From the boardroom to success: Mastering strategic decisions as CEO
ILLUSTRATION BY RUTH MACAPAGAL
One small hole can sink an entire ship. Most businesses, including today’s market leaders, are just one to two major strategic decisions away from complete failure. Failure requires adequate planning. So does success. In my work as the “mentor of the giants,” as Fortune has called me, and in my interaction with the world’s largest companies and famous entrepreneurs, I have seen that what separates the winners from the losers is proper planning, along with strategic decisions. Most people and companies plan too little and spend too much time being busy.
Design precedes execution. It’s not about how hard you row; it’s about the boat you’re in. This puts even more emphasis on strategy. As a business leader, your role is to know where the music will be playing a month, a year or two years from now.
In the high-stakes world of business, where the difference between success and failure often rests on a single decision, CEOs and business owners hold the pivotal role. Their strategic decisions can shape the future of the entire organization, steering it toward prosperity or peril. But how do the best leaders make strategic decisions?
Step 1: Write it down
First of all, I always advise our Fortune 500 CEO and wealthy business owner clients to write down their assumptions and principles once they make a decision. Document the process. Why? So you can check back later which principles or assumptions were wrong. We do the same with our clients when we guide them in their strategic planning. This is regardless of whether it is for a company or a family business conglomerate: You need to list all the assumptions and principles underlying your plans.
Even more important than the plans you make are the assumptions behind them.
Step 2: Identify the nature of the decision
Taking a page from Jeff Bezos’ playbook, the first step is to identify the nature of the decision. Is it a Type 1, irreversible decision or a Type 2, changeable decision? By categorizing your decisions, you can determine the amount of time and resources you should allocate to the decision-making process.
Step 3: Gather information and perspectives
Just as Reed Hastings fosters a culture of “freedom and responsibility” at Netflix, involve your team in the decision-making process. Gather a variety of perspectives and encourage open discussion. This will not only ensure that you have all the necessary information, but it will also promote a sense of ownership among your team.
Step 4: Evaluate risks and rewards
Elon Musk’s willingness to embrace unconventional ideas is largely due to his ability to evaluate the potential risks and rewards. When faced with a decision, weigh the potential benefits against the possible risks. What could you gain? What could you lose? This can help you determine whether the potential reward is worth the risk.
Step 5: Consider long-term impacts
Indra Nooyi’s ‘Performance with Purpose’ initiative at PepsiCo demonstrated her commitment to long-term strategic vision. Similarly, when making a decision, consider its long-term impacts. How will this decision affect your organization in the future? Will it align with your organization’s mission and values?
Step 6: Avoid decision paralysis
Not all information is important. The best decision-makers determine which are the key variables that are most important for their decision and rely on only a few. Then they decide. The unsuccessful hesitate and wait in the hope to have 100 percent of the information, which never comes. Over-analysis leads to paralysis.
Step 7: Make a decision and take action
Finally, once you’ve gathered information, evaluated the risks and rewards, and considered the long-term impacts, it’s time to make a decision. Remember, even the most well-thought out decision is worthless without action. Once you’ve made your decision, communicate it clearly to your team and take the necessary steps to implement it.
This process will not only help you make more strategic decisions, but it will also promote a culture of open communication, calculated risk-taking and long-term thinking within your organization.
Elon Musk: Embrace the unconventional
Let’s delve into the decision-making process of some of the world’s most successful CEOs and entrepreneurs to uncover their secrets.
When it comes to risk-taking and out-of-the-box thinking, few can match Tesla and SpaceX founder Elon Musk. His decision-making style is characterized by his willingness to embrace unconventional ideas and push boundaries. One such strategic decision was his commitment to develop electric vehicles at Tesla when the industry was still in its infancy. Despite the doubters and the risks, Musk saw the potential in what others dismissed and he relentlessly pursued his vision. Today, Tesla is a leader in the electric vehicle industry, a testament to the power of unconventional decision-making.
The takeaway: Don’t shy away from unconventional ideas. They may carry risks but they also have the potential to disrupt industries and put your organization at the forefront of innovation.
Jeff Bezos: 2 types of decisions
Jeff Bezos, the founder of Amazon, has a unique framework for making strategic decisions. He categorizes decisions into two types: Type 1 decisions, which are irreversible and must be made with great care, and Type 2 decisions, which are changeable and can be made quickly. Bezos argues that many organizations treat too many decisions as Type 1, slowing down their decision-making process and stifling innovation.
One example of Bezos applying this framework was Amazon’s decision to launch Amazon Prime, a Type 2 decision. Despite initial skepticism, Bezos pushed forward because he recognized that the decision could be reversed if it was unsuccessful. Today, the streaming service is a major part of Amazon’s business model, contributing significantly to its success.
The takeaway: Understand the nature of your decisions. Not every decision is a high-stakes gamble. By identifying which decisions can be easily reversed, you can make faster, more confident choices.
Reed Hastings: Culture of freedom and responsibility
Reed Hastings, cofounder and co-CEO of Netflix, made a key strategic decision to foster a culture of “freedom and responsibility” at Netflix. Employees are given the autonomy to make decisions and take risks, while also being held accountable for the outcomes. This culture has led to innovations like the decision to pivot to streaming and produce original content, keeping Netflix ahead of its competition.
The takeaway: Empower your team to make decisions. By fostering a culture of autonomy and accountability, you can inspire innovation and agility within your organization.
In conclusion, the best strategic decisions are not made in a vacuum. They are the result of a willingness to embrace unconventional ideas, an understanding of the nature of decisions, a forward-thinking vision, and an empowered and accountable team. Strategic decisions, when made thoughtfully and decisively, can lead to extraordinary success. INQ
