Oct12 11

The Friday Indefensible Position: A “C” is better than an “A” (by Ben Deda)

From the first day we are in school, we are taught that our goal on anything should be a grade of 100%. One hundred percent is better than 90%, 90% is better than 80%, and 80% is better than 70%.

A perfect score?

So you always want to strive for the 100% solution, right?

Absolutely wrong. In a lot of cases, the 70% solution is exactly what you want.

But how can the 70% solution be better than the 100% solution? It has to do with dynamic environments, some weird thing called the OODA loop, and the idea of tempo. You’ll find that the 70% solution is a great tool for startups and fits well with the ideas of Minimal Viable Product and Build-Measure-Learn of the Lean Startup methodology.

Dynamic Environment

Let’s start with the idea of a dynamic environment. A dynamic environment is one in which actions are not constrained to a set of rules. Rules like alternating turns and set amounts of time create static environments. In these non-dynamic environments you have a set amount of time to maximize your solution. Therefore it is best to strive for the closest you can get to 100%.

What about when there is no allotted time or set of rules? What do you do when it is a free for all and it is all a matter of actions and reactions that constantly change the environment? Do you still want to strive for 100% in this dynamic environment?

Hell no, just take the 70% and your C.

All of you honor students out there are probably thinking I’m crazy, but stay with me. What if every time you answered a question on the test you were allowed to choose the subject of the next question as long as your answer wasn’t completely wrong? Think Jeopardy with a curve. You want to make sure you keep the game in your strongest category. Wouldn’t you want the 70% solution instead of the 100% in this case?

This kid is happy, but he’s doing it wrong.

The OODA Loop

This is a portion of some incredible theory developed Colonel John Boyd of the United States Air Force. The story goes that Boyd was tasked with finding out why the U.S. was losing so many aerial dogfights in Korea compared to WWII. Popular opinion was that it was an issue with the pilots. After countless hours talking to survivors and eyewitnesses, observing in the field, and study, Boyd determined that it was actually the planes that were the problem.

“Nonsense!” was the response of the establishment. Everyone knew the U.S. had the fastest and most reliable planes in the world. Boyd acknowledged that this was a truth, but what they were missing was the fact that the planes’ designs greatly hampered the pilots’ ability to see what their opponents were doing.

Boyd believed that all decision making took the form of a reoccurring series of the same steps: Observe, Orient, Decide, and Act (OODA). You first observe your environment, orient yourself to the environment based upon your internal point of reference, decide what action is best to take, and then take that action. You then start all over by observing the new environment caused by your action. As in all things military it became an acronym. The OODA Loop.

U.S. pilots were having problems effectively seeing the situation and therefore their OODA loops were delayed. Opponents were completing their own OODA loop faster than the U.S. pilots and gaining an advantage.

Boyd became a major proponent for a change in aircraft design to more maneuverable craft with better fields of vision which led to bubble cockpits, the F-16, and the F-18, which are all still in service today.

The F-18′s bubble cockpit is also useful for communicating. Keeping up foreign relations. You know, giving him the bird.

It should be pretty apparent how this ties into the 70% solution. The 70% solution allows you to cycle through your OODA loop faster than someone who is taking the time to put together the 100% solution.

Suddenly the law of diminishing returns becomes relevant. The longer you wait to gather more information and mull over your decision, the less you gain from the incremental “correctness” of your decision. If you wait for the 100% solution, you might find yourself providing an answer to a question that is no longer relevant.

Tempo

How do you know what equates to a 70% solution? It’s not like the decisions we need to make are all numbered questions that we can track. This is where the idea of tempo comes into play.

Oodles of OODAs

If you notice, in each example I frame the decision in a competitive environment. The 70% solution loses its impact in a static environment where you are not competing against another entity. But truly static environments are pretty rare; you almost always have something with which you are competing. It doesn’t have to be another company or person. It can be the market or simply just time. You simply need another force that can impact your environment even if you do nothing.

