Each day brings a new set of challenges for early stage ventures. Decisions impact where you spend money, who you hire, and where to focus. The start-up roller coaster makes maintaining a disciplined decision-making process seem impossible.
Everything looks important. But they are not. And everything is not urgent.
Throughout the ages, philosophers constructed well-defined approaches to produce their "ideal" outcome. Their methods are very applicable to making business decisions. But many businesses lack this structure and process. Yet, defining a successful approach is well within reach.
Here are 4 simple steps to help make fast, high quality decisions.
Step 1 - Create a compass.
Know where you want to end up. Even if it changes over time (aka pivots), always have a compass for your business.
Step 2 - Establish metrics for success.
Know when you are winning and losing. Clear, quantitative targets are necessary. They should align with your business objectives.
Step 3 - Put in place a decision process.
Your process should be straightforward! Pick a team and ensure clear rules of engagement. Include a scoring method based on your metrics. And always be learning!
Step 4 - Define clear task and projects.
Do not make a lengthy list of one-liners. Define tasks and projects that deliver clear outcomes.
Organizations with high decision-making velocity and quality generate 2.5 times higher growth, 2 times higher profit and 30 percent higher return on invested capital…
1. Your Compass
Making good business decisions starts with having a clear understanding of who you are and what you want to be. Start with a target end state and then build a mission and vision statement. To help, Start-Up Mad Libs provide a set of simple templates.
Always know where you are going, or you will never get there.
Target End State
A Target End State creates context for your desired business outcome.
A vision statement is a simple but big bold statement of your end goal. Again, it should be short, focused, and directional. The best are less than 15 words.
For SpaceX, their vision is "Making Life Multiplanetary."
For Southwest Airlines it is “To become the world’s most loved, most flown, and most profitable airline.”
Build on your vision statement. Define your target audience and the value you deliver.
“Uber is evolving the way the world moves. By seamlessly connecting riders to drivers through our apps, we make cities more accessible, opening up more possibilities for riders and more business for drivers.”
Use this link to see this and 49 other examples of great missions statements.
2. Metrics For Success
Metrics, particularly for SaaS ventures, are clear. Your job is to pick the most critical. Outcomes and Key Results (OKRs) are a great framework for prioritization. I am a new disciple of this approach. But it makes the selection of attributes for prioritization integral to your venture's identity.
Start with a limited number of metrics (3 to 5). For simplicity, the charts below use Customer Growth, Customer Value, Customer Satisfaction. Use SMART objectives like the ones below to ensure clarity.
- Customer Growth = Grow customer revenue from $0.5 M ARR to $2M ARR by EOY
- Customer Value = Enable customers to reduce phone calls by 50% and emails by 75% within 6 months or next 4 releases.
- Customer Satisfaction = Improve daily customer usage from 50% to 75% and increase Net Renewals Rate from 92% to 100% by EOY.
Your metrics should also change over time as your business priorities evolve.
Extra context is also helpful. Just a few extra sentences. This level of exactness and transparency ensures organizational alignment. For instance,
- If top line growth is key, focus on activities that drive ARR while tasks that reduce acquisitions costs (e.g. CAC) are less critical.
- If customer account growth is important, put less focus on attracting new customers.
- If rising deployment time and costs are a priority, tasks that help automate manual processes become more important.
3. Your Decision-Making Process
Keep it simple and be consistent. It should include:
- Picking the team.
- Establishing rules of engagement
- Creating a scoring matrix
- Adding weightings and opportunity costs
- Learning and updating
Decide who gets to vote. Involving executive leadership and team members with the most insight is helpful. This should not be a popularity contest.
Do not default to highest paid opinion (HPO) wins.
Engaging designated team members should be a regularly scheduled event. Avoid constant "fire drills". Establish a rhythm that is most appropriate for your teams. Each participant should come prepared. All should bring data whenever possible.
Amazon has mastered the decision process by using a "disagree and commit" approach. Every team member gets an equal vote. They express their views and rationale for "scoring." After deciding, everyone supports it.
Using "disagree and commit" cuts the time it takes teams to make decisions in half, if not more, according to Bezos. It helps curtail long meetings and debates.
In other words, once made, decisions are not up for constant debate.
The scoring process should be straightforward. Avoid analysis paralysis. Use a table like the one below. Each team member places a number (1 to 5) in each box. Then add them together.
I am not a golfer so highest score "wins".
The scores provide a relative ranking between proposed activities.
In some situations, weighting certain factors can be important. This should be consistent with your detailed metrics and descriptions.
One approach includes adding risk and effort factors such as:
- Level of Effort (high effort=low number)
- Risk (high risk=low number)
- Confidence Level (low confidence=low number).
You may also add weightings to specific metrics. Below are some examples of how you might use weighted metrics.
- Time to Market: When speed is more important, divide Customer Value / Level of Effort (Time)
- Customer Satisfaction: If satisfaction is key, add a multiplier to Customer Satisfaction (e.g. 1.2)
- Quality (Risk): If risk is a high concern, then divide Customer Value / Risk (1 to 5)
- Customer Value: If customer outcome value is critical, add a multiplier to Customer Value (e.g. 1.2)
In some cases, not doing something also has a value. To accommodate, add an Opportunity Cost column into the scoring matrix. This enables your team to score the relative importance between tasks.
Learn and Update
Over time, as your business evolves, so should your scoring matrix. Regularly review the outcomes of your decisions. See how they performed versus what you expected.
Modifying your matrix does not mean you made bad decisions. It shows that you are learning and willing adapt as business conditions and outcomes change.
4. Defining Your Tasks
Now that you have a process, you need well defined tasks and projects. Too often, decision-making falters because task definition is poor.
Task deliverables must align with defined success outcomes. Each should deliver clear value without more steps or dependencies.
Task should include:
- Defined Outcomes (What)
- Level of Effort - Time and People (How)
- Supporting Data (Why)
- Target Completion Dates (When)
- Organizational Impact Analysis (Where)
Making Fast, High Quality Decisions Is Critical To Your Success
Prioritizing activities can be a daily, even hourly, dilemma for many start-ups. With limited funding, resources and time, each decision has meaningful consequences.
Making fast, high quality decisions does not need to be a complicated, drawn out process. Arm your teams with clear project definitions. Add a simple scoring process, and your teams can quickly make valuable decisions.