Decision-making in a start-up for business development in an environment similar to the Congolese market

At the end of the certification program offered by ENERGY GENERATION in partnership with Ascencia Business School and the College of Paris in which I am participating since October 2019, I defended a thesis for the award of my MBA - Business Unit Manager, on the issue of "what are the strategic directions for the competitiveness of Green Tech Africa on its market"

Indeed, Green Tech Africa is a Congolese start-up that manufactures and markets 100% organic industrial absorbents for the cleaning of industrial sites. This company is currently supported by Energy Generation and Total Energy Start up Center. Being new on an old market, the question related to the commercial development of this company brings us to a daily decision making.

Decision-making is not a situation of rest. The ambient uncertainty, characteristic of a complex and chaotic environment, limits the perception of clear signals.?

On the other hand, the speed of change leaves little time for deliberation and does not allow for all eventualities to be considered. We must act quickly, opportunities do not wait. This is why decision-making is above all a risk-taking exercise.

Each of us makes many decisions every day. Decision-making is the act of choosing between several possible courses of action when confronted with a problem, the aim being to solve it by translating the choice made into a behavior (a sequence of actions). It implies a certain number of distinct operations: the definition of the object (what the reflection is about and what the decision will be about), the research, the analysis and the organization of useful information, the elaboration and the evaluation of hypotheses of decisions by taking in particular support on knowledge and/or previous experiences, the choice of a hypothesis of decision and its implementation.?

Cartesians believe that everything can be explained and demonstrated through scientific analysis. If there is one area of management where we would like to be able to apply this approach, it is that of corporate decision-making. An abundant literature is devoted to it and its place in the programs is important. The teaching of decision making is marked by a rather procedural approach aimed at explaining how decisions are made. Students sometimes summarize it in a simplistic and mnemonic way with the famous "IMC" model (intelligence/modeling/choice) made famous by Herbert Simon. Descartes' fourth rule states that "method is the path that the mind must follow to reach the truth". However, managerial history is littered with cases of misjudgment and unfortunate decisions for companies. How could a group like Kodak ignore the development of digital technology? Why do some managers, supported by boards of directors and advised by armies of consultants and experts, ignore certain opportunities to such an extent or make such unfortunate and dramatic decisions? There are many dramatic examples (the Challenger shuttle explosion, the Mont Blanc tunnel fire...), with heavy human consequences; but companies are confronted every day with a multitude of decisions to make, in a world that is less and less "readable", where uncertainty is becoming the rule. The near disappearance of planning services illustrates this and perplexes analysts.

Simon Herbert tries to show that in a decision-making process, the individual will choose the solution "among the best possible, but not necessarily optimal with regard to real rationality". In fact, it is a question of setting up a rationalization process that has often been reduced to 3 phases: IMC (intelligence/modeling/choice). If this reduction allows simple shortcuts for some students, it could not, by itself, represent the extent of Simon's work (which earned him the Bank of Sweden prize in 1978, the so-called "Nobel Prize"). His main contribution was to work on the imperfect information that characterizes the situation of any decision maker. His approach is therefore very realistic and easy to illustrate. It is in the characteristics of the individual that we find the limits of optimal rationality, because we cannot integrate too much information. For example, the choice process in front of the (very large) washing powder department of a hypermarket will result from an approach combining several elements:?

Prior learning: the individual is shaped by his past experiences.?

A memory: which will allow to remember the previous decision process in a similar situation,?

A habit: which will take the form of reflexes in a given situation, a kind of "automatic behavior",?

A positive stimulus: the flow of information received by the individual will help him/her to decide (e.g. the headlines or advertising in the act of buying). The decision-making system is therefore simple and "procedural".?

Satisficing" is a model created by Simon to illustrate this. The individual examines the potential solutions one after the other and chooses the one that satisfies all the criteria.

