Monday, May 29, 2017

Do You Have What it Takes To Be a Business Leader?

Bill_Gates_speaking_at_DFIDRunning a business is not rocket science. As a long-time business advisor, and occasional investor, I have seen many successful businesses lead by college dropouts and people with average intelligence. Investors don’t look at CEOs for advanced degrees, but they do look for experience and emotional intelligence, often before they even evaluate the business plan.

Every business has to start with a leader – someone to drive through the thousand unknowns of every new venture, no matter how big the opportunity, or how amazing the technology. Steve Jobs, Bill Gates, and Mark Zuckerberg never finished college, and all started with virtually no business experience, but still they attracted the team and funding they needed to succeed.

So what are the right attributes of an aspiring business leader or founder? I just finished a new book, “The EQ Leader,” by Steven J. Stein, PhD, who is a leading expert on psychological assessment and emotional intelligence. I like his list of competencies, with my tips on how to highlight them, to score certain people as potential business leaders to peers and investors:

  1. Agility in learning. Agility in learning is the ability to diagnose the need for new skill sets and to acquire them quickly, despite incessant business pressures of change and no time available. In business, this agility is called “street smarts,” and is a coveted attribute. As an entrepreneur, even with no prior startups, you must highlight non-business examples.

  2. Communication skills. Effective communication in business requires an efficient flow of information to all constituents, and ability to share in any media, including speaking, writing, and listening. It also includes using and reading body language and state of mind. My angel group always asks the CEO to do the talking, to test their communication skills.

  3. Emotional intelligence. Emotional intelligence is the ability to work your way through tough business situations, and the ability to perceive, to understand, and to manage emotion, as well as to integrate thought with emotion when making decisions. Venture capital investors have been known to make controversial assertions to test your reaction.

  4. Resiliency/flexibility. Resiliency is the ability to recover quickly from failures, and pivot with lessor business changes. It includes the ability to discard experience that is no longer relevant or useful, and to change direction in accordance with new information. Be careful how you position any startups failures, and what you learned from the experience.

  5. Quest for excellence. A quest for excellence is the ability to hold your company and team to the highest standards, and to consistently exceed the expectations of customers. Leaders with this attribute always strive for the highest personal performance, as well. Positive examples from non-business experiences and efforts will help your case here.

  6. Self-confidence. Self-confidence is possessing and displaying credible assurance and self-reliance, without continual positive feedback from friends and advisors. It is the ability to envision business success and to communicate a sense of well-being to others. In business, don’t step over that fine line between self-confidence and overbearing ego.

  7. Creativity and innovation. These terms embody the ability to produce new ideas by thinking outside the box, and solving problems through calculated risks. In business, creativity and innovation are not a one-time thing, but must be done continually. When talking to investors, your examples from outside of business are equally valuable.

  8. Moral courage. Moral courage is a clearly articulated set of values and beliefs that drives business, as well as personal actions and decisions. Moral courage may also require physical courage when the consequences are lost business or physical peril. In business, actions speak louder than words. Associates and investors are watching.

  9. Accountability. Accountability is the willingness to accept full responsibility for all business actions and decisions, with a natural aversion to excuses. It implies the willingness to follow-up on fulfillment of all commitments, major and minor. I always listen carefully to the explanation, when aspiring entrepreneurs are late or miss a meeting.

  10. Cultural adaptability. Cultural sensitivity is the ability to perceive and learn from people strengths in different geographical regions, ethnic groups, and between different organizations and team subcultures, and to adapt behavior accordingly and positively. These days, the business value of cultural diversity is huge. Watch your team makeup.

  11. Decisiveness. Decisiveness is the practice of making a business choice or determining a course of action in a reasonable timeframe, by efficiently using and processing the best information available. It also means making good decisions with incomplete information. There is a reason that the savvy investors on Shark Tank often ask for a quick decision.

Of course, investors would prefer that all new businesses be led by entrepreneurs with a track record, and all the attributes highlighted here. But that never happens. All you have to do as a new business owner is highlight the strengths you have, and concentrate on developing at least one more than your key competitor. I haven’t yet found a perfect business leader yet.

