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Business is Using the Wrong Models to Make Decisions

One of my favourite management books is “Business exposed” by Freek Vermeulen. It basically says that most of the management theories we belief in, are based on nothing. Boards, downsizing, ISO, TQM, talent, strategy, numbers, innovation, you name it.

99% of the case hard science does not work

“The Moment of Clarity” is that kind of book. Business is using the wrong models to make decisions. Linear models of problem solving based on rational and logic don’t work. Particularly on problems with big levels of uncertainty, with no real understanding of the problem. Which is now 99% of the case. On anything to human behaviour, hard science cannot be applied either. As businesses are 99% human, sciences such as anthropology, sociology, art, philosophy and literature should be used.

What got you here, won’t get you there

Business are using the wrong assumptions, numbers are not the only truth, businesses are not objective or unbiased, they are suffering from confirmation bias, they are using the wrong language, market research does not give you the answer (18 bln spend per year), people don’t care as much about your business as you think they do, people lie all the time, are not aware why they do what they do and in general are not rational. A lot is unconscious behaviour. Say and do are two different things. (Read Kahneman if you don’t belief me). Therefore you need to question even the most basic assumption about your company and your customers. It is why for example innovation in exercise are not coming from sports companies, but outsiders like Nintendo Wii, EA spots and Garmin. And why the music industry did not make music mobile.

You have become the system

Numbers and jargon dehumanises . Particular technical language (as distinct from simple every day language), shows that the system is winning and that you are moving away from the real world your customers and staff are living in. It widens the gap between who we are and the system that we have become.

Creativity as the solution?

Companies know most of this. Which is why they use sabbaticals, retreats, break out sessions, brainstorming, finding your inner Elvis, out the box thinking, idea rapping and lots of other fun exercises. Which is again based on the wrong assumptions about creativity and innovation. There is no quick fix. You won’t become Steve Jobs. Big data is not going to solve it. Social media is not going to solve it. Open innovation is not going to solve it.

Deep dive an full immersion

Only a deep investigation into customer behaviour and an open ended embrace of reality -life as it really is- will tell us what matters and where your opportunities for innovation and future growth are. Developing the slow hunch.

Sense making

The authors have developed a method they call “sense making”. Using phenomenology. The study of how people experience life. The science of daily life. Using ethnography (the process of observing, documenting and then analysing behaviour). Straight from anthropology and a whole lot of other soft sciences. Giving consumer behaviour context. That data is used to develop a reflective process with a need for a deep connection with the data, which then creates the key insights. Filling the filing cabinets of your minds, emerging yourself in as much data as a you can.

Strategy is hard work

In some ways the book it is not far from “the science of serendipity”. Both start with reframing the problem. Frame the problem as a phenomenon. LEGO for example had to understand the nature of play (NOT selling more toys). Both talk about it as a contact sport. Steeping yourself in the culture of the customers. Then looking for the patterns. LEGO found that kids are over managed by their parents, find freedom in online gaming and are driven by the importance of achievement. The key insight was that kids want to achieve mastery at a skill. That changed LEGO. Focus on kids who want to achieve mastery through LEGO play. Making LEGO for people who like LEGO for what LEGO is.

Build the business impact

Which in turn changed the business. The mission of LEGO is now “Inspiring the builders of tomorrow”. Which is the last step of sense making. The business impact. The new mission. The leadership needed. The leadership to initiate the sense making and the fundamental questioning of all assumptions. Dealing with the resistance, dealing with the system that has lost touch with the customers. Moving from decision makers to sense makers.

Becoming a sense maker

You need to move from analysis to creation. To be able to lead open end discovery, to sense both hard and soft data, to connect the dots, trust your judgement, to see the big picture in an ocean of conflicting data. They quote Isaiah Berlin who studied the great leaders. They all share a deep sense of reality, founded by experience, wisdom, judgement, empathy and sensitivity. Showing the mastery that Robert Greene talks about.

Care

As a sense maker you need to care, and you need to lead with care. You need a strong perspective on the business and connect the different worlds inside the company. Caring is the secret sauce. If you care you can make meaningful distinctions, your intuition will work better and you will know what is important and what is not. Caring will make you connect the dots. If you don’t care, there is no point.

And if you can get your company (=staff) to care you will become better innovators, will get everyone gazing at the same star, following the same cause and it will break down the silos. Care is part of the soft science. you can’t install it like software or put it into the staff manual. It needs to be developed. Which goes back to the mission, the conversations, the engagement, the framing, the stories, the symbols of success, creating a community of purpose, a platform of common values, which is all straight from “The connected  company”. It goes back to walking in the customer shoes. It goes back to the composition of your board as well. Alan wrote about it last week. They need to care too.

Full engagement is good business

And the real kicker is (as soft and hard science has shown), people (=your staff) are at their best when they are fully engaged. With a proven increase in profitability and innovation. Freek Vermeulen agrees with that.

Do you have a challenge that you need to address? Want to know what the world’s leading minds think? Go here and find out.

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