It stands to reason that those with the knowledge, skills and experience mostly reach senior positions. Usually, they can point to a track record of results that imply a string of good decisions. They can often point to some really big decisions, such as an acquisition or exiting a market, that came good. As a result, there is a tendency to rely on those instincts, based on past experience and knowledge, for the next big decision. If we take an example, such as the current plight of the Mercedes F1 team, it is hard to sum up why they are currently so far away from their past success. Surely, having the people who succeeded in the past means that they will succeed again soon? This is the third season with little to no success for the team and they appear to be at a loss. So, today we discuss making big business decisions using only what you already know.
Making big business decisions
Every business makes hundreds, thousands or even millions of decisions every day. These can be as simple as agreeing how to resolve a customer query to agreeing budgets. The really big decisions range from which business to acquire, large investments and disposals. Other decisions might include which markets to enter, which customers to target or what products to develop. Sufficed to say that there is a big difference between a simple, localised decision and a complex, company-wide choice. Some small decisions can cost you a customer while some big decisions, such as creating a new position on the leadership team, can result in frustration. Many large companies enter a new market only to withdraw a few years later (such as Tesco with Fresh & Easy in the US). Similarly, many new products are launched only to disappear without a trace (such as Dasani and Google Glass).
Many senior hires are justified on the basis of obtaining the talent to make the big decisions. Their past track records undoubtedly put the majority of these senior professionals in a good position to execute. Shareholders demand high calibre and experienced people that they can trust to make them more money. In many ways, it is akin to selecting the best players for your sports team. You assess their capabilities, approach them to join and then hope that they deliver. Furthermore, they are chosen based on a perception of the complementary skills and experience they will bring. Unfortunately, like a sports team, not only do the constituent parts not always ‘play nice’ together, they sometimes don’t perform as you had hoped. So, what went wrong?
What you already know
Even a good manager, in the case of the sports team, can move from one location where they experienced success, to another where they could not. Some experience periods of success that ebb away, never to be recovered. Occasionally, one breaks the mould and generates repeated success with multiple teams. The latter is arguably rare, which is why management changes frequently, hoping to find the key to success. However, it is one thing to assemble a team to play a known quantity, in the form of their opposition, to the same analogy in business. Businesses have to compete with a vast array of competitors of all shapes and sizes, some directly competing and others indirectly. Some come from the same industry, others diversify or acquire their way into your market. A few disrupt your industry by bringing previously unseen business models or ground-breaking technologies.
Like a sports team manager, it helps to understand the opposition. It also helps to understand prospective customers, your competitive competencies and where opportunities are. The truth is that in the fast-paced world of business, many management teams do not have time to research or plan. They have to rely on instincts and hunches to make rapid decisions or they might sink. Tried and tested techniques are deployed again and again. What worked before gets used again and what did not work before is discounted. But this has its risks. For example, Steve Ballmer missed the smartphone revolution at Microsoft. Toto Wolff is failing to get Mercedes F1 back to the front after 3 years. AMD has ceded much ground to Nvidia in data centres and AI and Nvidia is valued at about 8 times AMD. Xiaomi, the smartphone maker, has developed the SU7 electric car quickly and competently to market (a smartphone on wheels?).
Missing what is right ahead of you
In the world of big pharma, we assume that armies of people in white lab coats are the best of the best. They experiment repeatedly to solve mankind’s greatest problems, sometimes succeeding with major breakthroughs. However, it is telling that people outside of the profession have occasionally been called upon to solve stubborn problems in chemistry. Similarly, the automotive industry has lent a helping hand to industries such as cycling and sailing. Finally, the COVID-19 pandemic accelerated the (commercial) acceptance of mRNA vaccines, despite the technology being around for nearly 30 years. The resulting success has certainly helped the value of Pfizer, BioNTech and Moderna.
We are not perfect and blind spots affect us all. Depending on our experience, the context and our emotional state, we sometimes ignore what is right ahead of us. Bias means that we discard valid suggestions because they don’t fit what we believe works. It also means that we find ways to discredit alternative thinking and look for ways to get what we want. A lack of time often renders research and planning obsolete and a quick decision is made. That decision may not deliver the benefits we thought but it may also take a while to show any downside. Opaque problems require greater time, focus, information and resources to solve.
Concluding on big decisions using instinct
In conclusion, we are sometimes constrained by what we know because it limits the number of options we consider. We also know that the human brain can get overwhelmed by a large number of choices, made worse with haste. Groups of people with average intelligence often work more collaboratively together, raising their collective intelligence. Ensuring that your business survives and thrives requires a set of strategies and an awareness of emerging risks and opportunities. Uncertainty and fear of the unknown hold even the toughest CEO back from making the best decision with all of the available information possible. Ultimately, you don’t need a 30-strong team of consultants to hand, you just need to be open-minded.
Thinking about big changes?
Why not speak to us and see how we can help you or your business to thrive? We support with research and planning to save you time and make the big business decisions with confidence. Simply call our office, drop us an email or pop in a few details for us to call you.
Finally, why not read some of the pros and cons of big and small consultancies.