MissingMethod

The other day I posted on the difference between researching the future and inventing it, pointing to an article that argued design-types are more likely to user “abductive reasoning” and creative thinking to decide what the future will/should look like, while corporate-types often tend toward research and deductive reasoning.

Here’s an article from Strategy + Business that discusses why managing by facts works. In it, John Lilly, former CEO of Reactivity and current COO of Firefox, talks about how they used to pitch venture capitalists during the dot-com boom:

In a period of 30 weeks, his team generated 30 PowerPoint presentations as “prototypes” for a diverse group of Internet-based startups. Out of these, a combination e-mail and Web browser was chosen as the most promising. Its PowerPoint presentation was fine-tuned and then shown to potential backers. Based primarily on this slide show — there was very little else for the venture capitalists to go on — Reactivity raised more than $100 million for a new company.

But Lilly says that approach wouldn’t work these days: “By and large, venture capitalists only fund Web-based companies that already have proven the ability to attract customer traffic,” he says.

Another case-in-point is Hewlett-Packard’s 2001 acquisition of Compaq, a move many consider to be the cause of HP’s current troubles. The transaction was made without much research of consumer attitudes toward compaq, and the result was a conflict in perception about the merged businesses.

Here’s the take-away:

From our research, we are convinced that when companies base decisions on evidence, they enjoy a competitive advantage. And even when little or no data is available, there are things executives can do that allow them to rely more on evidence and logic and less on guesswork, fear, faith, or hope.

… even hunches, fresh ideas, and inventions should be measured against logical and empirical benchmarks to determine whether they are efficacious ideas or just momentarily exciting thoughts better off abandoned.

Guidelines for an effective evidence-based strategy? First, act on the facts. Second, treat the organization as a prototype (read: be agile!).

Last Modified : October 5th, 2006
Filed under : Entrepreneurship
Navigate : Previous post / Next post