A Business Intelligence, Data Services and Data Analytics company with strong SQL database development and IT expertise
A Business Intelligence, Data Services and Data Analytics company with strong SQL database development and IT expertise
Should "We" Be Managing Anything?  Self-Deception & Confirmation Bias Lead To Questionable Decisions

 

Take a look at a cloudy sky, stare at it for a while and you end up seeing figures in the otherwise random distribution of …… steam. Clearly the clouds are not conspiring into a cosmic picture viewer for your delight – yet, if the figure you are seeing is a common object and you point it out to a friend, he too sees the same thing…. Or he sees a burger if he is really hungry.....
We are pattern seeking machines – in our effort to understand our world, our minds assign similarities to various patterns – this is how we recognize our world. In the process, when a pattern cannot be recognized, we find something “close” and our brain fills in the rest. Walk in a dark forest at night and you quickly realize that every sound that does not come from your own steps seems to worry you – you restlessly look for what made the sound – it is how we survived in the ancestral environment; were you not as paranoid, your lineage would not have survived so far and you would not be here reading this crazy introduction about data intelligence.
We want to assign “fault” or “cause” to everything around us – because not knowing the source of a nearby sound, could make us someone’s lunch in the savanna. Add this to our pattern seeking nature and you have the start of a wonderfully paranoid human being: Welcome to “US”…. Pattern seeking, fault inducing machines….but that’s not all. Evolution has endowed us with a number of biases – all of which served us well in the ancestral environment but, in today’s social climate may be counter-productive. Consider our strong bias toward sweet foods and you can quickly understand why diabetics reach for candy that slowly kills them. We have all kinds of biases – the “fairness” bias, we are always more “fair” than the other guy; the “righteousness” bias, we are always “more correct” than the other guy and so on.
So, we are self-righteous, better than others, pattern seeking and fault assigning machines….. but, please, it is important we understand “US” so let me just belabor the point with only a couple more quick examples…. If you inform educated people that “2 percent” and “2 out of a hundred” is the same thing and then test their responses between saying “there is a 2 percent chance that someone will be sick” versus “there is a two out of one hundred chance that someone will get sick”, the responses are different. In the “2 percent” case, emotional response is minimal; in the “two out of one hundred” the emotional response is high. We think with two brains – the emotional one and the logical one. When “percent” is involved, the logical brain is doing the thinking. Which “brain” are your managers using to make financial decisions? The emotional side makes the decisions for everything – the logical merely comes up with whatever explanation fits. But, if there is nothing to base a logical decision upon? Pattern seek and find something – let the clouds decide….or the cheeseburger. I think I am trying to say something here…..something powerful…..something shocking.
Gather a bunch of people and have them write the last 2 digits of their social security number down. Then, present them with a product and have them tell you how much they think it is worth….the answers you get correlate with the last digits of their social security number…… the last number they had in their mind is what their brain told them the item should be worth…..ridiculous but such behavior has been verified scientifically and, yes, it represents : US. So, knowing this, who should be setting pricing for the company? Who should be setting goals and growth levels? And after writing or studying what numbers?
Emotions are nature’s way to subvert logic and drive the person to maximize the benefit to himself and his kin; the emotional brain paints scenarios which the logical brain accepts as explanations – our pattern seeking, fault assigning nature being always cooperative in this effort. Making complex decisions based on gut reactions or ill informed, biased positions has been the frustration of many and the cause of failed programs in many companies (see our recent “Humans Just Like Us” article). Having a subjective and measurable model can subvert the emotional, reactionary decisions of even the most powerful manager – after all, people are not stupid, they are sometimes diluted and the data helps bring them back to normalcy.
“This product should be on the top of the charts but it is not moving – we need to know why and fast”, said the President. Based on what principles should the discussion take place? Is it price, competition, promotion, distribution? Where does the fault lay? What portion of the process must be fixed? And, if the fault rests with price, does this apply to all market segments? With all of these considerations and market slices, HOW IN THE WORLD can you trust pattern-seeking, fault inducing, full-of-biases humans to make any real sense of all of this? Note that taking human intuition out of the process would be a mistake – but a system is needed that can point out market/product strengths and weaknesses SUBJECTIVELY and without the involvement of human interpretations – then, and only then, can human intuition be used – without data, human intuition will gravitate to assigning fault to others and seeing patterns where there may only be noise. With a subjective evaluation tool, intuition can be guided toward productive and inventive means.
Will the product manager of a product know when it is time to discontinue it or will he drive the company to losses to keep his baby one more year? Can the manufacturing manager of a high margin product allow it to discontinue if he is getting paid on margins produced? It is very hard to get a man to see even the most blatant truth if his paycheck depends on doing otherwise. Will engineering admit the product they designed may have faults or will they keep blaming sales for not demonstrating the product properly? Where should effort be placed? Engineering, manufacturing, marketing, sales? If it means extra budget, every manager has his hand out for it and ready to justify his own area’s importance…..who’s right? How do we prioritize product improvements and new product designs for maximum engineering efficiency to the business? What type of promotion should we be doing for each market segment? Where should the money be first spent? What should the message be? What opportunities may lay in secondary markets that we can reach and lead the segment with minimal effort?
As of today, in most start-up and small companies, these decisions are made by “US”, the very pattern-seeking humans discussed above. Without a language and a system within which to analyze our business performance, there is no subjective way to make the decision – so, the decision ends up being an “educated guess” – as it turns out, founders of companies tend to have that special talent to see the market and their product and decide the course of action. But, larger companies are not run by “founders” and handle dozens of product lines with hundreds of products; they are managed by executives and department heads that may even have no idea what the company actually sells. The talents and understanding of a CFO and that of a good Product Support Engineer are totally different – so are the talents of an Engineering Specialist compared to a Salesman. In fact, you may find some of these people would differ substantially enough in character to be uncomfortable with each other.
HOW do we then get these disciplines to communicate with each other in an effective manner? Can we develop a commonly understood “language” that can help everyone understand the core disciplines of their own business? And, if we can provide a reporting and measurement system, can we then INTEGRATE this new system as a language within the corporate ethos? Can we hold conversations throughout the company, across inter-disciplinary lines and fundamentally understand the true causes for our failures and successes? The answer is “YES” – all of this can be done and we have implemented and described business strategies within a data structure and language that infuses managers and employees with a sense of “understanding the business and their role in it”. And, we are keen to “change” as little as possible – we do not “change” as “change” says “we were doing it wrong before”; instead, we help the organization evolve using the very competencies available within the operation and its culture. Through our data analytics and SQL software practice, we have assisted several companies and departments in achieving a greater understanding of their operation and, as a result, a more efficient employee team was able to speak the language of business at a level they can understand.
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