The pandemic has witnessed a slump in the economy along with being a health menace. This economic crisis compels us to revisit the 2008 financial crisis scenario that forces entrepreneurs to adopt more of a crisis management mindset in lieu of a growth mindset. Startups and early stage companies are the most hit during such slump. Founders are young and driven people who generally hold the major shares of the company. Startups are a work of passion, enthusiasm and innovation which involves a certain kind of temperament; their decision-making process is more instinct based. This piece explores the discussion of instinctive, intuitive and analytical thinking for startups.
An important discussion is about instinctive and analytical decision making in any business and startups should be very conscious of such processes. The founders would mostly be inclined towards instinctive decision making considering their pre-occupied mind filled with the enthusiasm of creating/making something new. Harvard Business Review (HBR) will give you two types of the most searched articles on that; one would tell you ‘Don’t Trust your Gut’ and the other would say ‘Instinct Can Beat Analytical Thinking’. However both the pieces are good discussions and don’t draw sharp conclusions on what should be done. Gred Gigerenzer, Psychologist, who has an extensive work on the topic, believes in using heuristics, rules of thumb, for better decisions instead of the models of “rational” decision-making developed by mathematicians and statisticians. He discusses in the latter HBR article “Gut feelings are tools for an uncertain world. They’re not caprice. They are not a sixth sense or God’s voice. They are based on lots of experience, an unconscious form of intelligence” which opens up the debate – isn’t it subconsciously your existing knowledge/logical thinking that helps you to decide and not just a whim or what we understand as an arbitrary gut feeling. Poyni Bhatt, CEO of SINE, IITB deduces the debate down to explaining it simply that certain risks have to be calculated strategically, she sure does gets the hunch how any startup would perform at the later stage, but seldom acts on her intuition/instinct, which is again not a whim, but wisdom – a heuristic approach of a seasoned professional like her. In any kind of crisis moment, she tells her mantra of making a decision is methodological and strategic rather than basing it on her intuitive approach.
Decision -Making: A factor for good governance in Startups
A SINE incubatee, SustLabs founder Kaushik Bose believes in strategic thinking, having an advisory board to guide through their decisions. He says it depends on startups and their functional area whether to have an advisory board early at the stage or later while entering the market. For SustLabs, they had the advisory board since they started, all top business professionals who guided them through the process. When asked if there were any clashes at the initial stage between their thought process and the founders’ thought process, he briefly recalls to say there wasn’t any major clash since the advisory board believed in the idea and did not intervene much in the innovative process. This helped us to understand the strife between intuitive thinking and analytical thinking since here we are talking about young founders with instinctive thought processes. Kaushik also responds to how their business was impacted by the pandemic and he tells that they certainly decided to ‘go low’; having a governance structure in place was apparently helpful for them.
Forbes will tell you “Intuition is an Essential Leadership Tool” and “In Business, Don’t Rely On Instinct: Why Intuition Is Different And Better”. These pieces give much clarity on instinct – which is an emotion developing out of fear where people act instantly as their brain responds, and intuition – that develops out of past experiences, precisely wisdom that Ms Bhatt emphasizes on.
It certainly gets confusing at times to have clarity on the decision making process for any startup and it is a continuous journey of evolving with multiple mistakes. The responsibility of all of it falls on the founders naturally and they have to take a call on being either instinctive which has made many business decisions go haywire, or having a logical plan with calculated risks which has a longer sustainability in the market. There are stages as well to adopt a certain kind of process: – the product stage where the startup is still coming up with their offerings and the business stage. The process however, is always a combination of both, intuition and logic where the business stage definitely needs analytical thinking demanding seasoned brains to guide through all sorts of situations – whether it is a crisis in the market or cut-throat competition.
This leads us to a discussion of corporate governance- an essential part of any functioning firm; the crisis has only made it evident that young startup founders have been going haywire understanding the ups and downs. The cases and discussion above provides insights to the startup founders for them to decide what structure they want to adopt for their business to function and exist in the market. The next blog will be in continuity of the same to discuss and bring fresh perspectives on the structure to be adopted by the startups to assist them through their decision making process.