the best entrepreneurs use a formal problem solving model to make decisions

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The seven-step process for entrepreneurial decision-making.

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Entrepreneurs are responsible for everything from the supply chain to Instagram account management. With so many spinning plates, how can anyone make the right decision in every situation?

The truth is, you can’t. Part of entrepreneurship is learning from experience when things go wrong and using that knowledge to be better next time. You can’t predict the future, but you can set yourself up with a problem-solving process to reduce the number of mistakes you make in the first place.

Following this checklist has allowed me to make faster, better decisions for my business. With a structure in place, I don’t have to approach every problem from scratch. Instead, I acknowledge the situation, run down the list and choose a course of action based on my findings. I can’t say I have never made the wrong call with this process, but I can say that I now make more informed decisions more quickly — and my company has benefitted as a result.

The next time you face a crossroads for your business, think about these factors to determine your next move:

1. Economic Impact

Start by understanding what this decision will cost in terms of time, money and personnel. This is the easy part. In most cases, the numbers will be black and white. How much money will you need to spend to make this a reality? How much time will you and your team need to dedicate? What revenue changes can you expect if you succeed or fail?

You may not have exact numbers in every situation, but don’t let that stop you from making educated guesses. Use what you know, and fill in the gaps with reasonable expectations. Then look at the sums to see whether the risk is worth the reward.

2. Brand And Experience

Ask yourself, is this decision “on-brand”? Is it consistent with what you stand for? Will it improve the customer experience or sentiment?

It’s important to take business risks, but in so doing, you might alienate some people. You can’t please everyone, and in most cases, it’s better to be meaningful to someone than vanilla to everyone. Knowing what you stand for as a brand will let you double down on your audience and take chances that support your core brand and improve the audience’s experience with your brand.

3. Worst-Case Scenario

What’s the worst that could happen? I always think about the worst-case scenario before I think about what I stand to gain. If the impact of that worst case scenario is nominal, you can feel freer to explore a boundary-pushing idea . Don’t avoid risks you need to take — no great company ever made it big without a few daring moves — but don’t put yourself in harm’s way without a plan, either.

4. Best-Case Scenario

With the potential consequences firmly in mind, allow yourself to think about the best outcome. Could your company take over your industry if you got this one thing right? Would your customers sing your praises and multiply your revenues overnight? Which new partners could this move attract for your business?

Dream realistically, but dream big, too. You won’t pursue your idea with passion if you don’t have a clear understanding of what you hope to achieve.

5. Opportunity Cost

Dedicating resources to one path means taking energy away from other potential pursuits. Consider not only the opportunity cost of saying yes, but also the cost of saying no. Many times, waiting carries its own negative consequences. Look at your budget and time, and be sure to consider holistic impact.

6. Gut Instinct

People tend to undervalue gut instinct in the era of data, but instinct is not random. Your intuition is based on years of accumulated experiences that have formed heuristics in your brain to point you in a certain direction. Look at your data and acknowledge your biases, but listen to your gut, too. Your unconscious brain might know something the rest of you can’t articulate.

7. Team Ability

No matter how much experience you have, there is no substitute for a room full of capable and driven people. As the CEO, you need to know when to make the decision and when to hand the reins to someone else. You hired your team for a reason, so give them the opportunities to exercise their expertise.

We recently migrated to a new inventory management system. I had plenty of options, and while the economic factors made sense, the opportunity cost for a mistake would be high. Our current solution was holding us back, though, so the opportunity cost of inaction was even greater. Recognizing both the need and my own technical limitations, I asked the team to take over driving the choice. We ultimately made a great decision based on cost, potential and risk mitigation, and I have my team — and this process — to thank.

Next time you face a major obstacle or opportunity, I hope this step-by-step plan will be useful in maintaining a high-level perspective of risk and reward.

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How to Use Mental Models to Make Better Decisions Faster Learn how to level up your decision-making with our favorite mental models and frameworks to help you gain perspective and discover more innovative solutions … and do it faster.

By Mark Miller Edited by Chelsea Brown Dec 9, 2022

Opinions expressed by Entrepreneur contributors are their own.

As a leader in your organization, you might as well be called "chief problem-solver." But if you're like most leaders, you might feel like:

The problems never stop.

The challenges get more and more complex .

You've got less time to step away to think clearly and strategically about solutions.

This can be especially true in non-profits that are trying to solve complex problems with limited resources. Whether your mission is to address poverty, homelessness, healthcare, racism, justice … these are huge issues built on systemic problems. And the last thing you need is for your team to just go through the motion of working for the sake of doing something.

No, you want your team to make a real difference. And the world is counting on it. But to come up with innovative, lasting solutions for systemic issues, you have to think differently. Today, I'm sharing some of my favorite hacks for solving complex problems and making better decisions faster.

Related: What Smart Entrepreneurs Know About Problem-Solving

How mental models train you to think strategically

Mental models are tools that can help you gain distance from a problem, view it from a different perspective and discover innovative solutions . They offer unique thought processes you can use to examine and make sense of challenges. Let's look at some well-known examples of mental models:

Newton's Laws of Motion : Something in motion can only be stopped by an outside force.

Occam's Razor : The simplest solution is almost always the best solution.

Murphy's Law : Anything that can go wrong … will go wrong

Most likely, you've applied these in your own life and work to help you make sense of a situation and decide on a solution. Mental models like these act as thinking hacks and shortcuts. They're brilliant for reducing complexities, which is just the thing you need when you're feeling the burden of solving a challenge .

But a single mental model doesn't work in all cases. Newton's Laws of Motion, for example, don't hold when working at very high speeds or in a very strong gravitational field. That's why the best leaders fill their toolboxes with mental models. They aim to internalize and practice different models, learning them well so they build a deep bench of options to choose to use in the right context for the right situation.

James Clear, the author of the #1 NYT bestseller Atomic Habits , writes : "Put simply, mental models are the set of tools that you use to think. Each mental model offers a different framework that you can use to look at life (or at an individual problem). … If you develop a bigger toolbox of mental models, you'll improve your ability to solve problems because you'll have more options for getting to the right answer. This is one of the primary ways that truly brilliant people separate themselves from the masses of smart individuals out there."

Related: 7 Methods to Maximize Your Decision-Making

Our favorite mental models to fast-track solutions

How many mental models do you actively apply to the challenges your organization faces? The more you add to your toolbox, the more you can draw on to find better, more innovative solutions — and faster. Here are a couple of the mental models we find repeatedly useful at Historic:

Marquee Culture:

We look at our clients' brands through the lens of Marquee Culture, which identifies six different layers of organizational culture .

By understanding culture through the layers of Marquee Culture, we help leaders not only gain deep insight into their organization's brand problems but also identify brilliant solutions that make an immediate positive impact at every level of their operations.

The result is increased customer satisfaction , better product delivery, higher employee retention and so much more.

Divergent thinking:

Innovation demands we think outside the box.

