Strategy. Innovation. Brand.

business innovation

Leadership: Why Decisions Succeed

train tracksIn my critical thinking class, we’ve been using Paul Nutt’s book, Why Decisions Fail. It’s an interesting look at debacles … “botched decision[s] that attract attention and get a public airing.” In the coming weeks, I’ll draw some examples from Nutt’s database of famously bad decisions.

While I like the book in many regards, I think it’s a mistake to study only failures. Hopefully, business is about more than avoiding something negative. It’s also about attaining something positive. So I’ve been looking for a counterpoint — a study of why decisions succeed. I haven’t found a comprehensive study, but I did find an intriguing article from Boston Consulting Group, “Winning Practices of Adaptive Leadership Teams.” The BCG researchers interviewed 93 executives and identified five traits of successful executive teams. Here they are:

One voice — effective leadership teams “take the time to get completely aligned about the organization’s vision, values, and vital priorities, while respecting individual differences of opinion and experience.” While this implies good communication and mutual respect, it also implies that each team member has an enterprise-wide sense of responsibility. As one executive put it, “If my division is successful, but another division is not, I would not regard that as a victory.”

Sense-and-respond capacity — the most effective teams spend a lot of time surveying the environment, identifying trends, and synthesizing information. Among other things, they make heavy investments in information technology and pattern seeking software. The goal is to successfully “… monitor the external forces that drive change in their business environment.”

Information processing — the investment in IT often generates a large volume of data. The adaptive team then has to process it to create useful information. The team needs to share the data effectively and debate it transparently. Several teams developed “…highly disciplined meeting designs and agenda formats to ensure that they routinely exchange key information through a streamlined process that breaks down silos of communication.” Many teams also emphasize “overcommunication”.

Freedom within a framework — several teams spoke of “guardrails”. Within those guardrails, executives have a lot of room to maneuver; they can make their own decisions on how to get things done. As they prove themselves, the team widens the guardrails. Within the guardrails, “…failure [is] seen as a possible and an acceptable outcome. Failure is debilitating only if the lessons learned are not disseminated and applied quickly.”

Boundary fluidity — executives move both horizontally and vertically. There’s a sense that successful executives are “utility players” — any executive could fill in for any other executive if need be. There’s also a sense that silos are self-defeating. As one executive put it: “We always try to move people around so that their perspectives evolve and things don’t get stale.”

So does it work? BCG has developed an Adaptive Advantage Index and applied it to over 2,200 public companies in the U.S. The index is strongly correlated to growth in market capitalization.

Why Decisions Fail can tell you what not to do. That’s an important perspective. On the other hand, the BCG study (and others like it) can tell you how to succeed. In my opinion, that’s more important. I’d rather focus on succeeding than not failing.

 

Round the Clock Healthcare — for Free?

This won't hurt a bit.

This won’t hurt a bit.

When I go on a long bike ride, I usually wear a heart monitor. I like to know how hard my ticker is tocking. I also carry a smartphone with GPS in it. I like to know where I am … and where the nearest hospital is.

Let’s do a little mashup thinking. What if my heart monitor were connected to the phone and GPS? Here’s a scenario: the heart monitor notices that my heart is going haywire. It sends a signal to the phone. The phone uses GPS to locate the nearest hospital, sends an emergency call (perhaps using Amcom Mobile Connect*), along with my location. The hospital dispatches an ambulance to my GPS location to pick me up. It could save my life. And it’s all based on currently available technologies. All we have to do is mash them up.

A few weeks ago I wrote a post about how a strategist might think about healthcare costs. All the experts say that healthcare costs are bound to go up. In my experience, when all the experts point in one direction, it’s always useful to look in the other direction — just to make sure.

Several of my friends let me know that I was wrong — healthcare costs will continue to rise, if for no other reason than the government is involved. That wasn’t really my point. I was merely trying to illustrate strategic thinking. But now I am thinking about healthcare costs and I wonder if new technologies won’t have a huge impact. By and large, many of those technologies are already available. We just need to mash them up.

