How To Make Bad Decisions

Companies large and small make poor decisions on a regular basis. Whether about releasing a new product, marketing campaign or even about investing in a new line of business, most companies depend on gut instinct to make decisions.

The image above represents the investment decision-making process at most companies.  Let’s walk through each of the stages.

First, someone comes up with an idea. Since they can’t build or launch the idea on their own (or if they can, it’s too politically risky), they work through a series of stakeholders to refine and gain consensus on the idea – this typically involves lots of opinions and compromise. The higher paid the person, the more they need to influence the idea, as they believe that’s why they’re paid so much money. Working it’s way up the chain, eventually an idea gets executive support and is funded.

At this point, the idea is a shell of its former self. From here, the company builds the idea. This usually involves a long requirements process and lots of estimation (later we find out this is wrong). By the time the idea is built, it has gone over the initial estimated timeline, is incomplete, and everyone is anxious for it to launch.

Clearly, the company has invested substantial time and money to build the idea.  If the timeline isn’t exceeded too much, often companies will perform fake research to help justify the large amount of time and expense invested to further convince everyone the idea is great. This usually manifests itself as focus groups, where users are shown the idea, asked for feedback and then someone compiles a report that includes the positive feedback, but moves any critique to an appendix.

Now it’s time to launch – crack the champagne! For the few companies that do pay attention to metrics after launch, there is usually significant enough confusion because of “external factors” and other ideas that were launched at the same time to ensure no one is accountable.

To those who actually use data to drive their business – by practicing, and embracing the results of, Lean Startup and Agile principles – this whole lifecycle seems wacky. As a guy who has spent time at dozens of companies large and small, I can attest that this is how decisions are made – with gut instinct and political maneuvering.

No business should make decisions like this. In the startup world, there is especially no room for gut instead of data.

Stay tuned for next week where we propose an alternative model for ensuring that you’re launching the right ideas to your customers, in the right way at the right time.

  • Greg_Bonny

    You have figured out one of the most crucial point of a company regarding release a new product, marketing campaign & even about investing in a new line of business.

    Thanks for the above image which shows the scenario.Yeah,definitely I’ll do the needful accordingly so that i can avoid the bad decisions.

  • Claire

    It is very easy to make bad decisions.  Great infographic because this shows a lot about how to avoid it. 

  • Tammy

    Yes making bad decisions comes from lack of information. You need to consult with other experts and let them know what you are thinking of doing when it comes to your business. They may help you avoid running into pitfalls. 

  • Pam

    Looking at this infographic it is easy to see how a bad decision is made and how often it happens. Thanks for providing valuable info for business owners.

  • Rich

    Thanks. I will keep this page bookmarked as I want to do what I can to avoid making bad important decisions. I can see where I have gone wrong in the past. 

  • Chad

    Very interesting way of looking at that. Makes complete sense and making bad decisions is very easy.  

  • Tawny

    Great to see that we can easily avoid making bad decisions by looking at this. 

  • RHnick

    Thanks for your thoughts. I found a great compilation of product flops, it’s entertaining to read: http://www.dailyfinance.com/photos/top-25-biggest-product-flops-of-all-time/

    My favorite is New Coke (also pictured in this post), because it’s a clear example where a company failed to listen to their customers, and then were forced to listen and pull the product off the shelves later – far too long after they had made the decision to invest in a new product.

  • habhday

    thanks for the confirmation. I’m in the process of a start-up, one advisor didn’t wish to hear the data I offered, just kept advising how he wanted to go straight to the top over night. Slow and steady with good data in hand, is how one wins the race, so say my gut!