Nothing has helped us do that more quickly and efficiently than divergent thinking, a suite of tools designed to push teams outside of their normal lanes of thought.

Instead of spinning our wheels in a conventional brainstorming session, we use divergent thinking tools and prompts to fast-track our creative thinking .

Applying cross-discipline mental models

Different industries and fields also offer rich mental models that you can apply to your organization. After all, the best ideas often come about when they're informed by other disciplines.

Take this mental model from Formula 1: If you want to move faster, reduce drag or increase acceleration.

To increase speed and help your team move faster, do one of the following:

Look for what's causing drag, and reduce it.

Put more resources behind something to increase acceleration.

To go deeper into this mental model, read Formula X , a business fable about organizational acceleration. I highly recommend it.

Related: The Need for Speed: How Fast Decision-Making Reduces Risk and Creates Growth

As a leader, you'll always have multiple problems competing for your attention and demanding solutions. But with a toolbox full of mental models that help you gain perspective and reduce complexity , you'll be able to better solve whatever problems arise — and solve them faster. Don't worry … when you find yourself out in the weeds with a particularly challenging problem, drop a line. We'll help you kickstart the process of finding just the right solution you're looking for.

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Problem Solving 101 – How to Make Better Decisions

This decision-making guide is designed to understand better what problem-solving and critical thinking entail. Not only will you learn about how to make better decisions in business, but these ideas can also make you a better problem solver at school or in your personal life when faced with challenges. Additionally, throughout this guide, we will provide you amazing online tools, videos, and resources to help you continue to learn how to make decisions better in your daily activities.

• Chapter 1 – The Importance of Problem Solving
• Chapter 2 – Critical Thinking in the Decision Making Process
• Chapter 3 – Are You Asking the right Questions?
• Chapter 4 – 6 Effective Methods for Problem Solving

The Importance of Creative Problem-Solving in Business and Life

Problem-solving is one of the leadership skills that successful business professionals and entrepreneurs are expected to have, yet many struggles with the simplest decisions. What makes solving daily problems so natural for one person and such a struggle for the next?

The truth is, even experienced decision-makers continually hone and perfect their creative problem-solving skills. And there are many compelling reasons to do so. Not only do those who make better decisions have more job opportunities, get promoted more often, and increase their work productivity, but they are generally happier. In a recent study from the University of Chicago School of Business, the research found that happiness depends more on opportunities to make decisions (i.e., freedom) rather than money or connections. This means that the ability to make decisions leads to more and better opportunities for success, which improves your quality of life. In other words, the better a decision-maker you are, the happier and more successful you’ll be.

This concept goes against what many business leaders believe – that it’s what and who you know that makes you successful. In fact, how you understand and solve problems that are the key to success.

Fortunately, problem-solving and decision making are skills that can be improved upon, studied, and mastered. By learning specific problem-solving and decision-making techniques, you can see problems sooner and make decisions faster. This allows you to make more confident decisions in your job and gives you more control over the happiness and productivity in every part of your life.

Critical Thinking in the Decision Making Process

Critical thinking is the practice of methodically gathering, analyzing, and evaluating information. It is one of the most vital parts of the problem-solving and decision-making process, as it is the act of clearly thinking through options that will lead to a final choice. While decision making is the process that leads to actionable conclusions, critical thinking is the element that defines whether the choice is sound. Think about it this way: If problem-solving is the car that gets your business to its goals, critical thinking skills are the gas.

Although humans have been thinking critically since the first Homo Habilis picked up a stone tool, critical thinking as a process has only become one of the most valuable business skills in the last century. John F. Dewey, the inventor of the Dewey library system and a noted educational philosopher, began touting the importance of teaching critical thinking skills in his 1938 paper, Logic: The Theory of Inquiry . This educational reform may have inspired the rising generation to explore the concepts more, as a resurgence of interest in the subject presented itself between 1950-1970. Many new decision-making strategies (relying heavily on critical thinking career skills) were created over this time period, including CATWOE, PEST, and the Cause and Effect Analysis model.

Since that time, critical thinking and decision making are synonymous with business skills expected of corporate leaders. Still, many people don’t truly understand exactly the underlying concepts that make critical thinking an effective process. There are four key structures that all critical thinking is based on:

Logic – An individual’s ability to see direct relationships between causes and effects. This is one of the most important decision-making skills, as logic provides accurate predictions about what kinds of effects a potential solution will have on individuals and systems.

Truth – The unbiased data of an event. Unbiased and unemotional facts are an important part of the problem-solving process. Good critical thinking culls out these biases and focuses on the historical and documented data that will support the conclusion.

Context – A list of extenuating pressures and factors that will or should be impacted by the final solution. Critical thinking must consider the historical efficacy of similar solutions, decision-makers’ physical and abstract stressors, and the assumptions or agendas of different shareholders. All of these outside elements must be considered to engage in a critical decision-making process truly.

Alternatives – Potential solutions not currently in use. Ineffective critical thinking, the individual can consider new ways of approaching problems that meet real-world goals and are based on accurate, unbiased data. This is the case, even if alternative solutions are not used or when outside determinants are unexpected.

When you understand each of these underlying factors, you will become more aware of personal biases and be more engaged in the critical thinking process. Also, improving your necessary thinking skills leads to faster, more confident, and more productive decision making. The essential fuel of thinking is the secret ingredient that will drive your business’s success.

Are You Asking the Right Questions?

Thought leader Clayton M. Christensen observed that business leaders often think so much about action that they fail to consider why they are acting in the first place. Unfortunately, good action isn’t possible without considering the right critical thinking questions. Critical questioning allows you to clearly distinguish facts from biases, stakeholders from observers, and solutions from potential solutions. If critical thinking is the lens by which you see solutions, questioning is the telescope that gives that lens shape, structure, and purpose.

Since questioning is how critical thinking and decision-making are accomplished, consider whether you truly understand what a good question looks like. A good question will result in an actionable answer, usually one that provides additional information to reach a final solution. But, how can you formulate questions that do this?

There are a few ways to know whether the question you’re asking is a good one. If you don’t have good question-asking instincts, interrogate your initial question with a few of these.

1. Is Your Purpose Clear?

A good question is carefully designed to meet a particular goal. For example, instead of asking, “When can I meet with you?” a clearer questioner would ask, “Would you prefer to meet on Monday morning or Wednesday morning?” The narrower range of options encourages a quicker, more decisive answer, which can, in turn, be acted upon. To get the most actionable information possible, you need to have a distinct idea of the kinds of information you are looking for. You can then make your questions more intentional and directed as you come closer to what you are looking to know. Specific purposes of questions may include:

• Definition: What does “work ethic” look like in our organization?
• Comparative: What parts of our marketing strategy are different from our competitor?
• Causal: If we invest in this new technology, what are some potential positive and negative outcomes?
• Evaluative: What about this product is working for our consumers? What isn’t?

Knowing which types of questions to ask in each situation, you’ll have a more targeted discussion that leads to actionable answers.

