Evaluating Opportunities and Threats - Three Key Questions
The enterpriship model describes the four activities that guide entrepreneurship, leadership, and management: establishing the mindset, enabling action, building relationships, and establishing order. Inherent within this model are three questions that must be considered when evaluating opportunities or responding to threats that affect either the current or future state. These questions address possibilities, assumptions, and probabilities.
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Enterpriship is the process of building enterprises by transforming innovative ideas into value, influencing others, and managing resources. Every successful idea starts as a vision in an individual's mind, and is transformed in value through hard work (and maybe luck too).
Mindsets can become fixed and difficult to change. Even the most innovative and action-oriented people can become comfortable in their current state, and may not want or perceive a need to change. Without an incentive, they justify prior behaviors and decisions, even if they suffer some pain or inconvenience as a consequence.
However, the only certainty is uncertainty, and business conditions can change rapidly. When presented with an opportunity or threat, entrepreneurs, leaders, and managers must consider options and then challenge them in the context of three questions from which decisions can be made:
- What are the possibilities?
- What are the assumptions?
- What are the probabilities?
These questions are addressed during the planning and policy development process, where alternative scenarios are considered, and decisions to commit are made based upon thorough analysis. In this process, facts and information may be widely available from which conclusions are drawn, and recommended courses of action are formulated. However, sometimes it is necessary to make a quick decision in a short period of time with only limited facts and information.
Whether time is available or is of the essence, and whether facts and information are widely available or not, answers to questions regarding possibilities, assumptions, and probabilities establish the mindset and intended actions going forward to address opportunities and threats.
What are the possibilities?
Possibilities define what can be achieved within the capabilities of resources that are available or can be acquired. Capability defines the capacity and ability of people, processes and functions, and products and/services to realize potential quality and value within certain time and cost parameters. Possibilities lead to options from which decisions can be made.
What are the assumptions?
Assumptions define assertions and propositions about the past, present, future. An assertion is a declaration about an event or condition; a proposition is a statement for consideration and acceptance.
Assumptions support options and are fundamental to decisions. Decisions to invest in research and development, build infrastructure, enter markets, offer products and/or services, and build relationships with constituencies are all based upon assumptions, whether right or wrong.
It is not so much the decision itself, but the assumptions behind it that matter. Assumptions are often justified, not challenged, leading to wrong decisions regarding ideas, time, or place. It is hard to earn back destroyed value if a wrong assumption is made. Typical quotes resulting from wrong assumptions include:
"Location, location, location!!!"
"An idea that was ahead of its time."
"That idea's moment has passed."
"The value proposition offered too many features and not enough benefits."
"Actual revenue was about half of expectation, and expenses were about double."
What are the probabilities?
There is an adage that suggests that "one should never assume." However, business cannot be conducted without assumptions. Options and assumptions lead to potential outcomes. It important to know what to do when certain outcomes arise, whether expected or not.
Probability is the likelihood of outcome - that an event can occur or a condition can arise. Therefore, every option and assumption should be challenged in terms of potential outcomes, even if on a simple "high, medium, and low" scale. Outcomes can then be framed in terms of "what if" scenarios that describe the best and worst cases, and those somewhere in between, with alternative courses of action. Hence decisions can be made based upon intended actions, with known contingencies in place, just in case an actual outcome differs from expected.
The cost of no decision may be higher than the wrong one. Therefore, opportunities and threats should be evaluated in terms of possibilities, assumptions, and probabilities, and then decisions to proceed should be made with anticipation, deliberation, and contingency.
Considering possibilities, assumptions, and probabilities is an enterpriship (entrepreneurship, leadership, and management) competency.
