Personally, I appreciate metaphors a lot when thinking about entrepreneurial scenarios. This time, I won’t be talking about mountains again but I might have to play the athlete card… 

So, whenever I prepare for a game and try to assess how the game could turn out, I think about the following: what are our capabilities, what are the opponents’ and what other factors (such as umpires and luck) may effect the game. All of this will help me form expectations of the game as I try predict if we are probably going to win or lose.

When it comes to predicting entrepreneurial failure, we can look at similar indicators or criteria: who is the competition, what is our knowledge/ idea/ strategy and what other factors such as market characteristics and luck could play a role.

Because this blog has a very strict word limit (no offence, Chris), I will only focus on how evaluating ideas with the Pugh Matrix can help predict entrepreneurial failure and success. To get a quick overview of how the Pugh Matrix works, let’s watch this video [see figure no.2] (to 3:20 minutes). 

As the step of evaluating different ideas often takes place at the beginning of an entrepreneurial business, it is essential to simplify complex indicators to enable rational decision making. As presented in the video, the choice of the criteria is crucial for the quality of the result a team can get from using the Pugh Matrix. 

„It is important to consider validating the criteria in some way or using criteria that have already been validated as representing the views of the stakeholder(s).“ [16]

Furthermore, the evaluation of each idea and criteria depend on the expertise and experience of the team members. So, the choice of people working with the Pugh Matrix, can have a big impact on the method’s effectiveness: 

„The wrong team can still follow the process and arrive at a result – but the result may not robust.“ [16].

Without knowing whether the team of Theranos ever used a Pugh Matrix to discuss different problem solving options, it can be used as an example for picking the ‚wrong‘ team. The board of the biotech company barely held any medical advisors limiting their perspective on technological and engineering possibilities in the Health Sector. This could have led to the failure of the company by basically entering the market without a performing product. Taking it a step back, this board of advisors may not have been able to detect the idea of replacing big sample blood tests by a test running on a single drop of blood. Their expertise may not have allowed them to detect the idea as technologically impossible. 

Lastly, the Pugh Matrix does not provide you with a success factor of 100% for one specific idea: „it can often result in the elimination of weaker options, but rarely identifies a winning option cleanly“ [16]. That is why, such decision making processes can mark a great starting point for idea development and design later on. Although they require some time commitments and established or external expertise [17], they can help build a strong foundation for entrepreneurial problem solving. 

As always in life, it is much easier to explain failure in hindsight than it is to predict it in the present. But with a small variety of tools, such as the Pugh Matrix, weak design concepts can be detected. Advantages and disadvantages of evaluated options can be taken into consideration early in the process, before design realization and big financial investments come up. 

Nevertheless, entrepreneurship remains a performative act and will often require a leap forward. Some circumstances predicting success or failure, such as timing and luck, will remain out of our control. Let’s just say it’s part of the game…

References:

[16] Burge, Stuart. (2009). The Systems Engineering Tool Box. [online] Available at: https://www.burgehugheswalsh.co.uk/Uploaded/1/Documents/Pugh-Matrix-Tool-v1.pdf [Accessed 20 Nov 2021]. 

[17] Kutay Guler, Denisa Mirela Petrisor, Jun Guo (Reviewing editor). (2021). A Pugh Matrix based product development model for increased small design team efficiency, Cogent Engineering. [online] Available at: https://www.tandfonline.com/doi/epub/10.1080/23311916.2021.1923383?needAccess=true [Accessed 20 Nov 2021].

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