2. Is The Question Framed Correctly?

Even with a clearly defined purpose, the question’s framing can still help or hinder its overall effectiveness. For example, asking, “Why should we invest in a Halloween party when clown costumes are so expensive?” will not be as effective as “Why should we invest in a Halloween party when, historically, they have not improved business culture?” The first question suffers from its poor framing, as it assumes that a Halloween party must include the investment in a clown costume. Poorly framed questions can be identified through various smaller issues, including false comparisons, false dilemmas, and ambiguity. A good question deals with only one issue and avoids bundling disparate concerns into a single blanket assessment.

3. Is Your Question Closed or Open?

One of the questioning process’s biggest pitfalls is asking questions with a predefined or “closed” set of answers. These yes or no questions don’t require synthesis, analysis, or evaluation of facts. They are often asked by leaders who already know the answer and have no interest in additional information. While these can be useful when only a handful of acceptable answers exist, they don’t lead to creative thinking or better management decisions.

In contrast, an open question requires thought and evaluation to answer. These questions can open the door to outside ideas and collaboration and lead to more productive conversations than closed questions. These questions are designed to bring additional information to light and often lead to a more in-depth understanding of the problem and potential solutions.

4. Are You Following Up?

Initial questions offer a vital starting point for any critical thinking and decision-making discussion. Unfortunately, some people stop there, and that can be the death knell of effectiveness and efficiency. To get the best answers, you must engage in a series of follow-up questions to support your initial inquiry.

Consider this question: “What are some areas we can cut to meet our yearly budget?” On its own, it will get you some information but may miss the crucial further discussion. Questions like “Who will be affected if we cut that department?” or “What will the impact of that departmental cut be on our production processes?” will provide additional actionable information and lead to smarter, safer cuts. In fact, the highly effective Five Whys system of problem-solving is built solely upon the idea of targeted follow-up questioning.

By incorporating effective questioning into your critical thinking equation, you will get clear answers that will help you to create actionable solutions.

6 Methods and Techniques for Problem Solving and Decision Making

Even with good critical thinking and questioning skills in place, it can be difficult to maintain problem-solving consistency. Organizations aren’t individuals but employ various people with different personalities, skill sets, and strengths, making solving group problems virtually impossible without a clearly defined framework. For that reason, many top-level organizations choose to incorporate a standardized problem-solving methodology. Not only does this provide the consistency a business needs, but it often leads to more focused and productive discussions. This newfound productiveness, in turn, leads to more actionable plans and clearly defined goals for success.

Even though these processes have mainly been designed for large organizations, organizations of any size can adapt these concepts to suit their needs. Large businesses, small businesses, and individuals can all benefit from these simple problem-solving and decision-making methods. They have proven to be effective at maintaining a structured problem-solving process regardless of the structures in which they see use.

6 Step Problem Solving Method

Although many have made variations on the 6-Step Problem Solving Method, the only research-based version of this methodology was invented by Dr. Sidney J. Parnes and Alex Osborn in the 1950s. After working with and observing high-level advertising employees throughout the brainstorming and implementation process, Parnes and Osborn recognized that creative people go through a series of stages as they create, organize, and choose good solutions for problems. Their findings were published in 1979 under the title, Applied Imagination: Principles and Procedures of Creative Thinking. In their original work, the 6-Step model was termed, “The Creative Problem Solving (CPS) Method,” and included these key segments:

• Objective Finding
• Fact Finding
• Problem Finding
• Idea Finding
• Solution Finding
• Acceptance Finding

These six segments were further organized into three key phases of problem solving: Exploring the Challenge, Generating Ideas, and Preparing for Action.

After Parnes and Osborn released these creative problem solving techniques, many different groups and businesses adapted them to fit their needs and organizational culture, providing a consistent framework for making daily decisions. One of these popular adaptations was created by Yale University, and includes an evaluative segment that provides for continual optimization of the final decision. This model also incorporates some elements from the Soft Stage Management model (SSM), which provides a seven-stage approach to problem solving. The Yale adaptation has been adopted by businesses and organizations worldwide, and includes these six steps of action:

• Define the Problem
• Determine the Root Cause of the Problem
• Develop Alternative Solutions
• Select a Solution
• Implement the Solution
• Evaluate the Outcome

Comparative Decision Making – Another situation in which the 6-Step Model shows its strength comes when comparing the efficacy of your organization’s ideas against a competitor. The method’s group-think structure allows for a logical discussion of potential best-case and worst-case scenarios resulting from each potential course of action. Not only is this a good thing when formulating new ideas or action plans, but it works magnificently when determining strategies to take in a competitive marketplace. The method’s evaluative phase allows for research and comparison with outside ideas and models, such as those of major competitors, which eventually will lead to a better product or idea.

Long-Term Restructuring – This model deals particularly well with long-term changes or processes in need of consistent evaluation and restructuring. Since the evaluation process leads back into the initial phases of defining problems and developing solutions, the method develops a circular flow that allows the user to tackle even the most daunting decision-making projects. It also adapts to the size of the project or system in which it is used, so as a small project or system gets larger and more complex, the 6-Step model remains effective and can even be applied to individual components and subsystems as necessary.

PEST – Analysis Political Economic Social Technological

Noted as one of the most widely-used decision-making techniques, the PEST model derives from the concept that several influencing factors can affect an organization, namely Political, Economic, Social, and Technological factors. By carefully analyzing and evaluating these factors, organizations can make more informed decisions and better understate choices for long-term implications.

The PEST model of decision making was introduced by Francis J. Aguilar, a Harvard Business professor. In 1967, he published a book including the PEST model (originally the EPST model) entitled, Scanning the Business Environment. Arnold Brown reorganized the acronym STEP (Strategic Trend Evaluation Process) sometime after the book’s publication. It was adapted further by several authors in the 1980s into acronyms including PEST, PESTLE, and STEEPLE. It is still well-known by some of these alternative nomenclatures, and each retains the core elements of the system introduced by Aguilar.

Although it was originally designed to understand the business arena’s unique layout, PEST quickly became a consistent way for leaders to understand both the internal and external pressures that affected their organizational processes and products. It can also be easily adapted for acquisitions and mergers, potential investments, and marketing campaigns. After decades of its use, the PEST model has proven to be especially effective in these specific situations:

Surveying Business Markets – Since this was its initial function, PEST functions best as a market surveying tool. The four key elements of the model can easily be adapted to any market, regardless of size or scope. The permutations of the model, like PESTLE, include additional pressures that help to understand further the potential marketplace, such as legal and environmental factors. This makes the PEST model perfect for political ventures, building projects, or even human resource concerns.

Evaluating Strategies or Markets – Another area in which the PEST model shines is evaluating current strategies for flaws and inconsistencies. Because the model structures itself around rigorous evaluation, it allows all decision-making team members to have a clear idea of the chosen course of action’s potential impaction. By adding a weighting system to each of these elements, those in the discussion can clearly see which strategies have the greatest potential for success and meet their goals. Such a system also figures in strongly when comparing markets or courses of action. It results in data points to illustrate the projected gains and losses for each potential solution.

