Monday, 22 February 2010

Asking the right questions

So often in life we search for solutions. We look for the answers to our problems, both in business and our private lives. Yet so often it isn’t the right answer that is eluding us, but the right question.

I’ve recently finished reading The Snowball by Alice Schroeder, the biography of Warren Buffett. Readers from nearby planets should know that Warren Buffett is one of earth’s richest men, and an astonishingly successful investor. She paints a vivid picture of his approach to investing. Rather than ask “Should I buy this stock at this price?” Buffett asks “What is this stock worth?” The difference may appear subtle, but the effect is dramatic.

The first question assumes the stock price is reasonable, and the decision hinges around whether you believe it will rise in value or the company will maintain its dividends. The second question is more arrogant: it attacks the very heart of the system. By going back to first principles Buffett ignores the market, and comes to his own independent conclusions as to the value of what is on sale.

It is clearly a successful approach because Buffett’s net worth has more zero’s on the end than this blog has space for.

Putting in a new software system also prompts questions. I see many companies approach the decision by asking “Should we install this software in our business? What benefits will we get by using it?”

Whereas perhaps the question could be better phrased as “What do we need to achieve in our business, and how are we going to get there?” The answer might or might not include software, but the process of figuring out what the objective is, and what the best steps are to achieve it, will produce a better result than concentrating on the functionality of any or even several software packages.

Peter Drucker famously asked “If you weren’t already in the business [you are already in], would you enter it today?”

It’s a tough question that requires some hard thought. And is likely to provide some valuable insights into your business, your competitors, and the direction the market is heading. It encourages independent thought, not a follow-the-leader mentality. I think that’s a useful skill in life and in business.

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