Marty Zwilling

*** First published on on 05/16/2017 ***



Saturday, May 27, 2017

Why Entrepreneurs Need To Keep Their Business Focused

business-focusEvery new business or product owner wants to attract the broadest possible audience, so they are prone to adding more features, multiple sales channels, and appealing to every demographic. Unfortunately, often the result is potential customers who are confused, the limited resources of your business are spread too thin, and customers and investors look elsewhere for a better fit.

Thus one of my key messages to entrepreneurs, as a business advisor and angel investor, is “focus.” It’s better to be known for and to do one thing extremely well, than to do many things poorly. For example, it’s all too common for a technology entrepreneur to highlight a new battery technology as the ultimate power for smartphones, medical heart pacemakers, and home lighting.

These are three different worlds from a business perspective. Focus simply means launching your first and most memorable initiative where you see a unique skill and experience fit, your best competitive positioning with the least risk, and the greatest potential return. People still remember Google for Internet search, Amazon for books, and Facebook for talking to friends.

Now, of course, they all do much more, but those things came later. In the beginning, like them, make sure you are focused on the following set of principles:

  1. Quantify one problem to highlight your solution. Focus means starting with solving a specific problem, rather than a generic list. Customers want a solution from you, not many. For investors, show the depth of your business potential by prioritizing a strategic plan for multiple later phases that capitalize on additional problems you plan to address.

  2. Pick a business model that you can best support. With limited resources, you can sell via ecommerce, but it’s much tougher to support retail as well, or hire a direct sales team. Consider a subscription model for a repeatable revenue stream, or full-purchase model, but not both. Your business model determines cash-flow, staffing, and funding required.

  3. Define no more than 3 to 5 goals and priorities. No organization can remember and deliver on a dozen goals and priorities without becoming unfocused and ineffective. Keep these balanced and aligned between people (customers, employees) and process (quality, service), and keep the scope limited. Eliminating world hunger is too broad.

  4. Zero in on a specific market segment. Targeting all the people in China as your opportunity gives you big numbers for a small penetration percentage, but will be seen as lack of focus by key constituents. The more precise you can be in your definition of the target demographics (location, age, income, education), the more successful you will be.

  5. Limit solution scope and features. Focus means creating a minimum viable product (MVP) first, and validating it in the marketplace. Feature-rich products take too much time and money to build, are hard to pivot, and will likely be slow and difficult to use. Your product will never have enough features to satisfy everyone, and it will never be perfect.

  6. Realistically characterize the competition. If you really believe that IBM, Microsoft, and Oracle are your competition, you have a big challenge that you can’t afford to meet. It’s better to focus on a niche that none of them do well, and build your plan around that opportunity. Claiming you have no competition also implies lack of focus on competition.

  7. Simplify your solution positioning. You can’t win by trying to position yourself as both a premium provider (high quality, high service, high price), as well as a player in the commodity end of the market. Your team, customers, and investors will all be confused with your lack of focus. The grass always looks greener on the other side of the fence.

  8. Concentrate your marketing efforts around a single channel. You always need a budget for marketing, but don’t spread it evenly or randomly across digital media, social media, direct, and traditional channels. Focus on one channel at a time, measure results, and then move to the next. Too many channels has the same effect as no marketing.

I understand the pressure to grow and scale the business to satisfy investors and your ego, but premature scaling is seen by many experts as the number one reason for startup failure. Don’t spend money, or expand your focus, into domains you don’t know, with an assumption that all new customers will be additive to your current base. One plus one sometimes equals zero.

In the same vein, you can also have too many advisors, and too many investors. If you listen to everyone, and take money from everyone, your focus will be diluted to the point that you won’t be able to satisfy anyone, especially customers. In the long run, it takes a narrow and memorable core focus to build a sustainable company.

Marty Zwilling

*** First published on on 05/11/2017 ***



Monday, May 22, 2017

7 Initiatives To Streamline and Focus Your Company

Chatting-Team-Business-MeetingSuccess in today’s rapidly changing and highly competitive business environment requires a total alignment between the needs of each business function and the priorities of all team members. If you see signs of internal misalignment, such as too many meetings, overload of emails, or lack of engagement at any level, now is the time to take action before customers and employees both sense it and leave you.