Large-Scale Change Including Complex Elements – Finally, the model allows for a methodical consideration of various influences so that large-scale change can be managed in advanced and intricate detail. The PEST method highlights weaknesses in potential mergers or campaigns, allows for detailed speculation about future partnerships or markets, and gives insight in each action course the regulatory or political drawbars. Applying the PEST model makes it relatively easy to create a concise checklist of items to be addressed. This makes it one of the most actionable decision-making tools for corporate-level change.

SWOT Analysis – Strengths Weakness Opportunity Threats

The SWOT model of analysis sets out to help businesses analyze their company and better understand the arenas in which they operate. In this method, the Strengths, Weaknesses, Opportunities, and Threats of a company are outlined in a grid fashion, allowing the leadership to identify toxic processes and behaviors quickly.

Albert S. Humphrey usually receives the credit for creating the SWOT framework, as he presented it during his work with Stanford. In reality, the concept may have originated earlier than his 1960s presentation of the concept. Several researchers, including George Albert Smith, Jr., C. Roland Christiensen, and Kenneth Andrews of the Harvard Business School, reportedly worked with a concept prototype during the 1950s. Their model, published in 1965 as Business Policy, Text and Cases, had a slightly different set of values: Opportunities, Risks, Environment, and Competition. This research likely held some sway over the Stanford research model, which Humphrey initially referred to as SOFT Analysis (Satisfactory, Opportunity, Fault, and Threat). Researchers Urick and Orr changed this to SWOT by 1964, and the name stuck.

SWOT lets users evaluate potential business risks and rewards for business ventures based on environmental pressures. Like other models, SWOT also lends itself to discourse that leads to making better decisions. Though it doesn’t work very well as a standalone decision-making model, it makes an excellent supplement to another more action-based system. Some of the situations where SWOT really shines include:

Brainstorming and Strategy Building – SWOT lends itself to sharing and discussing potential benefits and drawbacks of a single idea or course of action. Its simple format also plays well for situations involving big picture ideas and concepts. At the planning stage, it makes large issues readily obvious and illustrates key benefits for each idea. When deciding on the strategy for a particular product, plan, or business, SWOT can make an organization’s position and the benefits of each situation acutely obvious. A plan that has a strong strengths-opportunities correlation will support an aggressive strategy, while a plan that has a strong weaknesses-threats connection should be approached defensively.

Business and Product Development – The SWOT matrix’s simplicity is perfect for quickly identifying a business or product’s strengths and weaknesses. This model helps encourage discussion about the competitive advantages or gaps in the capabilities of a specific idea. It also helps bring to light clear threats for a course of action, such as political, technological, or environmental pressures that must be overcome before progress can be made. And, because it is such an adaptable model, it can be used for large-scale and small-scale problems. This flexibility makes SWOT a good choice as a standardized decision-making tool.

Gathering and Organizing Data – SWOT can be a good choice at the brainstorming level of creative problem solving, but can also prove itself an excellent tool during the researching phase of a task. The simple matrix can help present and organize data in preparation for action. Also, it can easily show where research is lacking or where more information needs to be gathered.

FMEA Analysis

As one of the first systematic techniques for observing organizations’ weaknesses, the Failure Mode and Effects Analysis (FMEA) system often see used as a diagnostic tool for companies and other large groups. FMEA puts forth the idea that all of the elements of a structure have inevitable failure modes, which are points at which they will break down under stress or over time. Then, the goal of FMEA is to identify the probable failure mode for each component and project the impact that these failures will have on the overall success of the plan.

The US military and surrounding industries began using this method as early as 1949 to identify potential military equipment and weapons weaknesses. Adopted in the early 1960s by contractors working with the U.S. National Aeronautics and Space Administration (NASA), FMEA helped these organizations produce parts and processes that would guarantee a high success rate shuttle program. In 1967, the Society for Automotive Engineers (SAE) published a version of FMEA, which, with revisions, has remained the standard failure mode model for the public aviation industry. Versions of FMEA have been used by the Automotive Industry Action Group, the U.S. Environmental Protection Agency (EPA), and the Food and Drug Administration (FDA).

Henry Ford was the first leader to widely incorporate the FMEA model to identify process weaknesses within a business. He adapted the FMEA model into two main areas: Process FMEA (PFMEA) and Design FMEA (DFMEA). PFMEA helps leaders to identify potential breakdowns of production, supply, and market failure for an organization, while engineers and other technical personnel use DFMEA to assess the ramifications of potential weaknesses and safety issues in their designs. The areas in which these two types of FMEA are most effective include:

Manufacturing and Assembly Processes – The initial goal of the FMEA model was to identify problems and potential failures of elements within a manufacturing process. Because of this, the FMEA model is a good choice for businesses that are heavily involved in manufacturing and production. It guides the participant through each point of the production cycle and allows them to foresee potential risks associated with parts, labor, and processes. Often, this results in fewer risks and unnecessary redundancies, which leads to a safer work environment and a more cost-effective business.

Business Strategy – Another area in which FMEA is highly efficient in any major change preparation stages. This model focuses on potential risks at every point in the new process, motivating leaders to understand and overcome challenges long before they arise. If a clear goal or emphasis is not established before beginning the FMEA process, this can become overwhelming and even paralytic, encouraging stagnation within a company. By assigning a Risk Priority Number (RPN) to each failure mode element, those using this model can make it much more obvious which failure modes require immediate attention.

Customer Satisfaction and Safety – Both PFMEA and DFMEA can help bolstering customers’ satisfaction and well-being. As processes are analyzed and evaluated closely, organizations become quicker and more cost-effective, often without sacrificing the final product’s quality. Because process flaws are identified and eliminated before taking the product or process to the customer, dissatisfaction becomes much less common. The DFMEA portion of the process becomes more reliable and safer as the model has applied time and time again, leading to higher employee retention and more loyal customers.

Soft Systems Methodology (SSM) is a decision-making process designed to tackle real-world problems with no formal definition or scope. In this system, users must consider six areas in order to solve these kinds of soft system problems:

• Transformation
• Environmental Constraints

CATWOE systematically incorporates these elements into a discussion about potential actions, looking at how these actions will influence the major players in a transition or other major problem. Originally developed by Peter Checkland and Brian Wilson, this problem-solving system has been constantly assessed and improved through continuing action research over the last 30 years. Initially, it was designed in response to the systems engineering approach to management problems. In 1966, a team of researchers at Lancaster University led by Gwilym Jenkins found that the systems engineering approach only worked when a problem could be clearly and narrowly defined. In cases wherein no clear definition was available, they found that the system was not effective for solving real and complex management problems. With Checkland and Wilson taking the lead, the SSM model was established. CATWOE was the problem-solving format that arose from their research.

