THE BLOG
08/26/2010 02:49 pm ET | Updated May 25, 2011

Decisions without Tradeoffs

A decade ago, I learned an invaluable lesson that serves me to this day: we have to make tough decisions, but we don't have to make tradeoffs.

I work for Cisco, the world's largest maker of networking communications equipment. Early in my career, I was tasked to re-write 800 lapsed dealer contracts. Unfortunately, each was put together individually, complete with different terms and conditions. My mission: standardize the documents so Cisco could develop consistent plans and policies for working with thousands of business partners.

Some days I wondered if rewriting the tax code would have been easier. But I stuck with it. The biggest challenge I grappled with wasn't accommodating special, one-off demands, but trying to protect Cisco's interests while preserving partner profitability.

Initially, I approached the challenge as though the two objectives were in conflict. But the more I worked through the fine details, I realized that they were actually complementary. Cisco needed to protect its interests, but it also needed to have happy, profitable partners, too.

That's when it hit me: my job was to make decisions, but not to make poor tradeoffs.

All these years later, I still approach business challenges with the same dual mindset. Yet all around me, I see people going another direction. When faced with a strategic decision, they often choose one option and abandon the other. They focus on innovation and new business models at the expense of core businesses or vice versa. They stress discipline and sacrifice flexibility. Or they focus on customers and ignore partners.

In some instances, the consequences can be devastating. BP, for example, shut off fire alarms and drilled after leaks were discovered at the Deepwater Horizon well. In addition to the 11 lives lost and the untold environmental damage, the decision to trade safety for productivity cost BP more than $4 billion in cleanup and containment expenses, and more than $100 billion in market capitalization.

Does anyone really think that was a smart tradeoff?

No.

And yet companies make poor tradeoffs all the time. Some are the result of split-second decisions, while others are the product of careful and deliberate thinking. Take Dell Computer, for example.

Dell is a true marvel when it comes to operational excellence and efficiency. For its efforts to create the world's most efficient supply chain, it climbed to the No. 1 spot in worldwide PC sales in 2001. But this decision to emphasize optimization over reinvention caught up with the company just a few years later when HP, Apple and others exceeded Dell in innovation. That led to a reversal in fortune. When HP surpassed Dell in PC sales, the company sacked its CEO and began a painful reorganization and reprioritization of the business.

Could things have turned out for Dell had it pursued both optimizing and reinventing simultaneously? I certainly believe so.

In industries as diverse as heavy machinery and pharmaceuticals, there are plenty of examples of companies that have benefitted from avoiding poor tradeoffs. Take drug maker Novartis, which benefits from doing well and doing good both.

In terms of performance, Novartis is producing results above the norm: Despite the global downturn, its sales grew 7 percent in 2009 to $44.3 billion. Net income grew even more (8 percent) and reached $10.3 billion--the highest in the company's history.

In addition to doing well, the company has a long history of doing good, too. Among other things, it has donated money, drugs and other assistance to humanitarian causes. After the devastating earthquake struck Haiti in January, for example, Novartis immediately pledged $2.5 million in assistance.

In addition to these efforts, Novarits does good by committing to develop drugs to fight diseases other companies ignore. Doing so has not only resulted in breakthroughs for under-served patients, but also produced new financial opportunities for the company, too. Novartis' drug Ilaris, for example, was originally developed for people with rare rashes and fevers. Now, it is helping people who suffer with gout.

When I think of my own experiences, I recall many examples of deciding to avoid tradeoffs--and benefiting as a result. Take Cisco's efforts in emerging market economies. Initially, Cisco tried doing business in Latin America, Eastern Europe and Africa with strategies devised for more mature markets. It did so to streamline efficiency and increase standardization. But emerging countries move at different speeds than more established nations, and have different needs and priorities, too.

So rather than force-fit plans crafted for one part of the world onto another, Cisco created an entirely new geographic region devoted solely to emerging countries. The region has its own management, go-to-market strategies and objectives. Later, Cisco assigned executives at headquarters to help bolster efforts in the field. I personally co-led a cross-functional team tasked with galvanizing the company's energy, securing resources and setting the strategy in emerging countries.

That led me to Mexico, where I met with Alejandro Burillo Azcárraga, chairman of Grupo Pegaso. He became so enamored by our TelePresence technology that he asked for systems at his home in Vail, Colorado, his office in Mexico City, and even on his yacht.

This relationship would not likely have been established under the old way Cisco did business in Latin America. But because the company understood that it needed a different strategy for the emerging world than it had for the established world, new opportunities arose.

It takes an effort to see difficult decisions as an opportunity to improve on two divergent vectors. A simple compromise is almost always easier.

Rarely however, does it produce the gains that avoiding a tradeoff can. Rather than deciding between one thing or the other, I suggest doing both instead.

Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Follow Inder on Twitter at @indersidhu.