Expanding the Decision Horizon: Why More Options Lead to Better Business Outcomes
Imagine you’re at a crossroads in your business. Do you take the well-trodden path or explore uncharted territory? This decision could make or break your company’s future. Surprisingly, research suggests that the mere act of considering multiple options can significantly improve your chances of success. A study by a prominent business strategist found that decisions based on multiple options had a 20% higher success rate compared to those with only one option. This fascinating insight forms the foundation of our exploration into why expanding your decision horizon leads to better business outcomes.
The allure of the single-option approach is undeniable. It’s quick, straightforward, and often appears as the path of least resistance. Many businesses default to this method due to time constraints, limited resources, or simply because “that’s how it’s always been done.” However, this approach carries significant risks. It narrows perspective, stifles innovation, and can lead to catastrophic mistakes.
Consider the case of Quaker Oats’ acquisition of Snapple in 1994. Quaker, eager to expand its beverage portfolio beyond Gatorade, zeroed in on Snapple as their single option. They paid a premium price of $1.7 billion for the quirky tea and juice company, focusing solely on how it could complement their existing product line. This narrow focus led them to overlook crucial factors like distribution challenges, changing market trends, and cultural fit.
Quaker’s single-option approach meant they didn’t seriously consider alternatives such as developing their own new beverage lines, partnering with multiple smaller brands, or even acquiring a different company that might have been a better fit. They also failed to thoroughly analyze the potential pitfalls of the Snapple acquisition.
The result was disastrous. Quaker struggled to integrate Snapple into its operations and failed to leverage the brand effectively. Sales plummeted, and just 27 months after the acquisition, Quaker sold Snapple for a mere $300 million to a holding company. This represented a loss of $1.4 billion, or about $2 million for each day that Quaker owned Snapple. This example starkly illustrates the dangers of the single-option approach and serves as a cautionary tale.
Contrast these cautionary tales with the multi-option advantage. Considering multiple options opens up a world of possibilities. It encourages deeper analysis, fosters innovation, and provides flexibility in the face of changing circumstances. When businesses explore various alternatives, they often uncover hidden opportunities or potential pitfalls that would have been overlooked with a single-option approach. A comprehensive study of Fortune 500 companies revealed that those consistently using multi-option decision-making processes were 35% more likely to outperform their industry peers over a five-year period. This statistic underscores the tangible benefits of expanding your decision horizon.
The psychology behind multi-option decision making is equally compelling. Humans are subject to numerous cognitive biases that can cloud judgment. Confirmation bias, for example, leads us to favor information that confirms our preexisting beliefs. The availability heuristic causes us to overvalue easily recalled information. By considering multiple options, we force ourselves to challenge these biases. We’re compelled to seek out diverse information, critically evaluate different perspectives, and ultimately make more balanced decisions. This process not only leads to better outcomes but also cultivates a more adaptable and resilient mindset within the organization.
Let’s explore some compelling examples that illustrate this multi-option principle in action.
Olay: The reinvention of Oil of Olay in the 1990s stands as a testament to the power of considering multiple options. Procter & Gamble (P&G), facing declining sales and an outdated brand image, found itself at a crossroads. Instead of making a knee-jerk decision, P&G’s leadership team explored three distinct paths: reinventing the existing Oil of Olay brand, launching an entirely new skincare brand from scratch, or acquiring an established skincare brand.
By considering these multiple options, P&G was able to conduct a deeper analysis of each path’s potential outcomes. This process helped them uncover hidden opportunities and potential pitfalls that might have been overlooked with a single-option approach. After careful evaluation, P&G chose to reinvent Oil of Olay, streamlining the name to “Olay” and completely overhauling its image and product line. This decision allowed them to leverage existing brand recognition while targeting a new demographic with premium, science-backed skincare products. The result was transformative — Olay became a billion-dollar brand by 2003, demonstrating the remarkable outcomes possible when multiple options are considered.
Azure: Another example that underscores the benefits of multi-option decision-making is Microsoft’s approach to entering the cloud computing market. In the early 2000s, as cloud technology was emerging, Microsoft found itself trailing behind competitors like Amazon Web Services (AWS). Instead of defaulting to a single strategy of trying to catch up by replicating AWS’s services, Microsoft considered multiple options:
- Focusing solely on providing infrastructure as a service (IaaS) to compete directly with AWS
- Leveraging their existing strength in software to focus on software as a service (SaaS)
- Developing a comprehensive cloud platform that would include IaaS, PaaS (Platform as a Service), and SaaS components
By exploring these various alternatives, Microsoft was able to identify a unique opportunity that aligned with their strengths and market position. They ultimately chose the third option, developing Azure as a comprehensive cloud platform. This decision allowed them to differentiate from AWS, leverage their existing relationships with enterprise customers, and create a more integrated cloud solution.
The multi-option approach helped Microsoft overcome potential cognitive biases, such as the tendency to simply imitate successful competitors (availability heuristic) or to stick with familiar software-only solutions (confirmation bias). By forcing themselves to consider diverse strategies, Microsoft was able to create a more innovative and tailored solution.
The outcome of this decision has been remarkable. Azure has grown to become a major player in the cloud computing market, second only to AWS, and has been a key driver of Microsoft’s resurgence and growth in recent years. From 2016 to 2021, Azure’s market share in the cloud infrastructure market grew from 8.7% to 22%, demonstrating the success of their multi-option strategy.
Conclusion: Expanding your decision horizon by considering multiple options is a powerful strategy for achieving better business outcomes. It encourages deeper analysis, fosters innovation, and helps overcome cognitive biases. As demonstrated by success stories like Olay and Microsoft Azure, this approach can lead to transformative results, enabling companies to adapt, innovate, and thrive in competitive markets.