Stratecution NEXT: Decision Strategy (3)

spotlight

This is part 3, where we introduce core concepts from our book, Decision Strategy, that received 5 stars as the 5th best management book globally of the year. If you have not yet read part 1 or 2, click the links below:

Decision Strategy part 1

Decision Strategy part 2

 

Part 3: When bounded awareness narrows our vision

””Facts matter not at all. Perception is everything. It’s certainty”

Steven Colbert

On 28 January 1986, all employees at the Kennedy Space Center in Florida were busy preparing the launch of The Challenger space shuttle. A thorough review of the spaceship aviation readiness had been undertaken and it had been cleared. The lift off had been postponed five times due to bad weather, but today was a clear day albeit also the coldest for NASA ever to launch a rocket. The event was highly televised as a civilian was onboard for the first time ever to help NASA regain financial support. At 11:38 the Challenge left Pad 39B and almost immediately struck disaster. 73 seconds into the trip, the Challenger exploded in a ball of fire, immediately killing all crew. How could this happen to one of the most professional and highly regarded organisations?

Highly focused on saving the space program and using the Challenger as a key marketing vehicle for this purpose, management had under analyzed the risk situation and overheard engineering concerns around o-ring temperature requirements. Now you would think such an everyday reason could not happen in such a critical situation, but bounded awareness contributes to people even in the same organization with similar skills and knowledge can draw different conclusions. Because we have a limited bandwidth, we can in a mix of chaotic information quickly come to see important communication as trivial and thus underestimate risks. In NASA it was not technical skills or knowledge that separated the leaders from the engineers, but rather the narrow vision, which comes in the wake of strong focus – management on saving the space program and previous successes – engineering on recent o-ring reviews.

 

colour-changing-card-trick

If you are in doubt about whether this applies to you, then watch the colour changing card trick video and honestly answer yourself, whether you are one of the few, who gets it…

Bounded awareness can occur in various stages of your decision making and we like to distinguish between seeing, seeking, selecting and sharing information – or 4SI for short:

Error in Seeing Information

Our ability to focus on one task is undoubtedly useful, but it can also limit our awareness of peripheral threats and opportunities in your business environment and thus your ability to craft a strategic response.

Now, if you do not see it often, you often do not see it, but we can learn to become more aware of changes in our environment: Military personnel can be trained to scan a crowd for suspicious behaviour, leaders can hone their awareness of critical information and organizations can set up early warning signals of key environmental change.

Error in Seeking Information

The Challenger disaster demonstrates what can potentially happen when professional and well-meaning leaders limit their analysis and fail to seek out the most relevant information. It is not difficult to make the connection to the recent acquisition of Nokia, where the CEO exclaimed: “we did nothing wrong, yet we lost”.

That said, how can we be expected to seek information which by its nature is beyond our awareness? The most important thing is that you are vigilant in your reflections on what information is actually relevant for the decision you must make. As a manager you often experience recommendations reaching your desk supported by a significant amount of data – a quick trick here is to be skeptical about the absence of contradictory evidence.

Error in Selection Information

It may be hard to believe, but we ignore many valuable and accessible pieces of information about changes to customers, competitors and other stakeholders, when making important decisions – particularly, when we are successful. The Swiss watchmakers held 50 percent market share before 1960 and despite being the first to develop quartz technology, the watchmakers were in less than 10 years reduced by two thirds from foreign competition in quartz technology.

One way you can determine if the information you have at your disposal is useful, is to think about how the other parties involved will act. If you are in a negotiation, how will the counterpart assess the business you are negotiating? One method is to understand the links between all the relevant information by not only focusing on the cause-effect relationship, but also to bringing other contextual factors in to play.

Error in Sharing Information

If we succeed to seeing, searching and selecting the right information in a non-biased way, research suggests that we still have a problem: Our cognitive limitations prevent us from unrestricted exchange of information. When team members discuss available information, they omit the unique pieces, that can make the difference. Why? Because it is much easier to discuss common information and it is often better rewarded.

There are many ways to integrate diverse knowledge in groups, but one of the simplest approaches is to set agendas for meetings with specific points to ask individual views or make a person/department responsible for valuable knowledge sharing.

 

6s-model

6S Model

There are many individual approaches to avoid or limit bounded awareness. We use the 6S model to apply the right type of method to the right type of problem. Are we dealing with an issue within Strategy, Structure, Steps (aka process), Systems, Skills or Style (aka culture)?

For example in Strategy a strong approach is to counter bounded awareness with a highly focused megatrend analysis on the company and industry in question to showcase key issues and relevant scenarios facing the company in the next +5 years, so strategy is based on solid ground.

Another example in Structure companies may have a tendency for proliferation, inequitable resource allocation or absence of significant branches. The best thing to do is run periodic due diligence on your structure: reasonable number of organizational layers, average span of control, a relevant mandate in each role etc.

A final example is Systems that are configured incorrectly has the special ability to get you very far away from your goal very quickly. This is because the system’s primary purpose is to solve tasks fast, but if “the GPS” is set incorrectly, you can quickly end up somewhere completely different than you expected. Your best option here is to think both lead and lag indicators measuring both the end result and the process of getting there similarly to Balanced Scorecard etc. It allows you to create an Early Warning System to correct course at the right time but the trick is to focus on a handful of KPIs – if you focus on everything, you focus on nothing.

Bounded awareness can break organizations in industries undergoing significant change. The solution is not surprising both systematically and continuously work to expand awareness of the organization.

This was part 3 on our book, Decision Strategy. Next week we will look at how our confirmation bias keeps our bad ideas alive far beyond disaster and what to do about it – stay tuned!

Did you like this blog article on Behavioural Strategy Group? Then contact us here, follow us or read some of the other articles on strategy and change.

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