As an entrepreneur advisor and startup investor, it always amazes me how obvious these alignment issues are from the outside, and how hard it is to make them visible inside and get them corrected. What every investor, and every customer, is looking for is a company where everyone is focused on the same objectives, the same values, and the same customer needs

I just saw some real insights on this challenge in a new book, “Total Alignment: Tools and Tactics for Streamlining Your Organization,” by Riaz and Linda Khadem. They bring over 25 years of experience in alignment strategy deployment for large and small organizations across Europe and North America. They summarize alignment as an embodiment of seven initiatives, as follows:

  1. Define a unified focus and direction, shared by all. You must have a clearly defined and communicated company purpose, with buy-in from everyone. The alternative is that people focus on their own agenda or other activities that will divert energy, cause confusion internally and externally, and impede the progress of your company.

  2. Measure execution on a single strategy, rather than talk. According to business expert Paul Sharman, nine out of ten businesses fail to implement their strategic plan. Failed strategies erode your competitive position. You must provide your team with constant training and support on what good execution looks like, and a follow-up process.

  3. Improve reporting structure support (vertical alignment). All too often, employees pay lip service to their management, but execute their own agenda, due to lack of understanding or disagreements. The solution is people-focused managers, who practice empathy and coaching to check alignment, rather than looking backward only at results.

  4. Enable cross-functional collaboration (horizontal alignment). This type of collaboration prevents silos from developing in the organization, which often work against each other, and certainly take more time to make decisions. Top business leaders arrange their agendas and time, building and maintaining cross-functional relationships.

  5. Give people the right skills to deliver (competency alignment). Delegation doesn’t work if the people are not qualified to deliver. This starts with hiring the right people, matching roles to interests, and regular coaching and training to improve competency in the required skills. Update skill requirements as technology and the market changes.

  6. Assure team alignment of values with company values. Misalignment of values quickly erodes the trust that your customers, suppliers, and employees have in the business, and culminates with the loss of all of the above. Alignment is improved through day-to-day team and individual reviews of values, behaviors, activities, and results.

  7. Reward people for desired results (compensation alignment). When people see that their hard work is not recognized or appreciated, their motivation decreases, and eventually the best move on, leaving you with a weaker and weaker team. Rewards must go beyond salary, to include personal positive feedback, and recognition in front of peers.

The biggest challenge for most companies is turning even a great vision into reality. If all your people and processes are not totally aligned, energies are wasted and things move too slowly to keep up with the market and competitors. So how can you tell if your perspective is aligned with others in the company?

I recommend that you meet individually with your manager, any direct reports that you may have, and key peers, to compare notes on your top five priorities. If you find a big mismatch, it’s time to dig deeper inside your own perspective to find the root cause, and focus on one of more of the initiatives outlined earlier, to minimize the disparity.

The future of your career, and your company, depends on it.

Marty Zwilling

*** First published on on 05/09/2017 ***



Friday, May 19, 2017

7 New Business Ideas Whose Time Has Come and Gone

Pitfalls-To-Avoid-In-Mobile-App-DesignAs an angel investor, I sometimes worry that all the viable unique ideas must already be taken. Entrepreneurs keep talking to me about the Internet of Things (IOT), autonomous vehicles, inter-planetary travel, and other exciting opportunities, but the majority of real plans I get seem to be “me too” variations of several common themes that have already been done too many times.

We all want to get out there ahead of the crowd, and invest in that truly innovative idea that seems so obvious in its appeal that you wonder why nobody ever thought of it before. Examples in the past, that were not huge leaps in technology, would include the light bulb, telephone, the zipper, and post-it notes. I haven’t found the next one yet, even on Shark Tank.

On the other hand, I do see often a myriad of concepts that have already been tried and failed many times, where the space is crowded, or it’s not clear that another variation with more features, slightly lower cost, or more usability, is worth the effort. Here are some of my favorites in these categories:

  1. Virtual talking personal assistants. By definition, these are all really thinly disguised Internet search engines, provided by or competing against the 500 or more existing search engines already out there, including Google, Microsoft, and Yahoo. There may be room here for something really innovative, but just a sweeter voice will probably not do it. If you have more money than the incumbents, try it, but don’t look for investor help.

