The $50 solution to the ridiculous way business proposals are reviewed

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This article first appeared in Business Insider on 3rd December 2015 here

You are on the market, looking for that special someone. You have a vision in mind, a picture of that wonderful partner, so what do you do?

Perhaps you take a leaf out of classic management texts and write a Request For Proposal (RFP) from potential matches who believe they can meet your exact criteria of “special someone”.

Starting with the basics, you want to know their name, age and address. From there you move onto family history, medical history, previous relationships, addictions, dreams and aspirations. If they pass, you might request the last three years of income tax returns, current bank account balances, and recent pay slips – after all, you need to know if they are financially robust. You want to know projected cash flows and the anticipated personal balance sheet of the would-be applicant well into the future.

Armed with all this you screen the applicants. Literally. On a screen. You sit inside in your climate controlled room, and scroll through the applications. Finally, you choose someone, followed by a wedding invitation for them to accept.

Ridiculous right?

You can’t choose a life partner like that. Way too theoretical. Way too hypothetical. Way too much guesswork.

Then why do we allocate our commercial funding for ideas in much the same way?

We debate the theoretical merits of ideas in an office on screens and whiteboards. We craft gorgeous looking cash-flow forecasts using perishable (or perished) assumptions about the commercial landscape. We copy and paste the formula across into those future columns and check the result in the bottom right hand box. Provided it clears our required rate of return, we then allocate the capital and begin spending.

It is risk management through analysis.

With our love life, we manage risk with action. We understand that we cannot know in the abstract. The only way to manage risk with the wrong choice of person is to experiment. So, we go for drinks.

Marcus Crow

MARCUS CROW

Drinks are a $50 experiment to find out if the idea (of them being our life partner) may work. We invest this small amount of capital followed by an hour or two of our time, to start learning the merits of this idea. We manage risk with a pre-loaded text message to our best mate “if you receive this message, ring me back and say my Mum is sick and needs me”.

This is how we mitigate the downside if it all goes wrong. No harm done, 50 bucks expensed to learn that this person is not for me.

On the other hand, if the drink experiment goes well, we invest more capital. We might go for dinner. A larger experiment to further learn the quality of this idea (is this person suitable to meet my parents and friends?). This same behaviour is now called for in our boardrooms, workshops and brainstorms.

Stop debating ideas with theory and opinion, instead take them for drinks. Spend $50 or $100, followed by an hour or two of your time to experiment.

Try the idea with one customer tomorrow. Share the idea with a hand-drawn mock-up of the concept or build a low-resolution quick and dirty proto-type. Listen and pay attention to their reactions, questions, confusions, and delights. Make notes, ask them questions and then do it again. Maybe another round of drinks for the same idea or maybe a different idea all together.

If all goes smoothly, take the idea for dinner. Three hundred dollars and a few hours of time to see what happens. Take away what went wrong and what went well so you can re-adjust the idea. Through this cannot-know-in-advance emergent process, the good ideas will shine through. The end result may appear differently, but the changes will have been implemented from action and reaction in the real world, not a management opinion on a whiteboard inside an office.

Finally, when the idea is in great shape, and you have had plenty of nights out together, you will be ready for a long term relationship in a serious way. Major capital expenditure, big commitments and much more fanfare and ceremony.

When you retell the story of your successful idea, you will recall fondly the first round of drinks you shared where you felt that flush from the twinkle in their promising eye.

The best $50 you ever spent.

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