What percentage of the important decisions you have to make are clear cut and straightforward? From my experience — as a business entrepreneur and a former corporate executive — the number’s pretty small.
Business decision-making is all about tradeoffs. There are the professional tradeoffs each one of us has to make, like whether to stay in a safe job that pays well or take a big risk on a startup or by becoming an entrepreneur. Then there are tradeoffs that can make or break a company.
Look at social networking phenomenon Twitter, which according to eMarketer, is expected to grow from 6 million U.S. users in 2008 to 18 million this year, a 200 percent growth rate. Nevertheless, Twitter is a venture-funded company that’s raised $55 million to date. Why hasn’t it begun to generate revenue yet?
Well, the management team has an extraordinary challenge of figuring out how to monetize its large and growing user base without losing the grassroots “viralness” that got it to where it is. For example, if it allows advertising on the site, will that have an “AOL” effect and scare people off?
Then there’s the widely rumored Sprint Nextel - Deutsche Telekom (T-Mobile parent) merger. DT is desperately trying to expand its U.S. presence, and since T-Mobile’s growth seems to have stalled, the only way to do that is by merging with Sprint to edge out AT&T and become the number two U.S. player behind Verizon.
But there are lots of barriers to a merger, not least of which are network incompatibility and regulatory approval. Moreover, big mergers are at best risky ventures, and nobody knows that better than Sprint CEO Dan Hesse who has been contending with Sprint’s merger with Nextel ever since he took the reins at the troubled telecom company.
Deutsche Telekim CEO René Obermann summed it up pretty well when he said, “Our mobile communications business in the USA generates a mixed picture.” Which is one way of saying he doesn’t know which way to go.
One of the most notorious and sticky tradeoffs in the corporate world is when a board of directors has to decide whether or not to fire a CEO. As more than one venture capitalist has shared with me in the past, the loss of a CEO or a founder — even if he is just stepping down from the top job — can be disruptive and counterproductive.
But waiting too long to make a change can mean a leader that lacks the skills to take the company to the next level, which can have just as detrimental an effect. The wrong decision, either way, can be a company killer.
Making the right tradeoffs can be equally critical to small businesses. I was talking with my dentist the other day. She and her husband, who share a practice, had an opportunity to move to a more favorable location. But while they might gain new clients, the move would also risk alienating existing clients.
These all sound like very different situations, but there are common practices for navigating complex tradeoffs and making the right business decisions. So, while I work on a post about which practices I use, why don’t you fill us in on what works for you?