CATWOE, by definition, works most effectively when it is being used to manage complex, real-world management problems. This broad approach means it can assist in solving virtually any issue that is not easily defined. However, some organizational situations still lend themselves more to CATWOE than other commonly accepted models, despite this adaptability. Some common CATWOE-friendly issues include:

Implementing Solutions – The CATWOE method also presents some strong tools when preparing to take action steps. Because CATWOE focuses on considering the influencing factors, people, and environments that will be integral to a solution, this method ensures that all of those elements are in place before the implementation. CATWOE also assesses each team member’s roles in the change, breaking individuals down into broad categories such as client, actor, or owner. Since these roles are defined in the CATWOE structure itself, each person has a better idea of how they contribute to the project’s success and can be easily held accountable for their responsibilities.

Cause and Effect Analysis

In Cause and Effect Analysis, also called Fishbone Diagrams or Ishikawa Diagrams, thinkers assess a single effect in an attempt to find its potential causes. During this four-step model, participants identify a problem, work out the involved factors, identify potential causes, and analyze the final diagram in preparation for action.

This problem-solving model was created in 1968 by University of Tokyo engineering professor Kaoru Ishikawa, although the Cause and Effect Analysis framework dates back to the 1920s. It was first included as one of the Seven Basic Tools of Quality Control, which W. Edwards Deming presented to post-war Japanese engineers, including Ishikawa himself. Of these seven tools, Cause and Effect Analysis deals with critical thinking the most extensively and uses compartmentalization and categorization to define which influencers contribute to the effect in question and how.

Each industry often develops its own unique set of categories that can be used with the Ishikawa design. The manufacturing industry, for example, uses the six Ms (Manufacturing, Method, Material, Man Power, Measurement, and Mother Nature), while the service industry uses the five Ss (Surroundings, Suppliers, Systems, Skills, and Safety). These categories are often used in conjunction with the Five Whys methodology for questioning, making the root causes of any effect clearer.

The Cause and Effect Analysis model has held sway for a long time thanks to the instances in which it outperforms many newer models. The most effective implementations include:

Group Decision Making – The Cause and Effect Analysis model works best with a key group of invested stakeholders, preferably from each of the main categories that the diagram will incorporate. This allows for the most in-depth analysis of the root causes of a problem from most people’s perspectives with that aspect of the business. The Cause and Effect Analysis model also lends itself to a discussion and can uncover fine details that may be closely connected and make analysis better. This happens most often in a group setting, where multiple members can become aware of the correlations of seemingly disparate parts of the business process.

Clearly Defined Problems – In complete opposition to decision-making models like CATWOE, which deal with ill-defined, nebulous issues, this model works best with concrete, tangible problems. This decision-making method starts by defining the problem, and without defining a problem clearly, the Cause and Effect model begins to break down. If the effect is vague or misunderstood by team members, analyzing its potential causes can be difficult. Framing is essential to effective use of Cause and Effect Analysis, as problems like “68% Employee Turnover” can be much more efficiently dissected than “Employees Unhappy.”

Complex, Interrelated Effects – Where this method really shines is in arenas where effects may have multiple, interrelated causes. This makes the Cause and Effect Analysis model perfect for large institutional changes like mergers and acquisitions. Even on a small scale, this method does a stellar job of highlighting how seemingly unrelated processes or production elements affect one another. Much like the PEST model, the Cause and Effect Analysis model assesses each segment of business operations that could change the outcome. This gives each stakeholder insight into the small changes that can be made within their part and helps them understand what might make the process or product more efficient and productive.

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How Entrepreneurs Are Problem Solvers: Unveiling 7 Key Principles

Wouldn't you love to wake up thinking like some of the world's richest entrepreneurs? How entrepreneurs think differently from the rest of us is something we’d all like to have insight on. Entrepreneurs like Bill Gates, Warren Buffet, and Jeff Bezos have amassed astronomical fortunes, so what is their secret to their success?  

How Entrepreneurs Think

Bill Gates, currently worth around $88.8 billion, believes that procrastination is the key to failure. Making a decision, sticking to it and seeing it through is important because it instils faith in oneself and avoids second guessing.  Warren Buffet is one of the world’s largest investors and also launched many companies in his youth. He’s currently worth over $80 billion and his best advice to new start-ups is to have fun. If you feel a passion for what you do, you’ll be “tap dancing” to work like Warren at 85! One of the youngest top earners is Amazon founder Jeff Bezos. His insights on how entrepreneurs think include the sound advice to love your clients, understand them intimately and build a product base from there. So how does the entrepreneurial mindset deal with the problem-solving process?  

7 Entrepreneurial Problem-Solving Skills

Problem-solving techniques are the cornerstone of entrepreneurial business. Identifying a problem that exists and filling that gap successfully results in long-term rewards. One of the best examples of this type of approach is Facebook's Mark Zuckerberg. He amassed nearly $72 billion in just over a decade, launching and developing his popular social media platform. He advises to start any new business by trying to passionately solve a problem, rather than building a new company as the consequence of solving a problem.   How entrepreneurs solve problems isn't magically different from the rest of us, they simply have a positive mindset and follow a set of problem-solving principles:  

1. Say no to defeat

There are plenty of failures along the way, but defeat isn’t in an entrepreneur’s mindset. Hence, it is even more crucial to learn from a mistake. When it comes to learning from business mistakes, there are several strategies that can be employed. First and foremost, it is important to acknowledge the incident and accept responsibility. This will help in avoiding the same mistake to be made again in the future. It is equally important to analyze the mistake and to understand it. This will help identify the root cause so that strategies could be developed to counteract the effects. Finally, use it as a learning opportunity. Identify what you could have done differently and seek feedback from your peers in order to gain additional perspective to the issue at hand. This can help you identify areas for improvement and develop new strategies for success.

• Nokia -  One real-world example of learning from business mistakes is the case of Nokia, the Finnish mobile phone giant. In the early 2000s, Nokia was the world's largest mobile phone manufacturer, but the company failed to adapt to the rise of smartphones and lost its market share to rivals such as Apple and Samsung. However, instead of accepting defeat, Nokia learned from its mistakes and reinvented itself as a telecommunications equipment provider. Today, Nokia remains a major player in the telecommunications industry, providing networking solutions and other services to companies around the world.

Being bold in a business environment can be challenging, but it is an essential trait for success. At times, being bold translates to taking calculated risks, making tough decisions, and charting new courses for the company. This can be achieved by inspire confidence and trust in employees, customers, and other categories stakeholders. This will instill courage to take risks and experiment, which can lead to greater innovation and creativity. The ability to take risks and learn from mistakes is crucial for business success. In addition, it is essential to be adaptable and pivot quickly in presence of new opportunities that ma lead to further grow and improvements.

