One-way and Two-way Door Decisions
Decisions are something that we have to do many times a day and having a heuristic for decision making can make us much more efficient and effective. I was researching product development at Amazon when the concept of one-way and two-way door decisions came up.
What are one-way and two-way door decisions? One-way door decisions are decisions that you can't easily reverse. These decisions need to be done carefully. Two-way door decisions can be reversed. You can walk through the door, see if you like it, and if not go back. These decisions can be made fast or even automated.
Even if you have to make a one-way door decision, there are still ways of limiting your risk. Getting good at recognising what kind of decision you need to make and then being able to make that decision quickly can give you a competitive advantage.
Identifying One-way and Two-way Door Decisions
One-way door decisions are ones that you can't reverse or take too much effort/expense to rollback. These decisions are usually strategic decisions that require a fair amount of information and deliberation. Fortunately, one-way door decisions usually don't need to be rushed.
Two-way door decisions are ones that you can rollback easily. If they don't work out as planned, then you can reverse them and try something else. Because these decisions don't carry many risks, you can make them quickly. If they happen often enough, you can even automate them so you can focus your energy on other decisions.
"One common pitfall for large organizations – one that hurts speed and inventiveness – is 'one-size-fits-all' decision making." Jeffrey P. Bezos
Understanding the difference between the two types of decisions is important because then you can focus on the crucial decisions instead of wasting too much time on the reversible ones. In many large companies, it is the same amount of paperwork getting approval for $50 as $50,000.
Even when you do have to make a critical one-way door decision, you can lower your risk by:
- seeing if you can transform it into a two-way door decision
- reducing your exposure
Make a One-way Door Decision into a Two-way Door Decision
Sometimes big decisions can seem like one-way doors, but after further examination and creative problem solving, the decision can be turned into a two-way door:
"For example, when we launched Virgin Atlantic I made a deal with Boeing that we could hand the plane back in a year's time if the airline didn't get off the ground. Thankfully, we never had to. But if the things hadn't worked out, I could have walked back through the door." Richard Branson
Framing is another technique to help you to transform one-way doors. Pricing can be challenging to get right, and it can be quite hard to change without upsetting your customers. You don't want to discount often to attract business because that will lower the perceived value of your product.
Testing your price with an "Introductory Offer" is an excellent way of letting you feel out the market without committing to a price. If you think, based on feedback from the introductory offer, that the market could pay more, then you can extend your experiment by expiring the introductory offer and bring in an "Early Bird" special.
You can also use these pricing schemes to help manage expectations while you refine your product. You can explain that the introductory price is cheap because you are ironing out the content or refining the code, as the product is polished, the price will increase. This not only gives you some breathing room will refining your product but give customers a sense of urgency.
Reduce Your Exposure When Making One-way Door Decisions
Sometimes you have to go all in. If you want to release a new physical product or you need to commit to a legally binding agreement, you need to try and do this with confidence.
Are there ways you can test the waters without risking too much? For example, can you release into a single market where you have enough know-how and penetration to test out the product, but it is not your major cash cow?
Can you presell the product on something like Kickstarter to gauge whether people are interested, customers are ready to pay for it and where your best market might be. If the Kickstarter doesn't take off, it is easy enough to return everyone's money and try something else.
If you are entering into a contract or planning a critical project, ensure you have some concrete and measurable milestones set, i.e. after X period, if you don't see Y result then have a clause that lets you get out. Yes, you will lose some cash and time but think of the cash and time you save by not pursuing the project.
Quick Decisions Help You Understand Your Environment
Ideally, we can do some research and get all the information we need to make a decision that is highly likely to succeed. However, this is not usually the case in our modern world.
Indeed, many people don't do enough research when making critical decisions, but most of those people wouldn't still be reading the post. So for those of you who DO do their research, you know that the more we learn, the less we know.
When you are playing in an environment where you and your competitors don't know the precise state of the market, those who can quickly try things out, learn and adapt, have a distinct advantage. If several of you can do, learn and adapt, then the winners are those who can cycle through the quickest.
Being able to recognise what is a two-way vs one-way door decision and then ensuring that company processes align, will not only empower your people to act fast but also to slow down and do their due diligence when faced with one-way door decision.
Being Nimble is About Culture and Policy
In large companies project spending has to be planned out for the financial year and involves so much work to approve that no one wants to say after 8 weeks "You know now that we have done more market research and tested our MVP, this product probably isn't going to fly. We should scrap the project and focus on something else." Large company projects can't usually pivot like this.
Employees are usually thinking about their jobs and vendors are thinking about their contracts. For employees, the project budget has been locked in for a year. As long as they can stay on the project, they don't have to worry about being made redundant. For vendors, they have fought hard to win the contract, and if this project is scrapped, they have to find more work.
So when a company says "We want to be agile and encourage entrepreneurship" the policies need to be there to allow people to make mistakes, learn and move on. The culture needs to be one where everyone focuses on the success of the products and company rather than their job/contract.
What is decision fatigue? Like a muscle fatigues from repeated use, so does our ability to make quality decisions. We need to rest and recharge, ensuring that important decisions are made while we are fresh. Using heuristics like two-way door decision making, we can focus our energy more wisely.
Do we really make 35,000 decisions a day? I can't find an experiment/study that proves that we make 35,000 decisions a day. When I find the number quoted it is referred to as fact or attributed to "various internet sources estimate". It also depends on what you classify as a decision. It seems obvious that we don't ask ourselves 1458 times an hour "Hmmm should I choose X or Y?", especially when we are asleep.