  2. Password storage and recollection schemes. Everyone is looking for an easy solution to the increasing need for complex security and multifactor sign-ons required by most applications today. So far, yellow stickies on your computer seem to be holding the lead, despite a multitude of password manager apps, biometrics, and encryption schemes.

  3. Yet another social networking site. Just for starters, Wikipedia now lists about 200 sites by name, which they claim is just the more notable existing social networking sites. I still get about one business “idea” per week for a new networking site, which will combine the “best of all the sites” into a new one. If you must do one of these, I suggest that you skip the improvements, and focus on a niche, if you can find an unoccupied one.

  4. The ultimate online dating site. Based on my own initial research, there are over 8,000 existing ones world-wide, supplemented by two or three new ones per day. Most of these will fail, or never turn a profit. I hope you have a better idea than SugarDaddyForMe, or Meet-An-Inmate. But then, this is an emotional need every single professes a demand for (not to mention the 40 percent of applicants who are already married).

  5. Jump into the new sharing economy. How many more personal things are you willing to share or collaborate on to make money? Everyone wants to be the next Uber (ride sharing), Airbnb (room sharing), Chegg (book sharing), or GwynnieBee (clothes sharing). Before you step into this space with a first-time passion, you might want to check the list of over 200 companies already there.

  6. No more shopping for food or cooking. Despite the spectacular failure of Webvan many years ago, this one keeps coming back. Currently Grubhub in the US and Deliveroo in the UK are showing some success, but new ones continue to pop up and fail every day. Fewer and fewer people love to cook, or the time it takes to shop for food, but time costs money, and everyone today expects services on the Internet to come for free.

  7. Mobile apps for everything and anything. Today there are well over 2.2 million mobile apps available to download for iOS devices, and even more for Android devices. Unfortunately, less than one percent of these ever make a profit. Granted, a mobile app business can be started for as little as ten thousand dollars, but it’s hard to make it up in volume if you lose money on every download.

Somewhere below this list is another tier of questionable potential startups, including more Amazon e-commerce knock-offs, photo sharing sites, music sharing sites, and more ultimate video games. Web site generators have made it cheap and easy to launch a site, but that doesn’t mean it’s easy to succeed.

In my view, the single biggest reason for startup failures is a lack of real innovation. Changing the user interface, and adding a couple of features doesn’t compensate for not being there first. The second biggest reason is lack of focus. Combining the features of several successful products will not assure success (“something for everyone”).

For other ideas, the wave has simply passed. Rather than trying to extrapolate linearly from solutions already popular, be the first to solve one of the myriad of current and future problems causing real “pain” in our society. Problems like health care and diseases, or alternative energy solutions, offer a wealth of possibilities, with huge potential paybacks for everyone.

These also have the potential of satisfying a higher purpose (socially conscious), as well as making money. The rewards are greater and longer lasting, and it’s a lot more fun. What are you waiting for?

Marty Zwilling

*** First published on on 05/04/2017 ***



Monday, May 15, 2017

Why You Should Enlist a Business Mentor, Or Be One

mentor-menteeBuilding a business is not rocket science, so there is no magic success formula. Some people think you need to get an MBA to get it right, while others are convinced that those who drop out of school early (Bill Gates, Mark Zuckerberg) have the advantage. In my experience working with startups, the best approach these days is to find and use a good mentor (been there, done that).

Of course, mentoring is not new – it’s been the favored way to learn arts and crafts since way back in the middle ages. And I certainly believe that running a new business is more an art than a science. Yet in this age of technology, many seem to favor tools and data to get the edge, or can’t find the time to talk to real people. But I assert that mentoring in business is making a comeback.

In fact, the best mentoring doesn’t have to be a huge time sink, and can be done most often by short but regular discussions and message exchanges. I just finished a new book that highlights this approach, “One Minute Mentoring,” by the legendary business consultant Ken Blanchard, in concert with Claire Diaz-Ortiz. They detail the key action steps required, including the following:

  1. Agree on the objectives and vision up front (Mission). A mentor/mentee relationship must be a win-win and learning experience for both. Each time I mentor an entrepreneur, I learn new things about their technology, customers, and business domain. Just like any partner agreement, it minimizes misunderstands to have objectives written down early.

