We live in an age of data-driven decision making. Customer touchpoint data, crowdsource input and decision-making tools help us filter out cognitive bias when making important decisions.
Yet more often than not, the wrong decisions are made. We can enhance our ability to make better decisions by understanding that decision is not a single event in time but a range of activities; from the analysis of known facts to the recycling of learnings from previously failed decisions.
When we do the right things throughout this spectrum, we can remove the guesswork and increase the probability of a good outcome.
Let’s break this down a bit further...
Knowns and unknowns
When you’re faced with an important decision, it’s obvious that you want to analyze all the known facts. Yet it’s just as important to consider “unknown” factors too. These areas of uncertainty include things like unexpected policy and regulatory changes, your competitors’ maneuvering or spontaneous cultural shifts within your organization.
But how can you analyze something that is “unknown”? For this you need two things. First a diverse team who doesn't live in its own echo chamber. Second, this team produces a range of scenarios based on their diverse perspective. With this approach you start covering more of the unknown territory.
Let the right team handle it
There are different types of decisions. Some are made frequently with a narrow scope. Others require cross-collaboration among different business units. Some carry huge risk if wrongly executed. Others can be forgiven in a larger scheme of things.
Whatever the decision is, we must start by assembling the right team. Remember that a top-down approach doesn’t work for all decision types. That approach might lead to bottlenecks that prevent you from acting swiftly and effectively.
Generally, the higher the risk of commercial and financial failure, the higher in the hierarchy the decisions are made. However, executive boards need to make sure that the right team conducts the known/unknown analysis, using debiasing techniques and collecting relevant expert knowledge.
Timing is everything
Do you ever wonder why great products so often fail, while mediocre ones succeed? Numerous studies show that it’s all down to decision of when to launch. Sometimes, we make the right decision, just at the wrong time.
To get the timing right, it takes three factors:
- Monitoring customer behavior, the customer journey and social-economic factors.
- Applying a lean start-up approach to testing and validating as we go along.
- Resisting the urge to rush.
Instead of piling head-on into a decision, spread out the cost allocation and investment over a relatively longer time horizon. In the meantime, remain agile and don’t lose sight of new data that becomes available.
Never assume that just because you have a hammer, every problem is a nail.
As the saying goes, “hindsight is 20/20.” Often, it’s painful to look back when things go wrong. Yet, this retrospection produces fundamental insights. We must cross-reference this knowledge, so we don’t repeat the decision-making errors of the past.
I also find the “pre-mortem” approach very useful. This means asking your team, “If this decision proves to be utterly wrong in a few years, what will have led us to this failure?” This approach changes people’s perspectives. It makes us more critical of assumptions. And it keeps us from being overly optimistic.
Another way to dilute the “enthusiasm bias” is to introduce an independent “devil’s advocate.” This should be a mandatory position introduced halfway through the decision-making process. By expressing independent opinions, the devil’s advocate creates a constructive tension. This stirs a balanced debate and gets the best options out on the table.
Organizations move faster when they take a structured approach to different types and levels of decision making. As a result, they are in a better position to attract entrepreneurial talent and remain competitive. And, as always, practice makes perfect. Making better decisions today, helps you make better decisions going forward.
First published on LinkedIn on January 16, 2020
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