28 Oct Luck as a Long-Term Strategy
Luck is not a business strategy because it can't be reproduced, right?
Certain words are a dilemma in business. Luck is one of those words. Luck is what most companies would love to have but few want to pursue. Luck is everywhere in business history -- in stories, myths, case studies, testimonials -- but mysteriously absent in business operations (for who funds a Division of Luck or Chief Luck Officer?). Luck is also missing as a course of study in today's MBA programs, though empirical research clearly shows that "managers seem more willing to acknowledge the role played by luck as they progress into greater levels of responsibility and control." *
How can something so desirable be so easily ignored? Seems obvious without thinking about it, of course. Luck is fickle. Why gamble hard-one company resources in the hope that something good might happen? Moreover, reliance on luck would undermine the value of know-how and experience. Who needs luck when you've got an expert! And, damningly, luck just can't be reproduced, or lotteries would be out of business.
But what if luck could be reproduced? What if it could be manufactured through great planning and preparation? Not the infinitesimally small "just won the lottery" luck, but sustained good fortune over a long period of time? Louis Pasteur, the great French biochemist, once said "chance favors the prepared mind." Could we shape our organization to maximize its potential for good luck? Maybe the place to start is to understand what luck is.
Luck is usually defined by at least three key components: **
- Infrequency ... it only happens rarely.
- Significance ... it only matters when the outcome has big impact.
- Control ... the participant did something (bought a lottery ticket), meaning it wasn't a random accident.
Surprisingly, the first two, infrequency and significance, are not all that hard to replicate. Venture capitalists have a portfolio of investments because they rely on an infrequent number of significant successes. Researchers test many hypotheses as part of theory development, expecting most to fail and maybe one to brilliantly prove something new. Even viruses follow a strategy of slight variation and mass distribution to find the one winner worthy enough to lay us all low during the flu season.
What is hard to replicate is the third component: control. Our corporate cultures are run by quantitative people with a great dislike for luck. Hence, active participation in luck creation (like in the models just mentioned) is quite modest (or worse) in most companies. To keep it corralled, organizations centralize luck creation into research, innovation, venture and product development teams. Not a bad approach, but hardly foolproof, as the graves of great companies are filled with the dust of R&D failures. A better approach might be to add more lucky people. Spread them around. And teach everyone else how to be lucky.
Teach people how to be lucky?
Some years ago Daniel Pink wrote an article for Fast Company. He interviewed a researcher who had studied what made some people lucky and others not. The lessons are relevant to organizations if the goal is truly to improve an organization's long-term odds for significant success. I'll paraphrase and extrapolate into three points.
- The parts of your company that are deeply focused and controlled by routine are unlikely ever to be lucky. Use your control to encourage a little less attention to detail (where your survival is not jeopardized) and a little more alertness to observation and advancement making.
- Be open to new experiences. Use your control to encourage staff to bring forward opportunities to learn, fail, and get smarter. (This is exceptionally hard to practice when you are ruled primarily by quantitative measures.)
- Find benefit in misfortune. Odd, I know, but this might be the most notable aspect of a lucky person's persona. They never seem to fail because they always seem to discover a way that they won. Use your control to make the same thing true for everyone in your organization. Failures are meaningless. Find the success in every outcome.
Luck can be a long-term strategy. You just have to actively manage for it.
* Parnell, J. and Dent, Eric (2009). The role of luck in the strategy-performance relationship. Management Decision (Volume 47 Issue 6), 1000-1021.
** Hafer, J. and Gresham, George (2008). Luck's role in business success: Why it's too important to leave to chance. Institute of Behavioral and Applied Management, 295-315.