How do you evaluate whether a given company (or product) will be successful or not? Clearly, you’ll want to study the business plan, interview management, talk to customers and competitors, and get an unbiased evaluation of the product. But is that enough? Unfortunately, it’s not — you’re only looking at those things that you can look at. You’re looking at the known knowns but omitting the known unknowns.
So how do you see what you can’t see? Instead of just looking at the individual case, look also at the category that the case derives from. If you’re evaluating a start-up company, look at all the details of the company. But also look at the category called “start-up companies”. What’s the success rate there? Studying the category won’t always tell you why companies succeed but it will tell you how often they succeed. That can provide you a “base rate” with which to compare your individual case. For a balanced view, always look at the case and the category.
Learn more in the video.