Good Heuristics Make Good Intuition

The Merriam-Webster dictionary defines heuristic as “involving or serving as an aid to learning, discovery, or problem-solving by experimental and especially trial-and-error methods."  The danger is that unless a well-grounded system is in place to provide sufficient objective information, over time a heuristic approach to decision-making in your business can very easily give rise to a certain mind-set, thereby establishing a pattern of behavior that leads to consistently undesirable results.  Without the proper frame of reference from which to form any decision, a successful outcome cannot be expected.

However, when the frame of reference is grounded with a solid profit mentality, the odds of producing positive and desirable results improve significantly.  Understanding the relationships that exist between the various types of information presented in the P&L is invaluable for understanding the true nature of the business.  Unless you understand the global impact of the decisions you make (and every decision has a very definite financial affect), you can never fully understand the business and you are in danger of fatal mistakes at almost every turn. 

Developing a better “feel” for your company requires an improved, properly grounded, intuition regarding the underlying dynamics that affect the various parts of the business.  When you understand the relationships that exist you will better understand how your decisions ripple through the organization.  Although financial issues are specifically being addressed here, the affect of each decision will be felt on every level and in every area; financially, operationally and organizationally.  It is a fact that the environment in poorly managed cash strapped companies is entirely different than that of well run cash rich organizations.

What do you do to make sure your business intuition is grounded in reality?