4 decision making insights that every executive needs to know
The ultimate value that executives bring to a firm is decision making. Strategy is knowing what to do, and, more importantly, what to not do. Strategy is a chess board o trade-offs, and the best executives are grandmasters of evaluating the costs, timing and pay-offs of certain moves.
As a tech executive, we have curated four (4) points you should keep in mind as you navigate a rapidly evolving technology landscape.
1. Systematize Decision Making
As your firm goes larger and larger, it is important to codify and build out a repeatable decision-making process that members of your organization can follow. Ray Dalio makes the business case for using radical transparency and algorithmic decision-making to create an idea meritocracy where people can speak up and say what they really think — even calling out the boss is fair game. As a business leader, it is imperative that you reduce your decision making process to a set of algorithms (rules) that your team members can use to arrive at a decision that is true – even in your absence.
Call to action:
Develop a decision-making process manual for your firm and cascade it to every level of the organization through trainings.
2. Think like an options trader
An option is a financial instrument whose value is pegged to that of an underlying asset. For example, an option can be pegged to the spot price of crude oil, and the relative value of the option will vary depending on the price of oil. Generally, options traders think in terms of potential ‘upside’ and ‘downside’. The difference between the potential upside and downside of an option is called its ‘option value’.
As a tech executive, as you consider different decision-making options, it makes sense to ask yourself two questions. Ask “what is the incremental benefit if I make this decision?” Then ask “what is the potential loss if I do nothing?” There are some decisions you will make that will create high upside, but there are other decisions you need to make in order to minimize losses. Both are important.