Here’s a simple example — the HAPIfork, which was introduced at this year’s Consumer Electronic Show (CES). The HAPIfork mashes up a fork, a timer, and (perhaps) an accelerometer to keep track of how fast you’re eating. HAPIfork measures the number of “fork servings per minute” and loads the data to a dashboard on your smartphone. You can keep track of how fast you’re eating. Apparently, eating slowly is better for you. You can adjust your behavior to be healthier.

I don’t think HAPIfork is going to revolutionize healthcare – but it hints at things to come. As the internet of things evolves, we’ll connect more and more sensors to monitor the word around us. We’ll also monitor our health with sensors that can inform us more precisely of our own condition. Am I getting dehydrated? Is my blood pressure up? Do I need to take corrective actions? A connected sensor could also alert my physician to potential trouble. Imagine, for instance, an internet toilet that uses chemical sensors to monitor your, um, output. If something is out of whack it lets you know. If something is really out of whack it lets your physician know.

Could connected healthcare reduce our costs in the long run? The real answer is that nobody knows. But it’s a question worth asking and technology worth pursuing. It’s an “unforeseen” solution that could just prove the experts wrong.

* I consult to Amcom and, yes, this is a shameless attempt to generate publicity for one of my clients.

Innovation and Memory

What was the other half of my idea?

What was the other half of my idea?

Do you forget stuff? Yeah, me too. It makes it harder to be innovative.

The trouble is that innovative ideas don’t come all polished up and wrapped in a pretty bundle. When a creative person describes her process, it may seem that innovative new ideas arrive in a flash of insight. That’s a nice way to tell a story but it’s not really the way it happens.

In truth, innovation is more like building a puzzle — when you don’t know what the finished piece is supposed to look like. You collect a piece here and a piece there. Perhaps, by putting them together, you create another piece. Then, a random interaction with a colleague supplies another piece — which is why random interactions are so important.

Each piece of the puzzle is a “slow hunch” in Steven Johnson’s phrase. You create a piece of an idea and it hangs around for a while. Some time later — perhaps many years later — you find another idea that just happens to complete the original idea. It works great if, and only if, you remember the original idea.

In previous posts on mashup thinking, I may have implied that you simply take two ideas that occur more or simultaneously and stick them together. But look a little closer. One of my favorite mashup examples is DJ Danger Mouse, who took the Beatle’s White Album and mashed it up with Jay Z’s Black Album to create the Grey Album, one of the big hits of 2004. But how long was it between the White Album and the Black Album? Well, at least a generation. I remember the White Album but not the Black Album. I think our son is probably the reverse. Neither one of us could complete the idea. DJ Danger Mouse’s originality comes from his memory. He remembered a “slow hunch” — the White Album — and mashed it into something contemporary.

So, how do you remember slow hunches? By writing them down. In fact, that’s one of the reasons I started this blog — so I won’t forget good ideas. I can now go back and search for ideas that I thought were important several years ago. I can recall them, put them together with new hunches, and perhaps create new ideas.

I like to read widely. I’m hoping that ideas — both old and new — will collide more or less randomly to create new ideas. Unfortunately, I often forget what I read. With this blog, I now have a place store slow hunches. And, since it’s public, I’m hoping that you’ll help me complete the cycle. Let’s get your random ideas colliding with my random ideas. That will help us both remember, put our hunches together, and come up with bright new ideas. Sounds like a plan. Now we just need to remember to stick with it.

 

 

Librarian, Farmer, Debacle

It's a quality issue.

It’s a quality issue.

In his book, Thinking Fast and Slow, Daniel Kahneman has an interesting example of a heuristic bias. Read the description, then answer the question.

Steve is very shy and withdrawn, invariably helpful but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.

Is Steve more likely to be a librarian or a farmer?

I used this example in my critical thinking class the other night. About two-thirds of the students guessed that Steve is a librarian; one-third said he’s a farmer. As we debated Steve’s profession, the class focused exclusively on the information in the simple description.

Kahneman’s example illustrates two problems with the rules of thumb (heuristics) that are often associated with our System 1 thinking. The first is simply stereotyping. The description fits our widely held stereotype of male librarians. It’s easy to  conclude that Steve fits the stereotype. Therefore, he must be a librarian.

