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How to make risky business decisions the Jeff Bezos’ way

Making risky business decisions is part of the job for all organization leaders.The right one can really propel the company forward, but the wrong one…

This is why a lot of business leaders try to minimize the risk and avoid rocking the boat. Ideally, you would make your decisions when you have the most information possible. But that rarely happens.

So what can you do? Jeff Bezos has you covered. In his annual shareholder’s letter he sheds some insight on how he makes risky business decisions. “Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90% in most case, you’re probably being slow”, he wrote.

Bezos has set up an entire concept which he calls Day 1. It’s about running his multi-billion dollar business like a startup. Or at least, taking the best characteristics of a startup and applying them to your case.

Bezos gave 4 steps on how to achieve that. “You have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations,” he writes.

So, how to do that? Here’s what Bezos does.

The Jeff Bezos’ way to make business decisions

You already know the first step: Learn to work with 70% of the data you need.

The second step is to be flexible after the decision is made. “Many decisions are reversible, two-way doors,” he writes. And also have a “a light-weight process” in place to reverse those decisions. You can tell if it’s a light-weight decision by answering the question: “So what if you’re wrong?” he writes.

Third, don’t be so focused on avoiding mistakes. Instead, refocus and become able to quickly recognize and correct bad decisions. “If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure”, he adds.

Finally, you will  always have some decisions that you can’t reverse. Or it will be too costly to do so. In this case, apply “disagree and commit”.

“If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, ‘Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?'” Bezos writes.

“If you’re the boss, you should do this too. I disagree and commit all the time. We recently greenlit a particular Amazon Studios original. I told the team my view: debatable whether it would be interesting enough, complicated to produce, the business terms aren’t that good, and we have lots of other opportunities. They had a completely different opinion and wanted to go ahead. I wrote back right away with ‘I disagree and commit and hope it becomes the most watched thing we’ve ever made.'”

And if you were right, don’t go on the road known as “I told you so”. Instead use this to provide more insight and to move to collaborate on action. “‘You’ve worn me down’ is an awful decision-making process. It’s slow and de-energizing,” Bezos explains. but “a high-velocity decision making environment is more fun.”

Image credit: Flickr (CC) / James Duncan Davidson