1 Way, 2 Way Door Decision Making
I recently read about Amazon using a 1 way, 2 way door thought process to help them make decisions.
In short, what they do is they decide on how big a decision is and if the decision is reversible or not. If a decision isn’t easily reversible than they will consider it a 1 way door. In 1 way door decisions, they will only invest a small amount of resources to protect their downside risk.
For example, if they are introducing a new product they will test it out in a much smaller market as opposed to a large market. This limits their risk. If the product they are testing doesn’t work out well than they can abandon it and they will only lose a small amount of time and money than if they decided to introduce it to a much larger market instead.
Facebook is doing this now. There have been rumors about them creating a dating platform on their social networking site but they don’t want to jeopardize all of the hard work and value they’ve created with their social network so they are testing out their dating service only in a small market as opposed to going global with it. For those interested, they are currently testing it out at Columbia University and you can find out more by following this link: https://www.wired.com/story/facebook-dating-how-it-works/
So then what happens when you don’t do what Facebook is doing with their dating service and you go straight for the home run by trying to capture a very large market? An example of the bad consequences of going global with a product as opposed to testing it out in a small market are what happened with Amazon’s smart phone. It flopped, hut their brand image a little bit, gave them some bad publicity and cost them a lot of money. They eventually discontinued the phone but not before taking a $170 million loss against their third quarter 2014 earnings.
Here is what Jeff Wilke, SVP of Consumer Business at Amazon said about their 1 way, 2 way-door thought process:
“We think about one-way doors, and two-way doors. A one-way door is a place with a decision if you walk through, and if you don’t like what you see on the other side, you can’t get back. You can’t get back to the initial state. A two-way door, you can walk through and can see what you find, and if you don’t like it, you can walk right back to the door and return to the state that you had before. We think those two-way door decisions are reversible, and we want to encourage employees to make them. Why would we need anything more than the lightest-weight approval process for those two-way doors?”
Understanding the second-order consequences of decisions is very important and the more important the decisions are, the more important understanding the second-order consequences becomes. Additionally important is understanding whether or not decisions are reversible or not and being able to categorize them as a one-way or two-way door decision can save a lot of headaches for not just business owners, but employees as well.