Wednesday, July 4, 2007

Dealing With Options

It seems that opportunity ebbs and flows like the tides. Recently it seems like a game of Whac-A-Mole around here with lots of potential projects coming in, leaving us wondering which to select and which to avoid. Exactly how does one make the best selection, improving one’s rewards while minimizing potential losses?

I’m not convinced Whac-A-Mole is the right approach for dealing with future planning. This arcade machine consists of a soft mallet used to pound on dummy heads that randomly pop up from a waist level cabinet. The more heads you hit, the higher your score. The heads pop up slowly to begin with and then accelerate as the game progresses.

Whac-A-Mole was invented in 1971 by Aaron Fechter of Creative Engineering, who sold it to a carnival operator without patenting it. Eventually another firm copied it (purportedly even taking molds from the original) while the creator went on to found a pizza chain and ended up being the biggest customer of the popular arcade game. A fine example of intertwined risk and reward.

Yet how does one develop the appropriate response processes to both minimize threat and maximize opportunity? A commonly used tool to do so is called a Risk Management Plan. Generally speaking, a good risk management plan contains several key components: a definition as to who owns the risk, probability for success, impact, and urgency. It often involves thresholds specific to resources, cost, and of time. Generally a schedule is included.

Often a risk register is also included, with prioritizes each project and its risks, near and long term risks, qualitative risk analyses, and a watch list dealing with lower priority risks. Once completed, a risk register comprises two main parts for dealing with positive and negative risks.

There are three strategies for negative risks- avoidance, transfer, and mitigation. Nothing different than what we do everyday in our own lives. Avoidance changes the plan and typically involves removing a threat by changing or reducing scope. Transfer generally involves moving the risk to someone else and paying them a premium to do so. Mitigating the risk reduces the impact to an acceptable level, often by adding redundancy or making the process less complicated.

Positive risks are all about share and exploiting the opportunity to maximum effect. The three strategies are generally simplified down where one shares, enhances, and eventually exploits the risk.

Sharing responsibility and accountability with another may give a team a great chance to effectively seize an opportunity. Enhancing a risk involves increasing the probability of success by improving the chances of the trigger conditions. Exploiting a risk involves using the best people and technology available to rapidly affect the outcome positively.

So once we’re done thinking through our response strategies and contingent responses we hope to make the best choices. Like Whac-A-Mole, we’re pounding away right now hoping we’re making the right decisions and aligning with the right folks. Hopefully we’ll couple the right logic to it as well, instead of pounding away and hoping for the best.

Perhaps we should consider the home version of Whac-A-Mole as a good training class of how not to predict the future. I doubt the IRS would allow that write-off.

Summer is a great time to plan and think about future opportunities, as well as developing the new skills where necessary that can augment your current capabilities. Perhaps getting LEED certification, the appropriate contractor’s license, implementing a CRM plan, or figuring out a way to drive new businesses to your website. The sheer amount of easily available content associated with these new activities on the web is amazing, and many of the tools are free for those willing to take a few minutes to figure them out.

I’ve been particularly impressed with some of the free website analytic programs recently made available. After inserting a bit of html code on your website and waiting a day, Google Analytics allows you to get in-depth information on your website’s visitors. It maps where your visitors are from on a world map, which pages are the most popular, how long they looked, what pages they connected in from, and which page they exited out from, and which pages are boring them. One can’t help but think we could use a similar analytics page on our own projects to optimize opportunity. Last month our web hosting company was offering similar information for only $3,500 a year. Now it’s free.

Planning for success certainly beats the Whac-A-Mole approach for figuring out how to most efficiently use one’s limited resources. A good response plan for the future is important, along with choosing a quality strategic direction that allows one to quickly quantify and qualify whether an opportunity is in one’s own best long term interest.