Loss Aversion and the Importance of Changing Your Lens

Loss Aversion and the Importance of Changing Your Lens

There is a concept called Loss Aversion that suggests that we hate losing exactly twice as much as we love winning.  That concept drives our behaviour in predictable ways and is a key driver for our aversion to failure in our work.  For that same reason I think it is twice as important to focus on areas of challenge with the right lens in order to accept our failures early and maximize our potential for success long term.In the late 1970's there was a study done by psychologists Daniel Kahneman and Amos Tversky that demonstrates the loss aversion phenomenon.In the first experiment they asked students to choose between two bets:a bet with 100% chance of winning $3,000 a bet  with an 80% chance of winning $4,000 and a 20% chance of winning nothingIn this experiment they found that 80% of the students would choose the $3,000 bet even though the second bet had a higher expected payoff.  (Bet 1 expected payoff...
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This Makes You… Think?

This Makes You… Think?

I came across this graffiti painted on the back wall of a building at Yonge and Greenfield in Toronto and I was drawn to it instantly.  Most tagging mostly makes me angry at the gall of people who violate the property rights of others, but this one was different - it had a message.If you can't read it clearly in the picture, the tag reads:THIS MAKES YOU...(  ) ANGRY (  ) UPSET ($) THINKI've shown this to a few people and I find it interesting the mix of reactions I've received ranging from "Yah so?" to "Wow that's deep", but I wanted to share my thoughts on it as it relates to the business world.So often in our work lives we do things the right way - we do things to be respectful of others opinions, to not rock the boat, to keep our heads down and to hold true to what we think people expect of us.And then one day you'll run across...
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The Power of Radical Goals

The Power of Radical Goals

How do you set goals in your organization today?  Surely by now we all define our goals according to the guidelines of SMART (Specific, Measurable, Attainable, Realistic and Timely), so everythings great right?What if I told you that SMART goals are self-limiting?  What if I told you that if you insist on defining SMART goals that your business will not achieve its potential and is at risk of being disrupted?Heresy right?Let me explain.Under conventional wisdom, we spend lots of time defining goals that we believe are 'stretch' goals, but that we are certain are attainable if our team achieves their potential.  We define specific measures, set the bar at what seems like realistic and attainable heights (but just far out enough as to require us to perform at a high level to attain them), and then we set our team free to deliver on those goals.Think of the types of goals you set for your teams today:  achieve year-over-year sales growth of 10%;...
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Modifying Drucker’s Five Most Important Questions

Modifying Drucker’s Five Most Important Questions

In his book The Five Most Important Questions You Will Ever Ask About Your Organization, Peter Drucker offers a tool for self-assessment and transformation in his "Five Most Important Questions You Can Ask".  The questions are designed to drive action and create focus on doing the right things to drive exceptional performance within your organization, only when I read them they fall short of delivering on what matters most.  So in the interest of challenging one of the greatest management thinkers of our time (and someone who I have great respect for) I will offer my own version of the Five Most Important Questions You Can Ask.As a starting point it's a good idea to provide some context by providing the five questions that Drucker proposed and a little bit of background as to why and with what I disagree.  Druckers questions are as follows:What is our Mission? Who is our Customer? What does the Customer Value? What are our Results? What is our Plan?When...
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Commit to making Errors of Commission

Commit to making Errors of Commission

According to Rosabeth Moss Kanter, when it comes to innovation the big mistakes are “generally not errors of commission”.  Put another way a former boss used to say “if you’re not failing you’re not trying”.   Ultimately they both mean that it’s actually the lack of innovation that is the most risky approach to doing business.So if the riskier approach is to do nothing and avoid innovation, then why are so many leaders and companies sitting on the side lines waiting for someone to invite them into the game?I believe that the answer lies in two primary factors.  First, many business owners and leaders perceive innovation as the act of taking big chances, risking on big projects with big financial costs that have low odds of success in hopes of eventually hitting one home run that will compensate for the costs of all the losers.  Second, most people are not typically programmed for a high tolerance for differences or change so...
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The Slipping Point

The Slipping Point

At some point in the evolution of even the most successful companies, an interesting thing happens – growth stalls.  Even the brightest and most experienced Entrepreneurs and managers are perplexed as the things they did to create the initial growth in the company no longer drive new revenues.  In fact if they stick with old methods and ideas things go from bad to worse as revenues and profits start to fall.  I call this moment of change a ‘slipping point’, and no business is immune to them.The reason that slipping points happen is that as companies grow their needs and markets change, but due to the slow and incremental nature of these changes they are hard to recognize until things have stalled out.The leadership skills that take a company from inception to $5 million in revenue are different than the leadership skills that are required to take a company from $5 million to $15 million.  The process of creating...
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Design Thinking and The Parable of the Fly Fisherman

Design Thinking and The Parable of the Fly Fisherman

Sunday night I got started reading my first book in a while (it is hard to get as much reading done when you're not riding the train for two hours a day). Luckily it is one that I've been looking forward to - Change by Design by Tim Brown (CEO of IDEO).  I have heard great things about the book before and I  heartily recommend it to anyone struggling with the 'old way' of creating in a corporate environment.  I believe that design thinking is simply a better term for us internal entrepreneurs who need to pitch a new approach in a more traditional company. It also reminds me of a great story that epitomizes the design thinking process - 'The Parable of the Fly Fisherman'. (more…)...
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Out Of The Box Opportunities

Out Of The Box Opportunities

There is a great article in this week's BusinessWeek magazine entitled 'Fertile Ground for Startups' that illustrates the opportunities that are at hand for truly innovative ideas in today's economy.  The article outlines that investment by angel investors and venture capitalists is up significantly over the first half of this year, and that as many as 50,000 new businesses will obtain some form of angel or venture investment in 2009 in the US.The article also highlights some of the ideas that are getting money, and there seems to be a pretty consistent theme - innovation gets investment.After the past 18-24 months of economic turmoil it shouldn't surprise anyone that it is innovation that is leading the way out of the mess.  Innovation has been a great buzzword for the past 10-15 years, but only a few of the really great companies have been able to really harness its power within their existing corporate frameworks, leaving much of the opportunity for the development...
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Appropriate Management Controls for Small Business

Appropriate Management Controls for Small Business

For those that read this blog regularly or who have spoken with me at one of the various networking events that I regularly participate in you know that my passion is in creating growth through value innovation, but I have had a couple of conversations in the past week with colleagues in other businesses about management controls so I thought I'd share my thoughts on specifically management controls and small business.One of my pet peeves (and one of the main reasons I haven't spent a lot of time in larger more bureaucratic organizations) is process for the sake of process, and I truly believe that management controls used poorly constitute exactly this problem.  One of the most innovation stifling innovations is the standard operating procedure, specifically if it implemented before there is a specific need for control or before an organization has grown to a size that would justify requiring that level of control.When speaking with one colleague he demonstrated for...
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Tips to be a more effective Networker

Tips to be a more effective Networker

As small business owners, one of the key sources of new business will be your network.  That means that the more effective you are at the art of networking, the more likely you are to generate quality leads and increase your business and professional footprint.  For those seeking new employment, the principles are the same but the target audience might differ.  I offer these tips not as someone who considers themselves as an expert in the art of networking, but as someone who is constantly learning and evolving - someone who is reaching for the stars and developing his networking skills to get there.First of all, I have to mention the best book that I have read on the subject and highly recommend that you go out and buy it and read it today:  Never Eat Alone by Keith Ferrazzi (click the link to go directly to Amazon.ca and buy it now).Let's get started with the tips:Yes You HAVE To Network Problem #1 for...
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