anything and tell you why it sucked.

Lesson #2 for all businesses – focus on meeting your clients’ needs. Not just the needs clients ask for, but those you, as the business leader, see going unclaimed and unmet.

Finally, no matter how much Apple and Jobs did or didn’t conduct market research while developing products, the company never skimped on marketing the final versions. Few Dell or Blackberry commercials entered the national consciousness like Apple’s “Think Different” and those ubiquitous dancing shadow ads. Jobs knew it wasn’t enough to simply unveil a great product and expect customers to flock to it. He actively demonstrated how his products could be used and – to an even greater extent – enjoyed, and he advertised heavily. He was selling a product he truly believed in. That passion inspired his product unveilings and infected roomfuls of critics.

As one Advertising Age columnist wrote http://adage.com/article/rance-crain/steve-jobs-secret-marketing-weapon-conviction-intuition/230310/: “The product was the hero, another concept that seems to be out of favor today.”

“What's the main thing marketers can learn from Steve Jobs? To believe in what they sell.”

Lesson #3: Be passionate and believe in your product. Let the product drive your campaigns, but don’t skimp on the overall marketing.

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