Those other forces will help you determine what constitutes 70% through relative speed, otherwise known as tempo. Tempo is nothing more than your speed in relation to your competitor’s speed. By understanding what that tempo is, you can determine when you reach that point of diminishing returns, which is the 70% solution.

The Result

I’ll give you a great example from FullContact. When we initially started commercializing our product we started at a price of $0.03 per match. We gained some initial traction, but we just weren’t seeing growth as quickly as we wanted. From some initial reactions from customers it appeared that our price was too high for an API.

We could have done in depth market analysis, pricing surveys, and held numerous meetings to discuss our options. But, we had a competitor that had a bit of a jump on us in the market and a potential capital raise on the horizon. So instead we took the data points we had, reviewed pricing from some API companies we respected, and started tweaking our pricing. We first added an additional plan at a lower price and reduced the number of free calls. We didn’t see the results we wanted from that so three weeks later we cut our prices 50x. Yes, 50x. Next thing we knew we had customers signing up at a consistent rate. Then our competitors made it seem like they matched our pricing and also modeled their website after hours. We had forced their hand by using the 70% solution, going through our OODA loop (or Plan Measure Build) faster, and iterating.

In conclusion, recognize when you are in a dynamic environment, be cognizant of your OODA loop, and know how quickly you are moving through that OODA loop in comparison to the tempo of your environment. Don’t stress out about trying to turn an uncertain and chaotic environment into the 100% solution. Take the 70% solution, execute, and get ready to do it again.

Improvise, Adapt, Overcome.

Ben Deda is Vice President for Business Development for FullContact, a Denver based TechStars company providing cloud-based contact management solutions. Ben is also a decorated former Marine Corps Captain adept at executing OODA loops under extreme stress.

11 Comments

Fletcher Richman | October 12, 2012 at 4:47 pm

I like this take on the lean startup methodology as a proven science. It’s incredible to see the plan measure build loop perfected by Toyota be applied to startups, government agencies, and corporations, all with incredibly successful affects.

On another note, the Lean Startup Machine has just released the Validation Board, a tool similar to the Lean Canvas but with more focus on key assumptions made in a startup and getting out of the building. I think this type of model could take over as the centerpiece in a place like TechStars.

One other interesting thing is the experience of the “70%” success model in my life as an entrepreneur has actually affected my educational career. I find it harder to motivate myself to push for A’s, once I learn the basics of a topic I immediately get bored and want to move on. Hope the parents understand!

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Ben Buie | October 12, 2012 at 10:32 pm

I totally agree. Taking this a step further based on the Pareto principle, 80% of our success can be attributed to 20% of our efforts. If this is true, which I really believe it is, this suggests that we can make our feedback loop even shorter and achieve much more. The trick is to remember this when we get bogged down in the details of an important project.

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Ilya P | October 13, 2012 at 11:14 am

I really love the comparison to the military (and how air force was not receptive initially either), but think some might still be missing the point here: the idea is not about delivering half-baked results sooner (and moving on) instead of trying to cover everything at once and right from the start, but rather about starting from alpha and iterating fast (speed+feedback, as opposed to waterfall approach, btw) with “perfect” improvements…
Coming from a perfectionist- I agree with Ben Buie, it is a hard thing you have to fight for- thank you for the inspiration Ben Deda!!!

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Alex Newmann | October 13, 2012 at 8:55 pm

Ben, great post -definitely agree with you. We are going through similar issues at PivotDesk – what to do when, how fast, how complete a task needs to be, how many resources to put on a subject. We use the 70-80% rule to test and gauge how our customers react and then we iterate. Thanks for putting it all together so clearly!

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Tosh Grebenik | October 14, 2012 at 12:59 pm

He’s absolutely right! Commonly, the last 20-30% of the product or project take 70-80% of the time, cost, and effort. If the customer is satisfied with the 70% solution, why not just save the extra time and money and move on!

While I certainly agree with this principle, I wish my professors did… =)

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Denelle Numis | October 14, 2012 at 10:42 pm

This also reminds me of the 80/20 rule that many companies use to help motivate employees to spend 80% of their time on the top 20% of their work. This type of efficiency seems to be right in alignment with your belief of 70% correct information.

