If you’re the kind of person who reads this blog out of personal interest and not merely out of maternal loyalty (thanks Mom!) you most likely know a bit about Clayton Christensen. There’s a reason I’ve quoted him as much as I have: he’s one of the world’s foremost business thinkers and it’s really not an exaggeration to say that his theory about disruptive innovation has changed the way our world works.
This week I read an article he wrote called The Capitalist’s Dilemma. In that article, Clayton and his co-author, Derek van Bever, describe spreadsheets as “the fast food of strategic decision making.” Very briefly, they highlight how the popularity of spreadsheets “has given rise to an unhealthy dependence” on financial metrics in modern business.
Clayton and Derek quote Scott Cook, the founder of Intuit, who observes that focusing on financial outcomes too early in the innovation process produces “a withering of ambition.” Explaining that financial metrics lack predictive power, Scott says “Every one of our tragic and costly new business failures had a succession of great-looking financial spreadsheets.” In response to this failure of spreadsheet-based decision-making, Scott explains, his new-product teams no longer submit a spreadsheet to justify new innovation, they focus instead on “where we can change lives most profoundly.”
I love this idea.
I love it even more because of the tension that it creates with another idea I’ve talked about: the idea that a great business idea is simply a spreadsheet with a skin on.
Spreadsheets are familiar. They’re ubiquitous. And they offer the siren clarity of black-and-white numbers. But because spreadsheets lack predictive power, they’re also like James Surowiecki’s noisy crowds: when spreadsheets tell us what to do they override our decision-making process in a way that leaves us searching for someone (or something) else’s expectation about the value of our business.
That’s a really perverse role for such a powerful tool. Instead of allocating our time, our money, and our emotional energy to the strategies we really want to implement, this sort of reliance on the spreadsheet pushes us to change our behavior in order to satisfy people who don’t have the same information, the same dedication, or even the same goals we have.
So by all means, make sure your business plan makes financial sense. But don’t let the spreadsheet fool you. Capitalism is not finance, success is not a high internal rate of return, and otherishness is a spectacular way to create healthy business.
