Due Diligence Isn’T A Strategy! Paralysis By Analysis

DUE DILIGENCE ISN’T A STRATEGY! PARALYSIS BY ANALYSIS

by Mike Manes

Dale Dauten, 'the Corporate Curmudgeon,' is one of my favorite writers. His weekly syndicated Corporate Curmudgeon, column, 'Who put the Rat in Bureaucrat?' remains a classic.

Dale’s June 15, 2003 column, 'Innovation Comes from Exploration' began with these stimulating and timely lines: 'Perhaps the most underrated sentence in our language is: ‘I don’t know.’ The voice of practicality asks, ‘What good will that do?’ The voice of adventure answers: ‘I don’t know — I just know I’m going to try.’'

His column closes with these words: 'The people who accomplish the most are rarely the most visionary, just the most experimentary, the ones who say: ‘I don’t know. Let’s do it anyway.’'

Sandwiched between this beginning and end is a most interesting observation. 'However, most creativity is not about seeing the future; it’s about accepting its unseeableness and groping ahead anyway. Innovation derives from the willingness to explore, not from hallucinations. Innovation is the call of adventure, the call of the unknown.'

If you fancy yourself a leader and these opening words don’t intrigue you, skip the balance of this story. Go back to managing.

I watch some local businesses and many clients struggle with the future. The problem is not that times are bad, but rather that they’re good. This creates a comfort zone — the most dangerous place of all for any business.

Machiavelli summed this up in his classic quote: 'There is no more delicate matter to take in hand, nor more dangerous to conduct, nor more doubtful to success than to step up as a leader in the introduction of change. For he who innovates will have for his enemies all those well off under the existing order of things and only lukewarm supporters in those better off under the new.'

We’re all aware of a few 'Great Visions.' These were winners and that’s why we acknowledge them. Had they failed, we wouldn’t know the vision and might not even remember the source.

Around 1490, a guy stood in front of Queen Isabella (in her role as a venture capitalist) and said something like, 'I have this vision. You see I really believe the world is round. I believe that if you’ll give me the resources to outfit some ships … '

A little less than 500 years later — on May 25, 1961 — John F. Kennedy said, 'I believe this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to Earth.'

These were big, bold, bodacious dreams. Maybe at their outset they were actual delusions. These were 'dice rolls' that I wouldn’t expect the ordinary leader to make. The day these visionaries spoke, their ideal exceeded the science of the day. No sane person would’ve given their OK on these projects. I’m sure these visions were voiced, decisions were made, and projects started in advance of, or in spite of, a due diligence study.

For us ordinary folks, let’s study tomorrow through the lens of mere mortals — not intimidate ourselves by benchmarking against legends about two of the world’s greatest achievements. Few businesspeople would ever attempt to mirror a president or a world-class explorer. However, we should be quite comfortable staring into the eyes of a retail storeowner and a pizza restaurant operator.

Most business leaders I know have read Good to Great. They’re publicly confident in their leadership skills and the future of their companies. At first blush, they’d be offended by the suggestion that they seek a lesson in leadership and vision from Columbus or JFK.

If you talk to these leaders in private or carefully view their organizations from the inside, you’d see very little 'new' happening. Many might even tell you about the difficulty or risk involved in change.

But suppose we use Dale Dauten’s ideas on innovation and 'do it anyway.'

I’m guessing that Sam Walton in his Arkansas five and dime store and Tom Monaghan in his Michigan pizza place probably did 'just do it anyway.' The results: WalMart/Sam’s Club and Dominos. I’d bet that they said:

My guess is that these guys had these ideas — visions — struggled with them for a few days or weeks or months, and then pulled the trigger on the concept. Made it concrete. In Dale’s terms they went into the 'experimentary' mode. They walked their talk.

A few years ago a gubernatorial candidate said, 'You can’t learn to swim in the gym. You’ve got to get in the water.' He was right. Dale is right. Leadership is about action, not foolish impulse, but thought-through action.

The Manes Theory on managing change (creating the new for tomorrow) includes four parts:

1. A Vision (something different/new)
2. A Commitment to the Vision (this separates leaders from managers)
3. A Plan
4. Implementing/Monitoring/Adjusting the Plan

This will work. If the Vision is sound you’ll know it (does it make your heart beat fast or at least make you smile?). Test the idea in your head and your heart. If it’s sound, you’ll feel it; and then commit to it. If you commit to it you must take it through a process to a conclusion. This is, as Dale says, the 'I don’t know, but I’ll do it anyway.'

Once you’re committed, you must create a plan of action. This process is called 'eating the elephant.' You must first cut your Vision into bite size pieces. After you write up the plan and complete the discussions, dialogue, and debate — jump in the water, pull the trigger, charge, take action, Just do it! Go experimentary!

My experience indicates that many leaders have an idea or realize that they must do something new. After all, the latest business books or the last seminar leader talked about change and the need for innovation. They’re leaders on the cutting end of studying change. They’ll innovate.

But just to be on the safe side (you know, prudent) they’ll conduct a due diligence, take a legal look at the plan, and maybe run it by the compliance officer.

STOP! THE DEAL IS DEAD!

The chances are that you, your organization, and its stakeholders are in a comfort zone. Change, like the weather, is something you’ll talk about but don’t or won’t really do anything about.

Working a new idea through your process is a sure way for the status quo to wring the life out of an opportunity. Process should be a tool to leverage the opportunities in your business future. As a practical matter, more often than not, this is actually a weapon used to kill threats to the status quo — the collective comfort zone.

If you don’t believe me listen after you announce your vision. You’ll hear, 'that’s a great idea; but the devil’s in the details.' Michelangelo said, 'God is in the details.' Have you ever heard that said following a new idea? If the devil’s involved, do you think the system will generate a positive result? The details are neutral — the devil or God lies in how you use them.

Due diligence is the process that allows everyone involved to CYA (a military term that means 'cover your assets'). If you’re part of the system, here’s where you hedge your bets. Rather than being a pioneer or adventurer and supporting the venture, those involved become conservators of the status quo.

They provide all the reasons why the new idea won’t work. If they don’t support the change and cite the reasons it might fail, they’re safe. If it fails, they told you so. If it succeeds, it’s proof of their exceptional talent, initiative, and effort making this 'near impossible vision' work. Once all the people in the due diligence process have covered their assets, it’s almost certain that the deal is dead. Who’d try this with all these risks attached?

Even if the leader goes ahead and forces the change or innovation a safety net has been built into the due diligence process. Obviously, if they fail, you can blame the problem on the consultants who did the due diligence because 'they should’ve stopped us.'

'It’s not our fault. We did all we could do. As a matter of fact we even had, _______________ Consultants complete our due diligence.'

Peter Drucker says, 'The only two functions in business are marketing and innovation.' Dale Dauten encourages you to be 'experimentary.' I agree.

There are also issues in terms of peoples’ willingness and ability to change: If you have people working for you who aren’t able to change — educate them. If you have people working for you who aren’t willing to change — try to create an environment in which they become willing to change themselves first, before changing your organization

If they’re neither willing nor able to change, why did you hire them and keep them on the job? What kind of leader are you? Be honest!

I believe that everyone must have innovation built into their job description, with the authority to try the new and be held accountable for doing so or not doing so. The system should measure risks before venturing out, but it should evaluate these risks with an eye for success/adventure, rather than focusing on failure.

Build systems that reward innovation and facilitate experimentation, action, and refinement. Make your process one of ready, aim, fire. Then check your target (results), zero in your weapon and begin the process again. Repeat as needed.

Remember the slogan from AIG — 'the greatest risk is not taking one.'