The second problem is more subtle — what evidence do we use to draw a conclusion? In the class, no one asked for additional information. (This is partially because I encouraged them to reach a decision quickly. They did what their teacher asked them to do. Not always a good idea.) Rather they used the information that was available. This is often known as the availability bias — we make a decision based on the information that’s readily available to us. As it happens, male farmers in the United States outnumber male librarians by a ratio of about 20 to 1. If my students had asked about this, they might have concluded that Steve is probably a farmer — statistically at least.

The availability bias can get you into big trouble in business. To illustrate, I’ll draw on an example (somewhat paraphrased) from Paul Nutt’s book, Why Decisions Fail.

Peca Products is locked in a fierce competitive battle with its archrival, Frangro Enterprises. Peca has lost 4% market share over the past three quarters. Frangro has added 4% in the same period. A board member at Peca — a seasoned and respected business veteran — grows alarmed and concludes that Peca has a quality problem. She sends memos to the executive team saying, “We have to solve our quality problem and we have to do it now!” The executive team starts chasing down the quality issues.

The Peca Products executive team is falling into the availability trap. Because someone who is known to be smart and savvy and experienced says the company has a quality problem, the executives believe that the company has a quality problem. But what if it’s a customer service problem? Or a logistics problem? Peca’s executives may well be solving exactly the wrong problem. No one stopped to ask for additional information. Rather, they relied on the available information. After all, it came from a trusted source.

So, what to do? The first thing to remember in making any significant decision is to ask questions. It’s not enough to ask questions about the information you have. You also need to seek out additional information. Questioning also allows you to challenge a superior in a politically acceptable manner. Rather than saying “you’re wrong!” (and maybe getting fired), you can ask, “Why do you think that? What leads you to believe that we have a quality problem?” Proverbs says that “a gentle answer turneth away wrath”. So does an insightful question.

 

 

The Anatomy of Debacles

I was satisficing. If only I had known.

What’s a debacle? According to Paul Nutt, it’s “…merely a botched decision that attracts attention and gets a public airing.” Nutt goes on to write that his “…research shows that half of the decisions made in business and related organizations fail.” Actually, it may be higher because, “failed decisions that avoid a public airing are apt to be covered up.”

Remember that I wrote not long ago (click here) that perhaps 70% of change management efforts fail? Now we learn that half — or more — of all business decisions fail. We’re not doing so well. Nutt has studied over 400 debacles — botched decisions that became public disasters — and has created an anatomy of why and how they happen. Nutt’s book, Why Decisions Fail, is a sobering look at how we manage our organizations and, more specifically, our decisions.

Critical thinking should help us avoid botched decisions and public debacles. I’ll be writing about critical thinking over the next several months and, from time to time, will pull ideas from Nutt’s book. Today, let’s set the stage by looking at the basics. Nutt writes that blunders happen because of three broad reasons:

  1. Failure-prone practices — Nutt claims that two-thirds of business decisions are arrived at via common practices that are known to fail. One of our problems is that we typically don’t analyze the decision-making process itself. We tend to ask, “how can we correct the problem?” rather than “how did our decision-making process lead us astray?” As an example, Nutt notes that “Nearly everyone knows that participation prompts acceptance, but participation is rarely used.”
  2. Premature commitments — Nutt writes that “Decision makers often jump at the first idea that comes along and then spend years trying to make it work.” In the vocabulary of critical thinking, this is known as satisficing or temporizing — two heuristics that can lead us astray. Nutt concludes that, “A rush to judgment is seductive and deadly and can be headed off.” I’ll write more on how to head it off in future articles.
  3. Wrong-headed investments — the basic problem here is that we spends lots of time, energy, and money to demonstrate that our decision is correct and the ideas behind it are sound. We call it an evaluation but really, it’s a justification. It’s better to invest our energy in clarifying objectives, discovering issues (and opportunities), and identifying measures of risk and benefit.

Nutt also criticizes contingency theory — the idea that your situation dictates your tactics. For instance, if you’re faced with a community boycott, you should do X; if you’re faced with cost overruns, you should do Y. Nutt concludes that, “Best practices can be followed regardless of the decision to be made or the circumstances surrounding it.” The bulk of his book outlines what those best practices are.

Of course, there’s a lot more to it. I’ll outline the highlights in future posts and put Nutt’s findings in the general context of critical thinking. I hope you’ll follow along. In the meantime, don’t make any premature commitments.

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