“It is our choices that show what we truly are, far more than our abilities," said J.K. Rowling.
Why do managers often make bad choices? Do decision makers get caught up in the excitement of the moment? Why is it that industry ‘think different outsiders’ introduce innovations that shake up the Kenyan market? Can seeking agreement, alignment, congruence in decision making be counterproductive? In business, is what you see, all there is? What does it take to move towards becoming a cutting-edge organisation?
Default mode in our minds is to take the inside view. Our being smart, may be actually stupid.
‘What you see is all there is’ says our brain that is designed to focus on immediate information ‘inside view’ and ignore uncomfortable unknown, or unseen data – the ‘outside view’.
Helps to get uncomfortable and look at decisions from various perspectives. Taking an ‘inside view’ and ‘outside view’ is a framework for decision-making by recognising how we often misjudge scenarios, by focusing too narrowly on specific details – as discussed by Nobel laureate Daniel Kahneman.
This is the ‘planning fallacy’ the tendency to underestimate the time, costs and risks of future actions. Bent Flyvbjerg, a major projects expert “has shown that around 90 percent of major infrastructure projects worldwide go over budget (on average of 28 percent) in part, because managers focus on the details of their project and become overly optimistic.”
Ask: What happened in similar cases?
Sarah, the ambitious rising star finance director at Red Oak Bank wants to be the CEO, by pushing through a data centre infrastructure investment. Understandably, she makes insider view predictions based on specific, unique details of a project.
She relies on a ‘cohesive narrative’ -- a compelling optimistic story of how events will unfold. The problem is her inside view ignores the facts on the ground, the hard reality of how similar projects have performed, taking into account power grid constraints, long lead times for specialised equipment and skilled labour shortages. ‘But this time is different’ says over-confident Sarah.
Board member Sam, an electrical engineer, pushes back taking an outside view, by looking at data and other base cases. Though it may be painful, Sam’s approach is non-causal and statistical, disregarding the specific emotional story of the project to focus on the average outcome of similar initiatives in Africa, and elsewhere.
Outside view asks ‘What happened in similar situations?’ Focusing narrowly on many fine details specific to a problem at hand feels like the exact right thing to do, when it is often exactly wrong. Taking an outside view helps correct the optimistic bias, providing a more realistic, often gloomier, but accurate forecast.
"Our natural inclination to take the inside view can be defeated by following analogies to the ‘outside view.’.. The outside view is deeply counter intuitive because it requires a decision maker to ignore unique surface features of the current project, on which they are the expert, and instead look outside for structurally similar analogies. It requires a mindset switch from narrow to broad” writes David Epstein his fascinating book, Range.
Breakthroughs come from the unexpected
It’s a balancing act on whether to take an inside or outside view. Smart approach is to use both. Intelligence is often defined as the ability to hold two conflicting ideas in your mind, at the same time.
In many industries, and innovations over the centuries, break throughs have often come from the think different ‘outsiders’. In Kenya, roughly 60 percent of GDP flows through M-Pesa created by a telecom, far outpacing the roughly 40 banks in high velocity transactions. Today it’s hard to find a bank or financial institution that does not offer insurance premium financing.
But when John Macharia originally tried to get support for introducing the new product, all the banks rejected the idea, except one. Macharia was an outsider in the risk averse Kenyan insurance sector, but he was one of the most innovative forming Triple A Capital to offer insurance premium financing and then he did it second time, in creating Directline Assurance, aiming to bring sanity and profitability to PSV insurers.
How do you provide affordable quality healthcare to hard working Kenyans? Quality health care exists for the affluent. Real question is: How do you make quality health services affordable? One smart solution has been created by a bank, applying systems, economies of scale and modularity. With 140 Equity Afya clinics across Kenya, Equity Bank has shown having an outsider perspective delivers.
Regress to the mean of what one knows best?
When managers are under pressure they try solutions that worked before. Rather than adapting to unfamiliar situations, organisation thinker, Karl Weick saw that experienced groups became rigid under pressure and ‘regress to what they know best’.
In an unfamiliar situation, manager regress to a familiar comfort zone -- hoping it to become something they actually had experienced before. Research on aviation accidents, found that “a common pattern was the crew’s decision to continue with their original plan” even when conditions changed dramatically.
If you are not aware of something does it exist? Awareness is everything in business. To avoid the pitfalls of having a narrow insider view it helps to realise what you see, may not be all there is. Congruence - alignment is treasured in management, but one has to be ready to listen to the uncomfortable divergent outside view.
It’s wicked decision-making world. Mark Twain nailed the paradox: "Good decisions come from experience. Experience comes from making bad decisions."
World class research labs, NASA and companies with annual budgets in the billions of dollars, often have management meeting weekly, intentionally asking -- What are we missing? Solutions come from the front line, helps to have monthly all staff Q and A town hall meetings.
WhatsApp like responsiveness should be the rule, in a Singapore like way, responding to all e mail and communications by close of business. Aim is to increase the velocity of the business, on a smart trajectory.
