Strategic tradeoffs: The importance of tough choices

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Tradeoffs are an integral part of business life – it is typical for businesses to face choices, with one course of action precluding another direction. If you focus your time and energy on one particular area you inherently put less attention on a separate part of the business. This article explores the need for making tradeoffs, and how to avoid the danger of putting off the tough decisions.

What are business tradeoffs?

Tradeoffs are the situations where it is not possible to achieve both things at the same time – doing one prevents the achievement of the other.

Commitment to a course of action is an example of this – if you decide to go in a particular direction, you are inherently ruling out the alternative path that you could have taken your company down, or allocated the resources toward.

Accepting tradeoffs

While it is easy to think that tradeoffs are bad – limiting options, or narrowing the customer base – they are an integral part of decision making. You will never be everything to everyone, and an attempt to do so runs the risk of being ‘stuck in the middle’, providing nothing of any value to anyone.

The fact is, you will continually be making tradeoffs, if only on where you focus your energy and attention. Firms typically have multiple possible directions that they can take their product and inevitably different possible customers that they can target and reach out to. The real question is not whether you are making tradeoffs in your decision-making, but are you actively thinking through the tradeoffs, giving active consideration to what best aligns with the strategy.

The danger of the non-decision

One of the real dangers in decision making is making non-decisions – essentially putting off decision making to a later point in time in the hope that difficulties associated with making the choice will resolve themselves. While there may be genuine reasons for delaying decisions to seek further information, if the fundamentals are unlikely to change, the non-decision rarely solves the tradeoff, and instead of doing A or B, you may end up doing the third option of neither (or some happenstance ‘choice’ made in the movement).

Making decision of what you are going to do – and consistently re-enforcing those decisions over time – is important part of remaining focused on a particular direction.  

Prioritizing: A way of accepting the tradeoff

One approach to help make tradeoffs is to view them as priorities – what are you going to do first, second, third. Sometimes it simply isn’t possible to do everything at once and an attempt to do so will leave your firm unable to succeed on any particular dimension. Recognizing that some things must inevitably be done first, can be a way of accepting some tradeoff decisions.