Revelation: The Answers Aren’t in the Numbers
Our obsession with “the numbers” in business exploded in the 1960s, when the new “science” of decision theory crossed paths with low-cost computer power. Business scholars began the stampede toward a new “law:” given enough numbers, anyone can run anything.
Quickly, business became more about math than about understanding of emotion, behavior and relationships in commerce. It became more about logic than about judgment.
Now that pendulum is swinging back. And, as happens with most cultural swings, being out in front (but not too far) is a position of advantage for a leader in the Job at the Top.
The truth about numbers
Even the toughest financial zealots are beginning to realize that there’s more to running a successful business than spreadsheets. Too many Excel-justified loans have failed. Too many overanalyzed investments in private equity and venture portfolios have disappointed. Most business leaders are now realizing to make money, you actually have to make a business better. You can’t just sustain, refinance or model it.
Still, you can’t ignore the numbers game. There is good in it; the financials serve as an indicator for how well everything else is going for your business. Moreover, so much of our financial infrastructure still underpins our access to capital and banking relations. Additionally, the formulas that determine the values of our businesses are important forces to consider.
Even though these numbers constitute the scorecard for most of the world of finance, they are not necessarily the best objective function for delivering exceptional results. In your own world, in your Job at the Top, you can think differently. Use the frameworks provided in previous articles – as well as in Just Run It! – will help you form your thoughts about what your business needs to be and how to get it there, before turning to the arithmetic.
What is the role of financial analysis and forecasting in your business, then? It tests and calibrates, rather than discovers, what’s best for your business. Discovery is your responsibility. And that treasure is not found on spreadsheets.
In your Job at the Top, you need to assume responsibility as the Head Thinker and the Head Mathematician. Your field of view must be broad and deep. You need to spend most of your time gathering and synthesizing information about how the pieces of your business fit together and about how well your business fits in with the environmental changes around it. Then you should use the numbers to check your thinking and to help you identify opportunities to improve.
Sixty minutes, three days a week
But I guarantee that looking at the numbers won’t get you out of most jams. Only thinking will. The kind of deep thinking that will improve your business requires that you spend more time in the company of customers, knowledgeable observers, other smart businesspeople, trend watchers, and technologists. It means spending your 60 minutes alone three days a week. And it means discussing your thinking with a small circle of trusted co-thinkers, and together looking for the patterns and big ideas that will transform your business into something extraordinary. You should engage others in the later stages of your conclusions, rather than bringing them in at your early musings.
Then and only then, after you have done your thinking, turn to the arithmetic to vet your conclusions.
Tips for Deeper Thinking
• Breakfast Group – form a weekly or biweekly gathering of good thinkers to discuss business issues.
• Teaching – offer a course at a local college or prep school in business management.
• Associations – become active in your industry association (like ASA!).
• Read – reserve time every day for thought-provoking reading.
• Television – avoid TV.
• Notes – keep a special notebook of key thoughts of the day and review it weekly. – D.C.