GUEST POST from Mike Shipulski

If you run a company, the most important thing you can control is how you allocate your resources. You can’t control how the people in your company will respond to input, but you can choose the projects they work on. You can’t control which features and functions your customers will like, but you can choose which features and functions become part of the next product. And you can’t control if a new technology will work, but you can choose the design space to investigate. The open question – How to choose in a way that increases your probability of success?

If you want to buy a company, the most important thing you can control is how you allocate your resources. In this case, the resources are your hard-earned money and your choice is which company to buy. The open question – How to choose in a way that increases your probability of success?

If you want to invest in a startup company, the most important thing you can control is how you allocate your resources. This case is the same as the previous one – your money is the resource and the company you choose defines how you allocate your resources. This one is a little different in that the uncertainty is greater, but so is the potential reward. Again, the same open question – How to choose in a way that increases your probability of success?

Taking a step back, the three scenarios can be generalized into a category called a “system.” And the question becomes – how to understand the system in a way that improves resource allocation and increases your probability of success?

These people systems aren’t predictable in an if-A-then-B way. But they do have personalities or dispositions. They’ve got characteristics similar to hurricanes. A hurricane’s exact path cannot be forecasted, the meteorologist can use history and environmental conditions to broadly define regions where the probability of danger is higher. The meteorologist continually monitors the current state of the hurricane (the system as it is) and tracks its position over time to get an idea of its trajectory (a system’s momentum). The key to understanding where the hurricane could go next: where it is right now (current state), how it got there (how it has behaved over time), and how have other hurricanes tracked under similar conditions (its disposition). And it’s the same for systems.

To improve your understanding of how your system may respond, understand it as it is. Define the elements and how those elements interact. Then, work backward in time to understand previous generations of the system. Which elements were improved? Which ones were added? Then, like the meteorologist, start at the system’s genesis and move forward to the present to understand its path. Use the knowledge of its path and the knowledge of systems (it’s important to be the one that improves the immature elements of the system and systems follow S-curves until the S-curve flattens) to broadly define regions where the probability of success is higher.

These methods won’t guarantee success. But, they will help you choose projects, choose acquisitions, choose technologies, and choose startups in a way that increases your probability of success.

Image credits: Pexels

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