In other words, our representation of the world is partial, which will inevitably influence the content of our decisions and, perhaps more importantly, the way in which we make them. Herbert Simon proposes a description of decision making based on the concept of procedural rationality in his so-called satisficing model.? The central idea of this model is quite simple. Any decision-maker is rational in the case of a simple choice: if he prefers choice A to choice B and choice B to choice C, he will opt for choice A. However, in the case of a more complex choice (with ten alternatives, for example) in a situation of uncertainty, he will try less to examine all the possibilities than to find a so-called reasonable solution, in this case a solution whose value reaches a certain satisfaction or aspiration threshold.?

This uncertainty is even greater in the African entrepreneurial world. Very often one lacks experience, one does not have the right network and, when one starts out, one has no objective mastery of the market. However, one already wants to make a turnover. Better still, decisions must be taken to attract investors and motivate them to invest in the start-up.?

As Reid Hoffman says, “Everything in life is about risk. What you really need to learn is how to manage it.”

In this sense, decision making implies doing some work upstream, and this work requires patience, time and to surround yourself with good people who by their experiences would be able to guide you with confidence in the process of developing good assumptions.

It is really the assumptions that define the purpose of the decisions, because unless you are able to bring together all the stakeholders that will be impacted by a decision in order to find a win-win consensus, only the right assumptions guarantee success in this process.

Knowing how to manage risk is already being able to identify it, to understand its relevance and contours in order to anticipate each of the forecasted scenarios that may arise.? To do this, it is customary to use the right management tools, the most commonly used of which are SWOT analysis, strategic planning, risk analysis, BCG matrices, etc.

How many of us really master these tools? How many of us know how to use them? And even if we do, where and how do we get the information to implement them in Sub-Saharan African countries???

Which brings us back to the importance of defining the assumptions for a start-up: we don't really know what the customer wants, we may know what the customer often uses, but is it really what they want? As Josh KAUFMAN says in Personal MBA: "The reason it's useful to create a Minimum Viable Offering is because you can't know in advance what will work. You don't want to invest all your time and savings into a concept that won't work, and the sooner you can be fixed on the chances of your idea succeeding or failing, the better."

After having obtained our minimum viable product, it was a question of testing the product on its market, in order to choose the business model which corresponds best, not having any notoriety on the very regulated sector of the depollution, we faced a barrier to the entry even of the market, we had a product which functions but that nobody knew.

How to reach our customer segment and sell when no one knew about us? How to set realistic prices compared to the competition? Is there really a market for our product? Is the need big enough to sustain a business??

Decision-making is even more complex in a start-up because it is a question of taking into account the resources we have at our disposal, the stakes and the objectives we have to reach. How to set them while being sure not to regret it later???

As Josh KAUFMAN says in the sequel to the same book, "Since feedback from potential customers and paid orders are two very different things, creating a minimum viable offering allows you to start collecting data from real customers as soon as possible, directly test the driving assumptions associated with your project, and reduce the risk of making an investment decision you'll regret later."?

This approach corresponds to what one of my mentors calls "continuous prospecting" the objective here, is to go to the stakeholder concerned by the decision in order to understand, through a design thinking approach, what their need really is.?

So we had to get closer to our target, by organizing prospecting and tests for concept and market validation in companies to get the answers to all these questions.?

After obtaining our minimum viable product, it was a matter of making assumptions that should guide decision making, but these assumptions should not only be objective by gathering information oneself, but also realistic in relation to the market in which one finds oneself. This approach is not easy on the African continent, because some stakeholders are not accessible because of cultural barriers. You really have to be able to cross them to get the feedback you need.

"It's better to be roughly right than completely wrong." JOHN MAYNARD KEYNES, BRITISH ECONOMIST?

Dear African entrepreneurs, I invite you to share your experiences!

Source:?

Simon, Herbert A. (1979). "Rational decision making in business organizations". The American Economic Review. 69 (4) : 493 à 513. JSTOR 1808698

?Simon, Herbert A. (1947). Administrative Behavior: a Study of Decision-Making Processes in Administrative Organization (1st d.). New York: Macmillan. OCLC 356505