We're either moving forward through action, or falling behind by inaction

A question for you: what kills more businesses than bad ideas? The answer is a leader who's too afraid to decide at all. I run into this pattern pretty much every week. A business hits a certain level of success, you know, maybe they've been growing sustainably for the past 5, 6, 7 years, and then something shifts in the culture of the business. New ideas start getting filtered through the lens of, "But what if we screw up what's already working for us?" The same instinct that says, "Don't bet everything on random experiments," also says, "Don't do anything that feels uncertain." And in a moving market, everything feels uncertain. I'm talking about the aversion to risk, or actually, probably more accurately, the aversion to loss. Now, loss aversion shows up in actual brain scans. It's a real thing. Uh, Daniel Kahneman got a Nobel Prize partly for documenting all of this. Um, Kahneman with his colleague Amos Tversky, uh, did some experiments and discovered that our brains perceive losing $100 as hurting twice as much as how gaining $100 feels good. Now, this isn't some touchy-feely thing. This is a measurable neural activity in the brain. Now, think about that in a business context where entire teams depend on our choices, and we're talking about money with more zeros on the end, right? It's surely human nature for our default position to be, well, let's keep doing what got us here. Let's not rock the boat. The problem is what got us here was being willing to try things when we didn't have much to lose. We took risks when the stakes were lower. Now we've got more resources and capabilities, the ones that we didn't have in the early days, yet we're still being cautious about using them. Markets keep moving whether we want them to or not. Customer behavior shifts, new channels open up, technology changes what's expected or what's possible. And we don't get a say in any of that. It's going to happen anyway. So we need to understand that competitors with no legacy systems to protect will be more open to try those things we've already decided as being too risky. Not only that, but these more nimble competitors are able to learn and iterate faster because they're not spending energy on internal justification for why the old way still works, right? There's no political overhead. Now, business strategy people talk about exploitation versus exploration— exploiting what we already do well versus exploring new approaches. Now, both of these things matter, but as businesses mature, it seems they always lead hard into exploitation. I suppose it's not hard to understand why, because, you know, optimization claims a less variable return. Right? Exploration, by its very definition, is messy, it's unpredictable, and it's uncertain. But the point is, exploration isn't really optional for most businesses anymore. It's more a question of, do we get to explore along our timeline, or do we get forced into doing it later when we have fewer options and our backs against the wall? Blockbuster had a chance to buy Netflix back in 2000 for, I think it was, $50 million. But ultimately they walked away from the deal. Now, Blockbuster stores were profitable. I mean, late fees were basically a way to print free money, right? But a mail-order DVD business, which is what Netflix model was at the time, seemed super risky to them in comparison. If you were Blockbuster and only looked at protecting the way that you made revenue today, then the decision to back out of that deal made sense. But Blockbuster missed the larger risk of the market moving ahead without them. And as we all know, you know, there's no Blockbuster anymore. They filed for bankruptcy about 10 years later. This basic idea of risk aversion because something's new and different shows up everywhere. Businesses that succeed by doing something new turn into businesses that, that succeed by protecting what worked when they started off. The muscle that built the business then starts to wither and die from lack of use. We get good at optimization and forget how to explore. Part of the problem is that the pain from these two types of risk feels completely different and is endured over different time spans. Supposing tomorrow we launch something new and it falls flat on its face, right? We feel that hit immediately. Everyone sees it. There's a project that we need to shut down. Maybe we need to lay off some people, and there's definitely going to be a bunch of uncomfortable meetings. But if we don't launch anything and slowly lose our market position, that pain gets distributed across quarters or years. Customer churn starts rising ever so slightly. Sales win rates on new deals start to drop a couple of percentage points. Market share erodes gradually. Website traffic starts dipping. The phone doesn't ring as often, right? By the time it's obvious to everyone that we should have acted earlier, we're already way behind. Now, throughout most of whom— human evolution, loss aversion made sense. Protecting what you had usually mattered more than getting more of it. Losing your winter food could mean you'd starve to death, but not finding extra food just meant you didn't have extra food. But business operates under different rules. Standing still is often riskier than moving. We just don't feel it that way because the pain from standing still accumulates slowly. You know, it's like the story of the frog in a pan of water. Failed experiments, on the other hand, hurt immediately. When what's, when what's working eventually stops working, we can point the blame on market changes or new technology or shifting customer preferences. Sure. But what we're scared to admit is that we saw it coming and we decided that our response was going to be riskier than just waiting it out. Now, there are a dozen ways to dress this up in business language, right? You can call it risk management, protecting shareholder value, fiscal responsibility, whatever. But underneath all of this terminology, what we're talking about is nothing more than fear. The businesses that survive long term are the ones that are willing to disrupt themselves. They don't wait for perfect information or guaranteed outcomes because then that stuff's never going to come. They recognize that the cost of a failed experiment is always smaller than the cost of standing still while the market moves. Right now, most of us can experiment while we have resources and the time to take those gambles, to learn, to test, to adjust. We can afford to get it wrong a few times. But if we wait too long, we're compelled to do the same thing, but now we're under pressure with less money and less time to deliver. We get forced into it by a competitor rising or by customers leaving. The need doesn't disappear, it's just that the conditions for change get worse. Markets continue to do what they're gonna do, and they won't put things on hold for us while we're trying to catch up. What worked last year works a little less well this year. New technology creates options that make old approaches look antiquated and no longer relevant to customers. Standing still isn't actually on the menu, even if it may feel like the safe choice. We're either moving forward through actions or falling behind by inaction. The businesses that make it aren't necessarily making better decisions. They're just keeping themselves open to keep making any decision, even if it might disrupt what's currently working. Because if we won't disrupt what we've built, somebody else will come along and do it for us, and they definitely won't check in with us first. Thanks for listening. If you like what you heard, please pass it on. I'm not saying I'm right, I'm saying many out there are wrong. 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