⇥ Of eggs and baskets

All companies—big and small—make mistakes (big and small). It’s just the nature of business that one is forever trying to divine the tastes and needs of customers who never seem to quite know what they themselves want or are looking for, and so it’s inevitable that business decisions are a hit and miss, regardless of how much thought and work goes behind them.

When making a business decision, the payoff is inversely proportional to the risk—a decision that is counterintuitive is, by definition, an unlikely choice for your competition, which means that, if successful, it will bring a significant benefit. Success alone, however, is not enough to bring the payoff, because a simple idea is easily copied by the competition, thus mitigating the potential return.

A business decision that brings in a significant benefit, therefore, must be both counterintuitive and costly in order to bring a significant benefit. This means that the downside of an idea that has a lot of potential is… the potential for a lot of downside.

I am, by nature, a very cautious person, which, I would assume, has to be a common characteristic among people who run their business the way I do: MTA has no debts, does not use its credit facilities and has adopted a simple rule for every one of its activities—there has to be a clear path to measurable profitability within a well-defined period of time.

As you can see, I don’t really like big gambles, and I prefer the Japanese principle of Kaizen to the cowboy approach of big leaps and bounds. While none of our products is ever perfect, we continue to alter them by means of small, simple changes aimed at improvement. When a change doesn’t work out, we simply step back to the “last good iteration” and move forward again in a different direction.

There are two corollaries to doing business this way. First, big spikes are unlikely both ways—I would be surprised if our business came crashing down around our ears all of a sudden and, at the same time, I am not expecting our revenues to triple overnight, either. Therefore, this approach to business management is for those who are in it for the long haul.

Second, it’s important to have a plan and not to fall into the trap of feeling like you have to catch up to your competition every time they come up with an idea that you think is cool. It’s best to keep plugging away at those things that you decided are important, and integrating other ideas where they fit your plans.