• Netflix:  This could be seen in the story of Netflix. When the company started as a DVD-by-mail service, they saw an opportunity to disrupt the traditional rental industry by offering a streaming service. Despite initial skepticism from investors and industry experts, Netflix took a bold step and invested heavily in streaming technology. This decision paid off, and today Netflix is a leader in the entertainment industry, with millions of subscribers worldwide. By being bold, Netflix was able to pivot quickly, adapt to changing market conditions, and stay ahead of the competition.  
• Female Entrepreneurs in Hong Kong Share Business Advice
• The Role of Enterprise Solutions in the Digital Transformation of Businesses

3. Be flexible

Knowing how to evaluate a situation and look at it from all angles is important and being able to pivot when necessary is critical to any fast-moving business. If you’re not seeing success with one idea, being bold and trying something new might just pay off. When trying to solve a problem, understand that there might not always be a solution. Identifying a gap in the market and quickly changing direction to fill it makes good business sense.

• Zara:   Amancio Ortega , owner of Zara and currently worth $78.5 billion advises that “that speed is everything”. The ability to recognise new ideas and execute them faster than any competitor has been crucial to Ortega’s success.  
• Kodak:  Kodak, a company that had been a leader in the photography industry for decades. However, with the advent of digital photography, Kodak's business model became outdated and the company struggled to keep up. Despite some efforts to transition to digital cameras and other digital products, Kodak ultimately filed for bankruptcy in 2012.  
• Canon and Nikon:  On the other hand, companies like Canon and Nikon recognized the shift to digital early on and were able to adapt their business models quickly. They invested heavily in R&D and created new products that were more in line with the changing market. As a result, they were able to maintain their positions as industry leaders and continue to thrive to this day. 

These examples show how being flexible and willing to pivot when necessary can be the difference between success and failure in a fast-moving industry. It's important to recognize when your current approach isn't working and be willing to try something new in order to stay competitive.

4. Delegate

Employing a great team is essential to any successful business and entrepreneurs understand that, when it comes to problem-solving, relying on staff expertise wins. Delegation is a crucial management skill and can result in various benefits when done effectively. First and foremost, the identification of what to delegate is an essential first step. Next, it is equally important to clarify priorities and provide guidance to employees by communicating the importance of each task in order to pave the road to success.

As a manager at a busy restaurant, you may delegate tasks to team members to increase efficiency. Identify tasks that can be delegated, prioritize them based on importance, communicate guidelines to team members, provide guidance and support, and offer feedback. This results in successful task completion, increased efficiency, and job satisfaction among team members, leading to improved customer service and increased revenue.

5. Foster creative thinking

In the 1970s, a scientist at 3M named Spencer Silver was trying to create a strong adhesive, but instead, he ended up creating a weak adhesive that could be removed easily without damaging surfaces. Despite being a failure in achieving the original goal, Spencer didn't give up. Later on, another 3M employee, Art Fry, realized that the weak adhesive could be used to create bookmarks that would stick to paper without falling off. This idea eventually evolved into the creation of Post-it notes, which have become a ubiquitous office supply worldwide.

• 3M:  Entrepreneurs know that it's not just about solving problems but also about considering the bigger picture and looking at the impact of decisions on the bottom-line. 3M's Post-it notes are a great example of fostering creative thinking in a business environment, which is an essential trait for long-term and sustainable success. It's all about being willing to challenge our assumptions, think outside the box, and embrace change as a path to growth and success. In essence, creative thinking is the ability to explore different possibilities in resolving a business problem. By encouraging creative thinking, businesses can foster a culture of innovation, which can lead to breakthrough ideas and a competitive advantage in the market.

6. Map out a vision

Entrepreneurs map the vision of their lives and how they can achieve those dreams. They aren't winging it or flying by the seat of their pants! They have a vision and execute that to make dreams a reality. The mapping out of a vision for your business is an essential step in defining your company’s purpose for different categories of stakeholders. The mapping out of a vision also helps project into the future in a manner that aligns with a business’ core values and business objectives.

• remote work:  The COVID-19 pandemic has led to a rise in remote work, resulting in an increased demand for flexible office spaces. These spaces offer amenities like high-speed internet and meeting rooms, making them a productive and convenient option for employees. For companies, offering flexible office space can attract and retain talent while providing cost savings and flexibility. The emergence of coworking spaces and other flexible office solutions means there are now a wide variety of options available. The rise of flexible office space benefits both employees and employers, offering a convenient, affordable, and flexible solution. The arise of remote work and flexible office space illustrates how modifying perspectives and finding new opportunities can lead to mutually beneficial outcomes for businesses and employees alike.  
• How the Third Place Can Expand Your Business Network
• 3 Overlooked Benefits of a Third Place in a Flexible Workspace

7. Dig deeper

Entrepreneurs are known for their ability to think structurally. This means that they are able to get to the heart of the matter and understand how things work. They ask structural questions and methodically break down problems into smaller, more manageable parts. This allows them to identify and address the root cause of a problem, rather than just treating the symptoms.

• Amazon:  Jeff Bezos is a great example of an entrepreneur who thinks structurally. When he first saw the internet explode in popularity, he didn't just jump into the fray and start a random business. Instead, he asked himself a structural question:

"What kind of business plan might make sense in the context of that growth?" (Source: Fundable )

He knew that books were a low-cost item that could be shipped easily and were universal. This insight led him to start Amazon, which initially sold only books but eventually grew to become one of the largest retailers in the world. By focusing on this one product and building a business model around it, Bezos was able to create a solid foundation for future growth and success.

Entrepreneurial Mindset

While the decision-making process of entrepreneurs may be unconventional, they possess a unique ability to take calculated risks and turn challenges into opportunities. With dedication, perseverance, and a well-defined mission, entrepreneurs can pave the way for success in their ventures.

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15.2 Making Difficult Business Decisions in Response to Challenges

Learning objectives.

By the end of this section, you will be able to:

• Recognize that cognitive biases can sabotage the success of the venture
• Identify key problem indicators
• Distinguish the emotional components involved in difficult decisions

Now that you are prepared to launch your business venture, let’s look at your business plan and the assumptions you made while preparing it. Did you keep a list of assumptions? Did you update assumptions as new data and information suggested “retiring” some initial ideas? Did you identify milestone timelines within your business plan? Did you fully assess risks and have mitigation plans to address them? These are essential questions to consider before launch. As the business venture comes into existence, you should review your assumptions and identified milestones. Ask the following questions:

• Are your assumptions still realistic?
• Is your business venture on for the associated milestones?
• Do you need to consider any changes that have occurred in the industry you plan to enter? Has the competition changed? Are there new regulations?

Tracking any changes and comparing them to your earlier assumptions provides an opportunity to reconsider whether changes to your plan, assumptions, and milestones are necessary. After you begin your venture, you should continue to review your assumptions and milestones. If you are not meeting your projections and milestones, what has changed? What decisions should you adjust to situate your venture into a stronger position for success? If your venture is doing better than expected, analyze why the venture is exceeding your forecasted projections.

