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The scientific method vs. Zombie businesses

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

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Talking about business failure is a way of taking the bull by the horns. Thinking about this possibility is useful, in case the event materializes, to be better prepared.

When I was choosing which career to study, my dilemma was limited to degrees in economics and business administration, the first considered a science and the second an art. But management is not necessarily an art. Yes, there is a way to manage a business according to scientific canons.

This involves posing a hypothesis, doing a repeated experiment, collecting data on the result, analyzing it, and reaching a conclusion: do we accept the hypothesis or reject it? Statistical analysis is extremely useful to understand what works and what doesn’t in a business. If a business grows in this way, it will perfect the way not to destroy capital and to reproduce it.

Another way to think about it is that scientific management is a risk management exercise. If you choose a partner or a supplier, you need a contract that is very comprehensive. Anticipating any possibility is one way to manage risk. In a country like Mexico, it is possible that enforcing the contract in litigation is very difficult and this is precisely one of the costs that must be anticipated. In addition to seeking performance guarantees: such as physical guarantees or stipulating in the contract control mechanisms for the financial flows of the partner or supplier.

Planning exercises in business are very helpful. Thinking very well before acting is essential. Sometimes we skip this period of analysis because intuition tells us that we must seize the business opportunity quickly, but that improvisation is the cause of the failure of many businesses. You have to think fast, do the best numbers, anticipate all possible contingencies.

In other articles on this topic, I said that it is important to have a good exit strategy for a business. It is important to operate that exit relatively early, if you sense that the business has no longer worked. If you let a zombie business live because you are in love with it, it will eventually bite you. Just like in zombie movies, there is a period of denial. “Don’t kill her, she’s my aunt, I’ll be able to heal her,” someone might say in a zombie movie. “I can turn this around, you will see that the strategy will work, it is something that they know us in the market”, is the typical excuse not to kill a business at an early stage if it is not giving results.

It is better to close early, limit losses, think about what went wrong, regroup, and if there is still capital, desire, and time to live, try again, but with a different approach. Hypothesis, repeated experimentation, data collection, analysis, conclusion: the scientific method. It is the only way to know if a certain strategy, if a certain product, if a certain innovation will work or not.

If you don’t want to do that, and you copy someone else’s business, it won’t be interesting, you won’t be aware of all the risks, and when things go wrong you won’t even know what hit you. A bankruptcy affects us psychologically, despite being told that there are important lessons learned from failures. Then we will be afraid to start again. Why? Because our approach to the future was one of imitation, of improvisation. Not of analysis, strategy, experimentation, validation, and then execution and scaling.

Thinking scientifically about our business helps us face the irrational fear of failure. The antidote to the irrational fear of entrepreneurship is an adequate dose of rationality. May our success be the work of our intelligent design, not chance.

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