Cannabis: The Power of Walking Away Before It’s Too Late
“You’ve got to know when to hold ‘em, know when to fold ‘em…“ The Gambler, Kenny Rogers
This post is for all the cannabis executives facing costly and potentially embarrassing strategic dilemmas. I was inspired by a book I recently read, “Quit: The Power of Knowing When to Walk Away” by Annie Duke. Annie is an author, philanthropist, and poker champion. Drawing upon the experiences of athletes, adventurers, and businesspeople, Duke explains why learning to quit can be integral to survival and success.
Not knowing when to walk away (or having the courage to do so) is dangerous from a financial, competitive and career perspective. Billions of dollars of capital have been squandered by cannabis firms on market missteps, failed product launches, IT implementation disasters and poor acquisitions.
Sadly, many of these car crashes were avoidable or at least the damage could have been minimized.
To prosper (let alone survive) in these difficult times, leaders must know when and how to prudently step back from impending failure so that they can reallocate their limited time, resources and capital to better strategies and initiatives.
This is not to say persistence, learning and patience are not important ingredients of success. They are. But in many cases the disaster writing is on the wall. Your inner voice, customers or trustworthy advisors & staff would be telling you to quit while you are ahead.
Why have so many cannabis leaders wilfully road into the abyss? I have been around the industry for a long time and have observed the following causes, in whole or in part:
1. The madness of the crowd i.e. firms blindly follow their competitors;
2. Psychological blind spots e.g., executive hubris, Sunk Cost and Double Down fallacies;
3. Doing a deal with the devil e.g., Canada circa 2017. LPs stressed more funded capacity (many knew it was misguided) to raise money from ‘size matters’ investors;
4. Ignorance i.e.some companies are too thick to realize they are headed for disaster.
It is hard to define milestones and evaluation criteria that can definitively address each hold ‘em or fold ‘em dilemma. Duke’s book provides some solid tips on walking away. But your best approach would be to prevent bad decisions from happening in the first place. Here’s how:
> Designate an internal or external contrarian to challenge strategic assumptions and ‘danger check’ your math;
> To avoid blind spots, have germane functional groups input into enterprise-wide initiatives;
> Establish a financial and time-based ‘stop loss’ on big investments;
> Adopt a ‘fail fast and cheap’ approach to R&D and product innovation;
> Ensure your Board of Directors deliberates and has oversight on major strategic moves.
#failure #MSO #LP #M&A #innovation #strategy #management