From Watching the Cash to Wagering the Cash

You know that to survive in business you have to watch your cash. Many companies die not because of the P&L but because of cash flow. But this mindset can be a double-edge sword. It can lead to an overly conservative view towards investment. And insufficient investment means limited growth.

Keith McFarland, author of The Breakthrough Company, (think ‘Good to Great’ but for mid-sized companies) researched fast-growing companies to identify which ones ultimately produced superior, long-term financial results and why. A key conclusion was that breakthrough companies are those that place increasingly larger bets, with the skill to place the right bets. An example of a big bet: Tony Hsieh of Zappos moving the entire company from San Francisco to Las Vegas to find the right employees at the right cost to staff their call center – a critical component of the Zappos business model.

How do you place the right bets? A combination of information and intuition. Utilize information but don’t ignore the insights that underlie your intuitions. Value your intuitions but don’t disregard the richness of information. Embrace the dynamic tension that results when considering both information and intuition – the two ‘I’s.’

So, yes, watch the cash. But be prepared to roll the dice.

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