Analysis Paralysis

Decisive action at an expansion stage software company (as well as any big company) has many enemies.

There’s the motivation to care and act. There’s work ethic. Time and other resources. And so on.

These are easy to spot. Someone who doesn’t care, is lazy, or doesn’t have the time or staff or money to do something is obvious.

But then there’s “analysis paralysis”. I first heard this term from OpenView Adviser and Scrum co-creator Jeff Sutherland, when describing what happens when product managers and developers get stuck in the analysis phase of determining what to build and how exactly for too long rather than just trying to build it and seeing what happens.

Wikipedia defines “analysis paralysis” as: “a phrase that describes a situation where the opportunity cost of decision analysis exceeds the benefits that could be gained by enacting some decision, or an informal or non-deterministic situation where the sheer quantity of analysis overwhelms the decision making process itself, thus preventing a decision. The phrase applies to any situation where analysis may be applied to help make a decision and may be a dysfunctional element of organizational behavior. This is often phrased as paralysis by analysis, in contrast to extinct by instinct.”

It’s a sneaky problem, as you might think you’re doing something right when in fact you’re not. After all, you have a complex problem, a decision needs to be made, you care a lot about the outcome and your organization so you do not want to make the wrong decision, and so you gather data, consult, and analyze to try to get to the right answer.

But sometimes, any analysis that will actually be actionable for you is so complex and expensive you’re better off just making a decision, making a mistake, and then trying something else (or get lucky!).

Sometimes, having some directional data and common sense is all you need to guide you.

I recently became paralyzed by analysis in trying to make a major decision, and Brent Barton, Agile coach and partner at SterlingBarton and former CTO of SolutionsIQ, was kind enough to point it out to me (admitting it is the first step to recovery!) and share with me an article on Collin Powell and his 18 lessons of leadership.

Specifically, lesson 15: Part I: “Use the formula P=40 to 70, in which P stands for the probability of success and the numbers indicate the percentage of information acquired.” Part II: “Once the information is in the 40 to 70 range, go with your gut.”

The commentary by Oren Harari adds:

“Powell’s advice is don’t take action if you have only enough information to give you less than a 40 percent chance of being right, but don’t wait until you have enough facts to be 100 percent sure, because by then it is almost always too late. His instinct is right: Today, excessive delays in the name of information-gathering needs analysis paralysis. Procrastination in the name of reducing risk actually increases risk.”

Powell and Harari are both right, and I see the senior management teams of the software expansion stage companies in our investment portfolio make this mistake all the time, in all aspects of the business, which is why I asked Luke Hohmann to present this point to at our Market Segmentation Forum two weeks ago.

This does not mean always go with your gut or don’t do any analysis. There are no bright lines here. You can’t really know if you have 40% or 70% of the information you need in the real world.

What this means is that you should weigh the costs of making the exact right decision and what it might take to get there, use your judgment, and if you’re finding you’re taking a long time to take action, ask yourself, “Am I in analysis paralysis?”