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When a “C” Beats an “A”

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

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?

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.

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.

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.


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