The potential upside is always unknown before an opportunity is explored. The effort required to explore an opportunity is also always unknown. Sun Tzu knew this 2,500 years ago when he wrote:
Make no assumptions about all the dangers of using martial force.
Then you will make no assumptions about the benefits of using arms either.
The point is that the future is the ultimate unknown territory. The biggest mistake we can make is thinking we can calculate what is unknown. All spreadsheet forecasts are fictions to one degree or another. But when it comes to exploring new areas of opportunity, it is a fantasy.
What is better understood is our ability to compare the likelihood of success. This is where we must focus our efforts. We cannot give this probability in percentage, but we can somewhat easily compare one opportunity to another to understand which are more likely to be successful. The list of rules is long, but here are some examples that are easy to understand:
- Small opportunities are more likely to be successful than big opportunities .
- Opportunities that can be tested in small ways are more likely than those that require a large trial.
- Opportunities that are close to what we are doing now or where we are not are more likely to be successful than those distant.
- Opportunities that require rare skills or resources that only you possess are more likely to be successful than those anyone can explore.
The strategic value of a new position is judged by how easy it is defended and how easily it is advanced. Sometimes we can judge the elements that affect these conditions before we explore an opportunity, but they are always better understood after a position is secured. One of the elements by which this is judged is “relative barrier to entry” which is the final point we made above.