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Matt Evans | October 15, 2012 at 10:35 am

I agree but still have questions. Why 70%? Why not 60% or 50%? I am still not sure how you strike that balance of taking the least amount of time (fast OODA) while achieving the best results.

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Ben Abell | October 15, 2012 at 2:17 pm

Very interesting post! This seems to be a kind of counterpart to the idea of “failing fast,” which also emphasizes reacting as quickly as possible in order to make corrections in strategies. I’ve also seen “failing fast” referred to as “adjust & pivot” and “launch & learn,” all of which is centered around the idea that you should not waste too much time brainstorming in isolation from your market and that you should use your the extra time that you are exposed to the market from a quicker launch to make a pivot if need be.

What I’ve found most interesting is trying to figure out where I would put “failing fast” in the OODA loop. Right now, I’m switching back and forth between it affecting the whole of the loop or the decide/act part. In reading a little more about the OODA loop on Wikipedia, it seems like the idea of shooting for %70 most significantly affects the “orientation” portion. I say this because “orientation” is described there “as the repository of our genetic heritage, cultural tradition, and previous experiences – [it] is the most important part of the O-O-D-A loop since it shapes the way we observe, the way we decide, the way we act.” In this context, our previous experiences and traditions taught us that we act based on a need to get to %100. By changing that orientation to a goal of %70, we have changed the way in which we regard the remainder of the loop.

I don’t know if “failing fast” could also be considered to affect the whole of the loop by impacting the “orientation” part, but it certainly gives a great context in which to analyze the idea!

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Ben Deda | October 15, 2012 at 9:18 pm

Hey guys, sorry for the late response. I’m used to getting my Disqus alerts!

I don’t believe there is any science behind the 70% number. It’s just the idea that you shouldn’t try to collect and analyze all of the information. Get as much as possible in the time you have, make a decision, and execute. Rinse and repeat. This becomes absolutely necessary in time-constrained environments. The problem is you usually don’t know the details of the time constraint. How long do you have before your competitor acts or the market changes? That’s the hard part.

It’s very interesting to see how military theory (OODA Loop, maneuver warfare, etc…), manufacturing theories (Lean manufacturing, Gemba Kaizen, Theory of Constraints) and now startup theories (Lean Startup) are converging.

I may be a bit biased in this, but the best in the business are US Marine officers. You are drilled in making timely decisions. The 70% solution is one piece. Recognition based decision making is another. Next post will be on that.

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Madelaine Maior | October 16, 2012 at 5:40 am

I have to admit, I was skeptical of this argument for the 70% solution. But I think the key here, for me, is that it is not about encouraging people to be sloppy or thoughtless but rather to prioritize flexibility, adaptability, and dynamism over finding the most elegant solution. This seems like a broadly applicable lesson. However, identifying where speed (or a fast OODA loop to use the lingo) is the most valuable metric sounds difficult. Perhaps it is the snail’s pace of the academic environment I am used to that is inspiring my fear! Thanks for a thought provoking post.

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Zak Kessler | October 17, 2012 at 12:01 am

What a great way to approach flexibility in decision making.

I have been kicking around in my head the ideas in this post for a few days now because this type of decision making really drew a contrast for me between the start-up and Fortune 500 companies that I’ve been a part of. It seems to help define for me the reason why so many larger companies fail to innovate. It seems to me that once the “system” becomes more complicated and there are too many interests at play at once without a hard and fast set of rules to prioritize those interests quickly, then the loop inevitably slows. It seems to me that this is the reason that many early employees feel so empowered at start-up companies – they are empowered to close the loops quickly. Oddly, the extremely hierarchical structure of the military seems to favor this type of decision making, but again the empowerment is provided to leaders in the field to execute their smaller portion of the plan as best they can. It seems that the more you can get employees, leaders, and companies to think in this manner, maybe the thought process could be self-reinforcing and scalable (i.e. government and bigger companies).

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