My colleague Ben Gilad posted a terrific essay on the shortcomings of “data-driven” decision-making.

I love data. I spent 15 years playing with the PIMS database alongside luminaries such as Michael Porter, Sidney Schoeffler, Robert Buzzell, and more. Many years later, I can run a few hundred million simulations before breakfast and tell you what they mean before the coffee’s temperature drops to 80 degrees F. I told you, I love data.

But data isn’t learning, and learning isn’t just about the amount of data. Is one data point enough for learning? How about a trillion?

When smart people fail, their failures are often (not always) because what they think they know is wrong. There’s often a deeper failure, a failure of knowledge, learning, and framing, rather than a failure of execution or data.

To see why, let’s look at rats.1

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No one adopts a strategy expecting it to fail, yet strategies fail. That doesn’t happen on purpose but it also doesn’t happen by accident.

Christele Canard, founder of Switched On Leadership, interviewed Competing.com co-founder Mark Chussil for the cover-story subject why strategies fail. You can read and download their wide-ranging discussion here.

Christele and Mark talk about:

  • Why smart strategists believe their strategy will work and what happens when they find out in business war games that it won’t.
  • What happened when Mark built a strategy decision test technology (patent pending) and his own strategies didn’t work so well. (Hint: first, he looked for a bug in the software. There was no bug.)
  • Why people are so comfortable thinking inside the box and what it takes to get them to go outside.
  • What’s wrong with “I did this and the result was that” reasoning.
  • How people can expand their strategic thinking with a simple question.
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LG and Samsung recently made smart decisions in the emerging OLED TV industry. Good for them, because competitive advantage comes from smart decision-making. What’s remarkable is that their smart decisions take them in opposite directions.
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Remember the bitter VHS versus Betamax war? Of course you don’t. You’re too young. I remember, though. I even took a stand in favor of Betamax. Betamax lost.

Remember the more-civil Blu-ray versus HD-DVD war? Of course you don’t. You were too busy pecking at your new iPhone. The iPhone came out in 2007. Blu-ray beat HD-DVD in 2008. That time my favorite won. No, that doesn’t mean I got smarter. It means the rest of the world did.

Now we have a war that didn’t happen, sort of, if we can imagine such a thing. According to Scott Wilkinson, Editor of AVS, LG is “forging ahead” with its OLED products for 4K/UHD TVs.1 (Don’t panic. That just means really, really good TVs.) Mr. Wilkinson also says Samsung has decided not to build a new facility to manufacture OLED panels for TVs, thereby calling off the war with LG.

LG and Samsung took opposite strategies, and both made smart decisions. The decisions would be equally smart if it were Samsung that was forging ahead and LG that was, as AVS said, “hitting the pause button.” But one of those smart firms is sure to be denounced later on for making a bad decision.

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“The Sound of Competing” Episode 1: Vision or Overconfidence?


Vision or Overconfidence?

Distinguishing between a vision (glory) and overconfidence (mirage) is important, critical, even imperative. Alas, it is also very tricky to do a priori; that is, before the fact. After the fact, we may be wiser. That’s one of the main arguments in Phil Rosenzweig’s new book, Left Brain, Right Stuff.

Rosenzweig makes valid points: no one thinks of him/herself as overconfident, and confidence, even in excess, may be the stuff that enables leaders to overcome resistance and skepticism. Still, we have encountered numerous occasions in which leaders, powerful executives, ignored early warning signs and crashed into mirages.

What does overconfidence look like? Or, perhaps, taste like. Coca-Cola is going all the way with its wonderful new toy, the Freestyle machine. These new and expensive dispensers are being deployed world-wide. The machines allow people to mix 146 possible flavors. They are incredibly fun and creative for those who crave designer sugar water. They raise vendors’ beverage sales as much as 6%.

And they will probably change nothing. Listen to the podcast to find out why, and which companies seem more likely to fall into the overconfidence trap.

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“The Sound of Competing” is a new podcast from Competing.com. It’s conversations from Ben and Mark, plus the occasional reckless guest. It’s remarkable. It mixes serious concepts with humor. It’s edgy without sacrificing critical thinking. It’s the antidote to the silly and shallow. Also, there are titanic battles between good and evil. A ping pong match between two strategy giants resulting in commentary smart enough to listen to.

Subscribe by RSS feed

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Don’t think you have to choose between left- or right-brain thinking when it comes to decision making. In fact, creatives and quants complement each other and can boost strategic thinking within groups. Effective decision making combines the best ideas from humans and machines. Machines are people too.
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Odds are I made up that statistic in the title. Does that make me a quant or a creative? Meanwhile, though, there are critical business decisions to be made. It seems there always are. Making critical business decisions proves we’re very important businesspeople.

We must decide whether to make those decisions with the quants and their shiny petabyte teraflop machines or the creatives and their glorious, soaring humanoid imaginations.

Or not. I vote not.

A recent Op-Ed by Timothy Egan in The New York Times, “Creativity vs. Quants,” eloquently and intelligently brought into the digital age the ancient debate between tastes-great and less-filling. Mr. Egan wisely did not take sides even as he noted victories and defeats for both clans. And yet there is still an either-or undercurrent, perhaps not from Mr. Egan but certainly in the general culture. As for me, I vote not to make quants and creatives an either-or dichotomy.

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Ben Gilad: Your new book, Left Brain, Right Stuff, places a sharp focus on a distinction be­tween events we can influence — directly or indirectly — and events we can’t. Analytics has a role in improving judgments in the latter case. Strategic decisions belong to the former – the leader has an ability to influence the outcomes. Analytics should not be confused, as it is in some large companies, with strategic vision. Is this a fair characterization of your thesis?

Phil Rosenzweig: My main thesis is that decision research has been immensely valuable in shedding light on the mechanics of human cognition, and has done so largely by conducting experiments that ex­amine choices among options we cannot alter, or judgments about things we cannot influence. The primary lesson has been for us to be aware of our propensity for common errors, and try to avoid them.

That’s fine for some kinds of decisions, but much of life is very different. Often we can alter the options we face and improve their terms. We can also influence outcomes, and for that high levels of confidence are useful. Many real-world decisions call for a combination of skills: on one hand a capacity of detached analysis, free of biases, which we associate with left-brain thinking, and on the other hand a willingness to push boundaries and act assertively, which I call the right stuff.

Strategic decisions, in particular, call for both. Deciding on a good strategy surely has to take into account many things we cannot influence, like currency movements, geopolitical trends, technological breakthroughs, and the actions of rivals. But setting a strategic vision and then carrying it out through the actions of others is not a purely analytical exercise. We also have to make it happen.

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Clear expectations inform and motivate. In competition they do more: they signal. That’s why people skilled at competing set expectations deliberately and strategically. Expectations declare boundaries to competitors: “this is my territory, stay away or we battle.” Expectations announce capabilities to customers: “this is what we will do for you.”

There are two ways to set expectations: unconditionally or conditionally. An unconditional expectation is a promise. A conditional expectation depends on something else. The unconditional type looks like this: “You will be able to keep your doctor.” The conditional type looks like this: “If enough young people sign up and pay for insurance then policies will be cheaper than they would be otherwise.” (On the concept of “otherwise,” see my co-editor’s essay “Success Is In a Word.”).

Conditional expectations are cautious and realistic. They spell out circumstances under which something may or may not happen. Given the no-place-to-hide ubiquity of Facebook and Twitter they are also wise. But they are far from exciting. In the age of millions of MBAs in marketing, apparently that is a no-no. We sacrifice the lesser good, wisdom, for the greater, hype! (That’s why I used an exclamation point instead of a period!)

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