It is important to return to your business plan and consider what you will do if your assumptions are incorrect, so if your milestones aren’t met, you can avoid the problem of escalation of commitment. The concept of escalation of commitment describes when an entrepreneur feels so committed to the plan of action that they end up losing their perspective on the reality of what is happening to the venture. They ignore the danger signs and think that if they just work harder, or pour more money into the venture, they can force the venture to become successful. Once an entrepreneur becomes this committed to the venture and is working passionately to keep the enterprise afloat, they can lose the focus and objectivity to make rational decisions. They can begin to react to the situation, stubbornly persist, or begin to ignore the danger signs that should alert them that reevaluation of the situation is necessary.

Escalation of commitment negates the recognition that a pivot action is necessary. As you recall from Launch for Growth to Success , in the entrepreneurial world, pivot is the action in response to recognition that the current method, approach, process, or idea isn’t working. Pivot is the point at which entrepreneurs realize that a change is required and pivot into something different.

Cognitive Biases and Problem Indicators

There is a fine line between believing in one’s abilities and the value of the venture versus stepping into a perspective that ignores new information or results. Entrepreneurs often need to face criticism and challenges where their confidence in the opportunity and their ability to create a successful venture override the criticism, but there is also danger in not listening to new information and re-evaluating one’s perspective to avoid biases. According to Cossette, in reviewing twenty-five empirical papers on heuristics and cognitive biases of entrepreneurs, overconfidence and optimism are the two most significant biases that contribute to an entrepreneur’s failure to recognize the need to change or end the venture. Other causes for the entrepreneur’s failure to end the venture include “the law of small numbers, the illusion of control, the planning fallacy, escalation of commitment, the status quo bias, and the hindsight bias,” 4 as shown in Figure 15.5 . To avoid this failure to exit the venture, we can identify fail-safe points within the business plan. These are the points that trigger the entrepreneur to consider what actions are needed to bring the venture back to a healthy position and whether this action is reasonable and feasible. Identifying these trigger points and creating contingency plans before opening the venture can prevent the entrepreneur from becoming trapped by these biases, such as the dangers of becoming overly committed and throwing resources into an impossible situation. Let’s look deeper into these biases and potential key problems that challenge our own decisions and the success of the venture.

As described in Cossette’s research, the law of small numbers refers to the target market not being large enough, or failure to attract a larger target market. The illusion of control refers to the entrepreneur believing that he or she can force the market into realizing the venture is the best, or that additional persistence will result in positive results. The planning fallacy identifies the pattern of creating a business plan that is too optimistic. Gish noted that business planning is intended to present realistic decisions and projections; however, research suggests that confidence in the plan places entrepreneurs in a position of believing their plans are accurate, causing a heightened belief that the venture will succeed, when in fact, the business plan is overly optimistic. 5

The status quo bias is a tendency to refer to a previously identified behavior or information as the ongoing habit to perpetuate. This bias can prevent the entrepreneur from recognizing that a new action is required—when a creative or innovative change is necessary to avoid economic distress rather than following a previously established pattern or habit—instead of continuing to follow the status quo. The hindsight bias is the belief that, in hindsight, the action or event was predictable, when in fact there was little if any indication that an event would occur.

As you can see, many of these problems are related to the hubris of the entrepreneur. Hubris is a strong belief in oneself, a belief of over-confidence or pride in one’s ability to affect the outcome of decisions when other factors have the greatest influence.

Aside from these challenges, other key problem indicators include insufficient available cash. Burn rate is the rate at which the venture burns through the available cash needed to sustain the business: More cash is going out than is coming into the business (review burn rate in Developing Startup Financial Statements and Projections ). Lack of control systems can be a contributor to excessive cash use, as can excessive waste in production, lack of follow through on collection of payment, or low inventory turnover creating excessive waste, such as with perishable products.

A misconnect between the target market’s desires and the product or service provided, can also create challenges, as can incorrect pricing of the product, or not having the right talent in your personnel or start-up team. However, planning only for success can be the biggest problem an entrepreneur makes. Keeping an open mind provides opportunities to see the reality of how the venture deviates from the plan as an action item to reconsider the venture from a new perspective.

Decision Making to Overcome Challenges

Now let’s look at how we can reevaluate the venture and consider what changes are possible to position the venture for a different future than first envisioned. Let’s examine a real story from Stacy Madison’s life. Stacy Madison is the entrepreneur who started Stacy’s Pita Chips . Madison had a background in social work but wasn’t happy with her career choice, so she decided to open a sandwich food cart business in downtown Boston. As her business became more popular, customers had to wait in line for longer times. When they reached the food cart window, they were often cranky and unhappy about the wait. Madison and her team discussed ideas on what to do for customers who grew tired of waiting in line. They came up with the idea of slicing bagels into chip size bites and baking the bagels with olive oil, then handing the bagel chips out to the customers waiting in line. Customers loved the bagel chips and requested the chips when they reached the food cart window. At first, Madison’s team would explain that they did not sell the chips but only gave them away to help their customers who grew hungry waiting in line. After repeatedly hearing this request from customers, Madison reevaluated her sandwich business and considered that maybe she should be in the bagel chip industry. The success of this story is that Madison sold her pita chip company to Frito-Lay for $65 million. 6 And the purpose of this example is to remember that when we start a venture, we need to be open-minded to recognize unexpected patterns and new information that can lead us in a different direction from the original plan and intention.

Personnel Change Challenges

One area of potential problems in a new venture is the entrepreneurial team, the start-up people on the original team, and the need for personnel changes within the team. Where did the people on your startup team come from? Are some of them longtime friends or perhaps family members? What skills or knowledge do they bring to the venture? Are they aligned with the needs of the venture? And importantly, are they the best resource for their role once the venture is up and running? Answering these questions clarifies whether team members are a good fit within the venture over time. The startup team no doubt provided enthusiasm and ideas that helped to identify and formulate the potential new venture. Team members probably contributed ideas and content in building the business plan, but over time, the needs of the venture will change. Being aware that changing needs might also result in changes within the startup team, and employee skills, is part of managing the growing venture.

For success, the team and employees need to align with the needs of the venture. Sometimes, entrepreneurs begin their business with people who agreed that the idea was sound and that the opportunity existed and was worth supporting. But these people might not have the knowledge, skills, and abilities necessary to support the venture as it grows. Frequently, we share similar skills and interests with our friends and family members. This means that we might have a venture with too many people with the same skill sets. Or we might have disconnects between what the venture needed in the past and what the venture needs currently.

