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Don't Pin Success on Hope: Predict & Prevent Failure

July 6, 2017

In Deepwater Horizon, a film about the massive BP oil spill of 2010, the lead character played by Mark Wahlberg warns BP executives against cutting corners to save money: “Hope ain’t a tactic,” echoing the sentiment of a statement by James Cameron, “Hope is not a strategy.”

That advice applies far beyond BP’s disaster. In the business world, hope has no bearing on your odds of success vs. failure – and it’s also the wrong way to fail.

“So many organizations just hope things will work out,” says Dr. Matt Semadeni, professor of strategy at the W. P. Carey School of Business at Arizona State University. “But hope is a four-letter word. It takes you to a really bad place if you’re relying on it as a strategy.”

Semadeni says that’s why leaders must be asked, “Did you go through the process? Did you talk to the stakeholders? Are we even asking the right questions?”

“Because it’s important to focus on what is truly unknown,” Semadeni says. “We don’t need to spend a lot of time on what we already know.”

Mysteries vs. puzzles

Your approach depends on the difference between mysteries and puzzles, says Semadeni. “If you’re dealing with a mystery, there’s very little you can do upfront to mitigate failure. There’s almost a 100% probability of failing, so the key is accepting and understanding that and then rewiring the organization so it has a better chance of succeeding at failure.”

“So many organizations just hope, but hope is a four-letter word. It takes you to a really bad place if you’re relying on it as a strategy.” Click to tweet

“But if you’re dealing with a puzzle, the likelihood of failure is lower because you can follow well-defined processes to get to an acceptable end,” he says. And while “succeeding at failure” may sound like a contradiction, Semadeni says success can come in the form of improvements in predicting.

“When you do have true unknowns, use the scientific method – go out and collect data, talk to customers, triangulate. Do whatever is needed to build knowledge,” he says. “I’ve sought to turn my class into a knowledge creation engine where students go out and test whether their assumptions and unknowns are right or wrong. Because often we don’t test those things and then we make big decisions based on flimsy assumptions.”

As technological advancement grows faster than people’s ability to adapt, uncertainty can be the result. That makes it harder for organizations to improve their prediction abilities or reduce their incidence of failure, Semadeni says, “particularly if you’ve got competing technological standards.”

As an example, he points to the music industry’s competition between various audio formats such as MP3, ACC, OGG, etc. or DVD formats Blu-ray and HD DVD. “Various standards are out there until one emerges dominant. When you don’t know which way the market will go, you have to hedge your bets. So until one standard emerges and uncertainty goes away, the market can’t move forward.”

Avoiding ‘flimsy assumptions’

To get past those flimsy assumptions, Semadeni starts with a simple approach: “I tell my students there are three buckets for any question or issue – what is known, what is unknown, and what is assumed. The thing that will trip you up every time is the assumptions.”

“We generally make big decisions based on pretty flimsy assumptions.” Click to tweet

“When I discuss strategy with students, one of my critiques is, ‘Can we assume that our competitors are stupid, because it seems like we are saying our competitors are not seeing the same trends we see, they’re not going to react to what we’re reacting to, and we’re going to have this market all to ourselves?’ And they respond, ‘No, our competitors are actually smart.’”

If that’s the case, “then we have to factor that into the model,” he continues. “How are our competitors going to respond to our investments or our product releases? They are not going to sit on their hands. And if they hit us with a price drop and the bottom falls out of the market, this could be cataclysmic to both firms.”

“Thinking about that reality ahead of time and working through the various scenarios can be very powerful.”

A process for predicting

Semadeni says it’s up to leaders to ensure their organizations improve at predicting. “The better companies and organizations – the ones that have really learned from this – have a definitive process.”

That process should include vetting the effort with internal audiences, especially those with different opinions, and studying larger external trends to anticipate roadblocks or detours. “If you’ve done those, then you have a more holistic picture. But unfortunately, we almost always just cover our eyes and point – and hope we pick right.”

Which brings us back to that four-letter word – hope.

“Hope is not a strategy, so get better at predicting. It’s a discipline, and it’s a process to sit down and work through all the possibilities,” Semadeni says. “But that’s how you learn to succeed through failure.”

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