I recently had a conversation with the CEO of a fast-growing scale-up. During our chat, he asked me how to reach optimum decisions or how to know if you are on the right path: "If I am making business decisions, is there a way to improve their chances of success by knowing they are the better option?"
While I don’t believe there’s a single right answer, I shared my thought process from my later years at Bunny Studio. Our goal was to ensure a thoughtful approach, act with intention, and maintain clear communication with the team.
Here’s a four-step approach we used:
Step 1: List Your Big Ideas
First, list your next “big ideas” or business experiments clearly for yourself and your colleagues. If your time and space allow it, you can do something as fun as a design thinking session or get more hands-on by starting with a Google Sheet. Use the format that feels good for you and your team to promote an idea-dumping stage.
Step 2: Tag Them by Effort and Impact
Next, tag these ideas in terms of effort and impact. I prefer a straightforward approach I learned from a former colleague. For effort, tag each idea as: Piece of cake, Doable, Chuck Norris. For impact, use: Low, Medium, High. Depending on the time you have, you can get more detailed and add formulas to determine effort and impact more precisely. But I wouldn’t start here. Let your system grow over time if it really asks for it.
That said, if you’re working with colleagues, I’d recommend that everyone list their ideas separately, including their effort and impact. Then, come together to discuss them. This is valuable because different perspectives can debate if an idea appears multiple times, and whether the comprehension of effort and impact is similar or not. Reviewing the work in this order helps avoid confirmation bias.
Step 3: Analyze and Refine
After this, you’ll end up with a list of 10, 30, or 70 ideas, depending on your team's stage and size. In most cases, 90% will be either too complex for their impact, or even if feasible, their impact does not correlate to the state of your company.
Step 4: Challenge Your Contenders
Next, you’ll have a good 10% of potential ideas to pursue. Now break them into hypotheses. What are the inputs of your hypothesis and what is the output that you expect? Is the hypothesis reasonable? For instance, if it’s an acquisition effort, map out the journey of your hypotheses. How many reach-outs do your salespeople need to make each week? How many reach-outs will engage? How many of those will become leads? How many will convert? How long will it take? What will be the ticket price? What’s the cost of supporting this experiment? How long will it run? What’s the success threshold? Does its impact align with your company objectives?
Then, challenge these hypotheses with others. Are the inputs reasonable? Do you have the resources to complete the reach-out effort? Will you have people picking up the phone to manage the calls you expect? Does your product have the required features to manage a new conversion funnel? How much time will it take for engineering to develop the specific requirement? Can your budget support the cost of the experiment? If you're a startup of three, get another pair of eyes to avoid confirmation bias. If you're a scale-up, involve different levels of your team, including those outside management. If you’re a CEO exploring new markets, reach out to stakeholders in that market to brainstorm your hypotheses. After doing this, check if your initial story holds or if any part changes. Does your hypothesis still hold the same impact after these changes?
Focus on the ideas that pass this peer-review threshold and disregard those that don't.
The last time I ran this effort, we were setting hypotheses for the coming 18 months. We brainstormed close to 380 different ideas. We grouped them, discussed them, and trimmed them. After that, we had a good 20 to 30 projects for the coming 18 months and were able to prioritize 9 for the coming quarter. We focused on breaking detailed hypotheses for these and moved two of them to the backlog. Among acquisition, retention, and monetization efforts, we had 7 key hypotheses to test.
Outcome and Adaptation
Some ideas will fail, and some will succeed. Over time, a well-engineered team will build hypotheses faster, reach peer-review quickly, and increase the ratio of successful experiments. If the stage of your company allows it, you can discuss projects in terms of years—with good quarterly checkpoints. If your company is just starting, perhaps half a quarter of ideas is more than enough. Build a backlog that feels manageable for the size of your team and its stage.
That said, this approach won’t eliminate uncertainty but will improve your analytical skills for decision-making. There will always be uncertainty in new projects. You'll never have all the information. Bezos writes that a company should make decisions with 70% of the information available; otherwise, they’ll be acting too slowly. Your talent as a builder is to read the market and move towards the path you believe the market will take in the future, backed by strong analytical skills.
Final Thought
Is this too much for a startup? I don’t think so. This is a thinking phase. Without it, intensity and randomness won’t compensate.
A few weeks after my conversation with the CEO, I found the following in a book I happened to be reading:
And that’s exactly what Bazerman and Moore (2009) suggest for optimum decision -making: determine the most important principles that ought to guide your thought process and create an analytical procedure that you can systematically follow in order to de-bias your judgement. According to Kahneman (2015), a Nobel prize winning behavioural scientist and author of Thinking, Fast and Slow, this will allow you to disconnect your brain from an intuitive thinking (System 1)—often fast, effortless and emotional, and pursue a reflective thinking (System 2)—which is slower, deliberate and logical. Ideally, unhurried, intentional and effortful thinking should be used for all important decisions, including investing.1
In the book, they are referring to investment decisions in the context of buying companies. Regardless, as a builder, you make constant investment decisions that will determine the growth of your business.
Whatever decision you are making, I hope you find value in a couple of items from this approach. Regardless of whether you use one or multiple parts of this framework, my invitation would be to add a thinking phase to the rhythm and culture of your team. Gut feeling is not enough.