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Sunday, November 20, 2016

Can Doing Nothing Be A Strategy?

Last week, a bright young person asked me the precise question of today’s post. In a slightly indirect way, this leads us in to a brief discussion of the concepts of cost benefit analysis and opportunity cost.

Many times in life and in business we face a tricky situation.  We then generally draw up  a list of factors and calculate what something costs and how it might benefit us. It might be a new job, evaluating a media property, buying a house or a business or moving to a new city. Interestingly, few people seem to attempt to calculate the cost of NOT making the choice. In essence, what happens if we go on as we are?

In answer to the young person’s question, I had a few examples to draw on from my career. Late in 2001, I was asked to provide an analysis of buying some kind of special package or media effort in Salt Lake City for a multi-unit retail client during the 2002 Winter Olympic Games. A team member and I hopped out to Salt Lake City and literally gave them a “baker’s dozen” of options of customized media efforts for the Games. People all listened politely but I could see some unease on their faces with the pricing that each package had. Many had an enormous premium over normal rates for similar efforts in a non-hyped environment. When I came to the recommendation page, someone whispered, “Here it comes.”

The recommendation was DO NOTHING. Our thesis was that with the metro area teeming with tourists, business would pick up on its own and they should pocket the money for later in the year when they might need it to fight a competitive fire. My clients were shocked and thrilled. Sales jumped low double digits during the Games and they were even more delighted and my team had great credibility going forward.

A few years earlier, I was having lunch with a friend in Dallas. He told me about a hot company that he had purchased shares in and strongly advised me to back up a truck and buy as many shares as he had. I went back and researched the company and did not quite understand what they were doing. So, I stuck with my cash and waited for another opportunity. The company was Enron!  In essence, I gained by doing nothing rather than buying shares in the soon to be bankrupt company. I profited by not doing what my friend suggested.

At other times in my life, I did not buy Microsoft, Apple, Facebook at their IPO’s so I had an “opportunity loss” by not getting in to them at the earliest possible moment. Hindsight, of course, is always 20/20.

To conclude, the point to take away is that sometimes doing nothing is the right thing. I looked at thousands of media opportunities over the years and, in reflection, only recommended a small fraction of them and bought even fewer as I could not pull the trigger without client approval.

My young friend’s question was slightly off kilter. Doing nothing is not literally a strategy but it is more often than you might think a wise decision.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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