  2. Set a regular schedule and way to share (Engagement). Determine the type of engagement that works best for your personalities and other commitments. Good mentoring partnerships require both the flexibility to engage in digital communication and the power of in-person meetings when possible. Meetings can be informal or structured.

  3. Expand your network on both sides (Networking). A key value of mentoring is getting access to each other’s networks, who can be new business partners or new mentors. True business leadership is more about relationships and knowing who knows, rather than personally knowing all the answers. Shared social media is the new networking.

  4. Build and maintain a trusting partner relationship (Trust). Building trust takes time, but it can be destroyed in an instant. It starts with always telling the truth, staying connected, and being dependable. A good mentor won’t always tell you what you want to hear, but rather what you need to hear, but always with courtesy and respect.

  5. Create opportunities for your mentee to grow (Opportunity). As a mentoring partner, you will have access to personal and business opportunities that simply aren’t available to non-mentors and non-mentees. These opportunities can be cross-generational, which is an excellent way to exchange and compare time-tested as well as new knowledge.

  6. Regularly review progress and adjust focus (Review and Renewal). You will never get to where you want to go if you don’t have a roadmap, and you’ll never know if you have arrived if you don’t take checkpoints. These days, flexibility and agility to meet new customer requirements is a key to success. Practice how to do this with your mentor.

Most people don’t realize that even the most successful people in business have benefited from mentors, and don’t try to dodge or hide these relationships. Bill Gates often refers to his ongoing relationship with Warren Buffett as a mentor, and Mark Zuckerberg counted Steve Jobs as a key mentor. I wonder who the lucky people are who now count Gates or Zuckerberg as their mentor?

Some people ask me about the difference between a coach and a mentor. In my view, coaches focus on bringing out the best in an individual’s generic skills, while a mentor adds the element of sharing information about the industry, company, or business unit that the mentor believes is relevant to the mentee. Good mentors also must be role models and advocates for the mentee.

If all these points are already clear to you, then it’s probably time for you move from the role of mentee to the role of mentor for someone else. Those who extend a helping hand to others always have much to gain, in business as well as their own personal satisfaction. In the words of an ancient Buddhist proverb, “If you light a lamp for someone, it will also brighten your own path.”

Marty Zwilling

*** First published on on 05/02/2017 ***



Wednesday, May 10, 2017

7 Steps Toward Implementing A Breakthrough In Growth

business-growth-breakthrough“If you build it, they will come.” It's a line from an old movie "Field of Dreams" which is still leading to the demise of too many startups, led by entrepreneurs who really started their business to build an exciting new product or service. Most struggle with the idea and practice of marketing and sales, and see these as a necessary evil, if even required.

Of course, for a price, there are many marketing organizations and gurus willing to come to your aid. But marketing is not “rocket science,” so I’m a big proponent of self-help and practicing the pragmatics in-house first. A great resource is the classic book by Drew Williams and Jonathan Verney, “Feed the Startup Beast: A 7-Step Guide to Big, Hairy, Outrageous Sales Growth.”

This book correctly characterizes every small business as a beast that has to be well fed to grow. The ingredients for growth are well known: patience, persistence, and a plan. The first two p’s are up to you, but I agree with the authors that an effective plan and execution in this new Internet world needs to be built around a minimum of the following seven steps:

  1. Ask the single most important question. The only question you need to ask is “How likely are you to recommend my [product/service/company] to a colleague or business associate?” In every constituency, there are fans, fence-sitters, and critics. Fans contribute 2.6 times more revenue than “somewhat satisfied,” and critics kill revenue at twice the rate that fans increase it. Too many critics and not enough fans spell disaster.

  2. Listen to targeted prospects through real engagement. Engage first, sell later. The laws of engagement require targeting the best prospects first, offering a real value proposition, and making an offer which is valuable, timely, and relevant. Use demand generation services, as required, to build the relationship and nurture them into paying customers.

  3. Focus your resources to convert prospects to customers. Build a plan with automation to manage the volume, but every customer has to feel like you are reaching out to them personally. Fine-tune the marketing and sales conversion engine to narrow the funnel, and build a sales team to close every sales-ready lead.

