The scientific method vs. Zombies businesses

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Talking about business failure is a way of taking the bull by the horns. To be more prepared in the event of an emergency, it is helpful to think about this possibility.

I had to choose between business administration and economics when I was trying to decide what career path to take. The first was considered a science, while the second was an art. Management is not always an art. There is a method to manage a business that conforms to scientific standards. This involves creating a hypothesis, performing repeated experiments, gathering data, analysing it and coming to a conclusion. Do we accept or reject the hypothesis? Statistical analysis is extremely useful to understand what works and what doesn’t in a business. This will help a business grow in a way that doesn’t destroy capital or reproduce it.

A different way of looking at it is that scientific management can be described as a risk management exercise. A contract must be comprehensive if you are going to choose a supplier or partner. You can manage risk by anticipating any possible outcome. It is possible for a country such as Mexico to make it difficult to enforce the contract through litigation. This is exactly why you need to anticipate the cost. You can also seek performance guarantees, such as physical guarantees and stipulating in contract control mechanisms to ensure the financial flows of partner or supplier.

Business planning exercises are extremely helpful. It is important to think well before you act. This is why we sometimes skip the analysis phase. Our intuition may tell us to act quickly to seize the opportunity. However, improvisation is often the root cause of many business failures. It is important to think quickly, make the most of numbers and anticipate any eventualities.

I have written about the importance of having a solid exit strategy. If you feel that the business is not working, it’s important to plan for an exit as soon as possible. If you let a zombie business live because you are in love with it, it will eventually bite you. There is a time of denial, just like in zombie movies. In a zombie movie, someone might say, “Don’t kill him, she’s mine aunt, I can heal her.” If a business is struggling, “I can turn it around”, is a common excuse to not kill it at an early stage.

It’s better to close early to limit losses, to think through what went wrong, to regroup and, if necessary, to try again with a new approach. The scientific method is based on hypothesis, repeated experimentation and data collection. This is the only way you can determine if a strategy, product or innovation is viable.

Copying someone else’s business will not be an interesting venture. You won’t know all the risks and what to do if things go wrong. A bankruptcy can affect us psychologically. Despite being told there are valuable lessons from failures. We will then be afraid to begin again. Why? Our approach to the future was one that was based on imitation and improvisation. Analysis, strategy, experimentation and validation are all part of our approach to the future. Not execution and scaling.

Thinking scientifically in relation to our business can help us overcome the fear of failure. A healthy dose of rationality is the antidote for entrepreneurial irrational fear. Our success is not a result of chance but intelligent design.

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