Another personnel problem is discovering unethical actions that violate the code of conduct created in the preparatory documents. According to the National Business Ethics Survey of the U.S. Workforce in their 2014 report, 60 percent of reported misconduct involved someone with managerial authority. 7 These findings alert us to the importance of creating a code of conduct that aligns with the values needed to support the success of the organization. When the entrepreneur feels pressure to act unethically in an attempt to bring in new business or prevent the organization from financial stress, unethical actions can become tempting. Knowing that 60 percent of unethical actions occur at the managerial level should provide evidence to support the need to proactively consider how to avoid this dangerous situation. The same report encourages addressing potential problems by including zero tolerance for abusive behavior, lying, discrimination, and sexual harassment. An interesting finding noted that egregious rule-breaking behavior was infrequent, while more subtle “ongoing and continuous behavior, such as abusive and intimidating behavior, seems to be more prevalent.” 8 This result speaks to our earlier discussion on the importance of creating an appropriate culture. If an undesirable behavior is prevalent, this would seem to indicate that the culture supports this behavior. The study also noted that “frequency of misconduct reflects the strength of the company’s ethics culture,” noting that “60% of misconduct committed in companies with a strong ethics culture was a one-time occurrence,” and that frequency of unethical acts rose as the culture of ethics declined. 9

Recommendations from this same report for encouraging ethical behavior include the actions shown in Figure 15.6 .

Ethics and alignment of personnel to the venture’s future growth and success are all reasons to reevaluate the entrepreneurial team and personnel. Frank conversations are required to protect the future success of the venture and the best decisions to support this success. Ethical challenges need to be addressed quickly and preferably proactively to avoid being pulled down into reacting to a crisis that could be avoided by creating a culture and code of conduct that encourages correct actions. Sage advice is to clearly state up front the vision for the venture and agreement from the start-up team that the survival of the venture is the priority. Ethical behavior is an important topic of these discussions.

Personnel and Growth Challenges

Before starting the venture, the start-up team should ask these two questions:

• What happens if we are wildly successful?
• What happens if we are horribly unsuccessful?

The purpose of these questions is to consider how resources and debts will be resolved before the venture begins to use or acquire resources. If your relative or friend contributed by letting you use her living room for your planning meetings and bought pizza to keep the team energized, does she have a stake in your venture? If your venture is wildly successful, she might believe that she should receive financial remuneration for her contributions. The point is, people often change when there is lots of money or when the venture is on the edge of disaster. Planning for both extremes provides a framework for the entrepreneurial team to consider their own expectations and the expectations of other people involved in the project before these types of situations happen.

This discussion should also address the agreed-upon method for making difficult personnel decisions. Is there a severance package? If so, who is entitled to the severance package? Does the exit of employees, and even people on the start-up team, exclude them from future expectations if the venture is successful? If the funding source includes contractual liabilities, how is the release of a start-up team member resolved? If new team members or employees are added, will these people be considered employees who earn wages, or are some positions identified as receiving equity positions with financial gains through the harvesting of the venture? Addressing these questions before starting the venture can preserve relationships by clearly stating and agreeing to these sensitive decisions that can carry long-term consequences. In considering these questions and awareness of how the venture’s need will change in the future, you might want to revisit your founder’s agreement for clarity and alignment with any new information or concerns that arise in the start-up phase.

Lack of Sales and Customer-Base Challenges

Perhaps the biggest disappointment is when the entrepreneurial team has completed the pre-planning, received funding, and opened the venture for business, only to find out that sales aren’t realized. The target market isn’t rushing to the website or location to purchase the product or service.

There are many reasons this can happen, which can make finding a solution difficult. The first action is to bring the team together to discuss possible reasons why the projected sales aren’t being realized. This could result from inadequate marketing, targeting the wrong market or audience, selecting the wrong distribution system, communicating the wrong message or benefit within the marketing plan, or perhaps lack of training for sales personnel or first responders who manage the venture-customer relationship.

Identifying the problem is one solution to consider. Some tools that help in problem identification include brainstorming, creating mindmap s, and conducting additional research. Brainstorming provides a free flow of ideas for further exploration and analysis. The most important part of brainstorming is not judging any ideas: the more ideas that are shared, the higher the probability for identifying the problem. A mindmap taps into a different approach to gaining a new perspective on thinking about the problem. A mindmap has a center that states the problem, such as lack of sales. Next, you create branches identifying all the possible reasons why the problem occurred, such as incorrect target market and incorrect marketing message. Then you create sub-branches that relate to these first-level branches. Including pictures and color diagrams contributes to the process. The goal in creating a mindmap is to be creative in exploring the problem rather than attempting to hone in on a solution. Adding visuals encourages people’s brains to think creatively. After creating the mindmap, take a break from thinking about the problem. As strange as this seems, the process of focusing on creating the mindmap alerts your mind that this is a problem that is important. As you walk away from the problem, your mind is still thinking about the problem, but at a subconscious level. This opens the opportunity for an “aha” moment where you’re better able to figure out what is happening and understand what you need to do.

Both brainstorming and mindmapping are excellent tools that lead to conducting more research. After completing brainstorming and mindmapping, you should have a better understanding of the problem and a clear picture of topics to research, and possible methods to gain new insights into the problem of lack of sales or customer base, such as surveys, focus groups, or free samples. You can even go back to brainstorming and creating a mindmap around this newly discovered area identified through the first round of brainstorming or creating a mindmap. Or you might already have feedback that reveals a pivot for moving the venture in a new direction, like Stacy Madison did in discontinuing the food cart and moving into the snack food industry. Another response to lack of sales or customers is to use social networking sites to draw attention to your business. You can offer short-term incentives to encourage your target market to react or provide feedback about your product.

Are You Ready?

Mindmapping.

Practice either brainstorming or mindmapping by identifying a potential problem your venture might face. Include at least four branches and four sub-branches in your mindmap. After reviewing the completed mindmap, identify at least three methods you could use to research the most significant topic discovered through creating the mindmap. Was this activity beneficial? How might you use this method in the future?

• 4 Pierre Cossette. “Heuristics and Cognitive Biases in Entrepreneurs: A Review of the Research.” Journal of Small Business & Entrepreneurship , 27 (5), 471–96. November 2015. doi:10.1080/08276331.2015.1105732
• 5 J. Jeffrey Gish. “Failing to Plan but Not Planning to Fail: A Theory of Entrepreneur Optimism and Business Planning.” Academy of Management Annual Meeting Proceedings , 2016 (1), 1. November 30, 2017. doi:10.5465/AMBPP.2016.10945abstract
• 6 Katie Morell. “The Story behind Stacy’s Pita Chips.” Open Forum. May 11, 2012. https://www.americanexpress.com/us/small-business/openforum/articles/the-story-behind-stacys-pita-chips/
• 7 Ethics Resource Center. National Business Ethics Survey of the U.S. Workforce. 2014. https://www.bentley.edu/sites/www.bentley.edu.centers/files/centers/National%20Business%20Ethics%20Survey.pdf
• 8 Ethics Resource Center. National Business Ethics Survey of the U.S. Workforce. 2014. https://www.bentley.edu/sites/www.bentley.edu.centers/files/centers/National%20Business%20Ethics%20Survey.pdf
• 9 Ethics Resource Center. National Business Ethics Survey of the U.S. Workforce. 2014. https://www.bentley.edu/sites/www.bentley.edu.centers/files/centers/National%20Business%20Ethics%20Survey.pdf

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• Authors: Michael Laverty, Chris Littel
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• Book title: Entrepreneurship
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