  4. Use partners to attract and get found by the right prospects. The planning is done, and now it’s time to execute. Make your startup valuable and visible through partners, with great content that cannot be missed by online search, influencers, and offline events. Use social media in concert with a web site and offline media. In all venues, 20% of the effort gets you 80% of the results.

  5. Pursue and intrigue prospects who respond. Put your best efforts into helping prospects break through the clutter, engage them, and intrigue them. Your goal is to get them to think different, like Apple, or be surprised and delighted with the experience. Be sure to track the engagement rate, and be quick to pivot if the breakthrough rate is low.

  6. Nurture customers and influencers into real fans. Turning your customers into real fans is the best leverage you have. Fans have a triple impact: they are more profitable, stay longer, and bring in others. Effective fan-nurture programs include an advisory panel, a “constant contact” program, referral program, and a one-question survey.

  7. Grow and measure the conversion rate. Here are four essential conversion rates you need to track: prospects to engaged prospects (target 38%), engaged prospects to sales-ready leads (20%), sales-ready prospects to customers (35%), and customers to fans (60%). This kind of conversion can easily result in 100% year-over-year revenue growth.

If you want success in selling your product, you need to put the same focus, intensity, and innovation into marketing and sales, as you have put into building the product. It won’t happen magically, but it doesn’t require an army of experts or a huge budget. Really, it’s all about having great information, great tools, and the determination to learn what customers really value.

Completing each of the above steps allows your startup beast to pick up momentum, fueling a breakthrough in growth, and ultimately making it unbeatable in the marketplace. The modern day field of dreams mantra has pivoted to “If you market it, they will come.” Are your customers coming fast enough?

Marty Zwilling

*** Published by Xerox Small Business Solutions on 05/01/2017 ***



Friday, May 5, 2017

7 Strategies For A Low Entry-Cost Sustainable Startup

low-cost-sustainable-startupIf your dream has long been to start and manage your own business, there is no time like the present to get started. The cost of entry is at an all-time low, working from home through an Internet website seen globally, turning a hobby or an invention into an online business. But don’t be misled into thinking that long-term business success is assured and low risk.

According to Digital Point and others, there are about a hundred new websites and businesses created every minute somewhere in the world today. Unfortunately, most of these are never able to declare long-term success. Statistics show that the failure rate for new businesses within the first four years is fifty percent or greater, even with companies that have a large startup budget.

In all cases, it pays to understand some proven strategies to increase your chances of success. Here are some key ones that I recommend, based on my experience in business, and my many years as an advisor to entrepreneurs:

  1. Choose a name that works across the Internet and the world. In addition to legal and local requirements, you need a business name that is available as a website domain name, and a user name on key social media channels, including Facebook, YouTube, and Twitter. Make sure it has no negative implications in any foreign language or culture.

  2. Provide online content that ranks you ahead of competitors. Having a website won’t help if customers can’t find it. They expect to find you on the first result page from search engines, and position ranking is driven by relevant keywords, new content on a regular basis, and inbound and outbound site links. Focus on usability, layout, sound, and video.

  3. Expect to spend your limited budget on marketing. Word-of-mouth and minimal marketing does not drive a sustainable business. All marketing costs money, including viral marketing, search engine optimization, click-through, and social media support. You must continually assess cost versus value for the best returns in your case.

  4. Use social media to actively engage with your customers. Many businesses ignore social media, other listen on one or more channels, while the best talk as well as listen to customers and potential customers. Customers today are looking for relationships, not just transactions. They want to know you before they recommend you to their friends.

  5. Focus on providing memorable total customer experiences. Customer service is not just fixing problems. It starts when the customer begins his search for a solution, includes the buying and support process, and extends through follow-on transactions. Delighted customers are your best advocates, bringing in more customers than any advertising.

  6. Manage cash flow personally every day. A big influx of customer orders may feel like success, but can kill your business quickly if you don’t have the cash to manufacture product, deliver on a timely basis, and cover receivables. The best business owners manage cash flow ruthlessly and never delegate decisions about spending money.

