Non-Linear Growth

A glimpse around the next corner; mind the curves.

September 1, 2011 • 2:18 pm 0

Finding the Proverbial Pony

Tech people use the phrase “there is a pony in here somewhere” to describe a tough situation where there is a hidden big opportunity. I hear it most often in the context of a stagnating business that can’t seem to break-out and needs a new catalyst for growth. For example, in businesses that need to make a pivot (btw, the most overused word of 2010/2011 in my mind).

I like the idea behind finding the pony, although not the specific phrase for reasons made clear below. Which leaves a very important question: How do you find the pony? I recommend the following process:

1) Deconstruct Your Assets/Capabilities/Resources: Pull every part of your company, organization, product and systems apart. Absolutely deconstruct each of these parts of the business into their smallest base elements.

2) Get Out of the Office: Plan a day out of the office with no agenda and nothing more than a white-board and the list of your assets/capabilities/resources. Bring in the most creative people you can find from within and outside of your company. Bring in people from spaces that are on the periphery to the space in which you current operate. You want to avoid groupthink so a diversity of backgrounds is better.

3) Evaluate Each Element: As a group, evaluate each of the elements you have isolated. Focus on the raw component parts of your existing product. One of those base elements might be the nugget of a big idea, but was too buried in a system view of your product for you to see it. Also focus your time on elements that are nearest in proximity to revenue streams. That is to say, focus on elements that enable other companies to generate revenue, as opposed to those that will require you to be a vendor selling a back-office product at a “cost”. Prioritize your top ideas.

4) Groups: Break-up into groups, assigning each two ideas. Make sure there is overlap, so that at least two groups cover each idea. Assign each group to come back with a back of the napkin business plan idea for the high priority components you have identified.

5) Research: Take the best ideas and work them.

This exercise won’t automagically generate a whole product or write the business plan, but it might lead you down the right path.

An Aside:

So why don’t I like the phrase? Well, the genesis of the phase “there is a pony in here somewhere” is a joke. It goes something like this:

Once upon a time, there was a mom and dad that had two children. One of them was an optimist, the other a pessimist.   Wanting to understand why the two children were so different, they consulted a psychiatrist, who set up an experiment to help figure it out. The psychiatrist led the first child into a room that was full of brand new toys. Immediately the child burst into tears.   The psychiatrist asked why, and the child replied “all of these toys are new, and if I start playing with them I’m afraid I might break one.”   Obviously, this was the pessimist. So the psychiatrist led the other to a room that was full of horse manure. The child immediately dove in, scooping out handfuls of the disgusting stuff.   The psychiatrist asked why the child was doing that, he replied “with all this horse manure, there has to be a pony around here somewhere, and I’m gonna find it.”

I don’t know about you, but I’d much rather polish a diamond in the rough than find the pony.

Filed under: Random, , , ,

November 13, 2009 • 5:09 pm 1

Simulation of the Monty Hall dilemma

For those that are still skeptical of the answer to the Monte Hall dilemma I posted on a few days back, my colleague Tom Simonson has written an excel simulation. Tom’s simulation proves that across 5,000 observations, you are two times more likely to win by “switching” doors than by keeping the door you originally chose. The version posted is static (Google Docs doesn’t handle data tables very well); for those of you who want the dynamic version, drop me an email and I’ll send it to you.

Update:

For those of you still in disbelief with this, these links may help.

  • Wikipedia entry on the Monte Hall dilemma; here.
  • Peer reviewed paper on the Monte Hall dilemma and the associated cognitive disconnects it creates; here.
  • A nice simulation of the Monty Hall game that you can play online; here.
  • Another simulation that enables you to run multiple trials; here.

Remember, the key to this dilemma is understanding that the game show host knows he is opening a door with a dud prize and not a door with the valuable prize.

For me the beauty of this is how a simple game can be so deceiving to our internal probability calculators. Imagine how we perform making complex probabilitic decisions with incomplete information.

Filed under: Random, ,

November 12, 2009 • 4:04 pm 1

A fun (and potentially infuriating) mental exercise

Every couple of years, I run into this probability puzzle that reminds me just how bad humans are at assessing probabilistic outcomes. Its called the Monty Hall problem, named after Monty Hall, the host of the famous gameshow, Lets Make a Deal.

The puzzle goes something like this.

Suppose you are given the opportunity to choose between three doors. Behind one door is a prize of significant value; say $1 million. Between the other two doors are near valueless prizes. Pick a door, any door.

Now that you have picked a door, the host, Monty, opens one of the two remaining doors, revealing that there is a pile of coal behind the door. The $1 million is clearly still behind one of the doors that remains closed; perhaps the door you originally selected. To make things interesting, Monty gives you the opportunity to switch doors; you can keep the door you selected originally, or switch to the other door that remains closed.

So, do you want to switch doors? Are you better off keeping the door you originally selected or switching to the other closed door. I know what you are thinking; it doesn’t matter right. There is a 50% chance the price is behind the door you picked and a 50% chance it is behind the other door. After all, there are only two doors remaining and you get to pick one. You might as well keep the door you originally picked.

What if I told you that your instincts are wrong and that the prize is two times more likely to be behind the other closed door than the door you originally selected. You’re thinking “Derek is crazy; this non-linear stuff has eroded his ability to think logically.”

Lets start over and try the exercise with 100 doors. You picked 1 of 100 doors; you have a 1 in 100 chance of picking the door with the prize on the first try. Now the game show host opens 98 of the other 99 doors, revealing that there is nothing behind them and leaving only the door you selected and 1 other door closed. Remember, you had a 1 in 100 chance of getting the door right on the first try. That means that there was a 99 in 100 chance the the prize was behind one of the other 99 doors. But 98 of them have been opened with nothing behind them.

Do you see now, there is a 99 in 100 chance that the other door contains the prize and only a 1 in 100 chance that the door you originally selected contains the prize. In the three door example, there is a 1 in three chance the prize is in the door you originally selected and a 2 in 3 chance the prize is behind the other door that remains closed.

Still don’t believe me, this Wikipedia post has a lengthy explanation here.

Our brains just aren’t very good at dealing with probabilities; or the randomness we face in the world. I get a kick out of that and try to keep that in mind whenever I’m making a big decision.

Filed under: Random

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