  7. Measure against specific objectives, rather than crises solved. Surviving daily challenges is necessary but not sufficient to build a sustainable business. Start by setting some specific growth targets, and implement metrics to chart your progress. Plan to update these objectives and your implementation plan, on at least a quarterly basis.

The next secret is building into your business and your management style the ability to adapt quickly to the continuous changes now occurring in the marketplace. Some people call this pivoting, while others call it continuous innovation, or even killing your cash cow before someone else does. If you aren’t making sizable changes every quarter, you are likely falling behind.

So, while the cost of entry into business today is low, that doesn’t mean that business success is easy. Don’t let the low cost of entry lure you into a false sense of security. In my experience, there are still only a small number of key principles and strategies that contribute large amounts to long-term sustainability and satisfaction. How many of these strategies are you following today?

Marty Zwilling

*** First published on on 04/20/2017 ***



Monday, May 1, 2017

8 Unconscious Biases Shape Your Business Decisions

bias-your-business-decisionEvery boss and decision maker is convinced that he or she is able to look objectively at any problem, and make an unbiased decision. Some typically worry about biases in their team, but rarely think of themselves as a source of bias. In reality, everyone has biases, and needs to make sure they are researching objective data, and listening to alternatives, before making a decision.

In her new book, “Problem Solved,” Cheryl Strauss Einhorn offers some excellent guidance and a system for evaluating complex problems, to overcome the human tendency to apply personal biases. These biases, mostly unconscious, are much more extensive that I imagined, and are a key reason that every boss should actively listen to employee input before making decisions.

Here is my summary of some of the key decision-making biases to avoid that she and I have found in most entrepreneurs and business leaders today:

  1. Confirmation bias. This bias refers to a form of selective thinking in which every boss seeks out and overvalues information that confirms their existing beliefs, and neglects or undervalues information that is contradictory to those precepts. A confirmation bias often leads them to interpret information falsely because it conflicts with their prior views.

  2. Optimism bias. Many frequent decision makers are more confident in the accuracy of their decisions than objective facts would support. Studies show that people who proclaim to be “99 percent sure” of a decision, are right only about 80 percent of the time. This bias can also apply to their subjective confidence in someone else’s judgment.

  3. Projection bias. Without meaning to, decision makers tend to project their thoughts and beliefs onto everyone around them, and assume all will think the same way. This can lead to “false consensus bias,” which concludes that all others will find the same decision point that they have reached, leading to a false consensus decision.

  4. Salience bias. Salience bias refers to the human tendency to overestimate evidence that is recent or vivid. For example, a recent bad customer review online can easily convince a business leader that customer support is their biggest constraint to growth, when in reality a much bigger problem might be poor lead generation or lack of marketing.

  5. Narrative bias. Many business decision makers prefer sample customer stories to data. These narratives add a sense of reality, and help everyone explain and interpret the problem context. However, because stories simplify, this inherent preference of narrative over data often limits a decision maker’s understanding of complicated situations.

  6. Relativity bias. The relativity bias inhibits a decision maker’s ability to objectively assess information based upon an over-dependence on comparisons. For example, when given a choice, people tend to pick the middle option: not too pricey, not too cheap. Thinking outside the box is often required in business for an innovative approach to a problem.

  7. Authority bias. This bias refers to a decision maker’s natural inclination to follow and believe in authority figures, like top executives, industry experts, or public figures. For example, if Warren Buffett invests in a given business sector, may other business executives will lean that direction in looking for partners or the next big opportunity.

  8. Liking bias. If a boss really likes someone on the team, all data and input will be interpreted in their favor. In other contexts, he or she might be inclined to favor a hiring candidate who attended their alma mater, or shared the same cultural background. A related bias is the tendency to reciprocate a favor that someone has done in the past.

There are more, but you get the idea. If you want to make sound decisions or recommendations to your boss on complex problems, you need to know how to control for and counteract your own as well as their assumptions and biases, and apply more expansive and objective thinking.

If you are frustrated by someone on your team or a boss that continually allows their biases to direct their decisions, maybe it’s time to print out this article and leave is on their desk as a reminder. It may be the best decision you can make for the health of your business, and your career. Problem solved.

Marty Zwilling

*** First published on on 04/17/2017 ***