The Most Important and Least Asked Question in Business

All companies, from Celgene to United Technologies to Mars, are maniacal about the need for innovation. Whether for new, game-changing products or continuous improvement of operational processes, innovation is increasingly the primary grounds for competition in today’s world.

As a result, senior executives (and many others throughout organizations) are constantly confronted with the need to make decisions in situations characterized by ambiguity, uncertainty and strategic importance. Rarely are these decisions amenable to all-inclusive holistic analytical modeling, leaving executives to rely on their experience, intuition and partially informed judgment. However, this typically does not prevent them from investing large sums of resources in an attempt to subject the situation to “analysis.”

Sadly, most of this analysis is doomed from the start, and hence a waste of time and money. Not that it does not end up changing executives’ minds, but rather that it has no chance to do so from the start. The situations are simply too complex to allow for a comprehensive model that can produce definitive guidance. The insights produced by any model can be easily dismissed with “But that ignores [fill in the blank with whatever ignored aspect of the situation that supports one’s intuition].” Analysis becomes not a tool to protect executives from the many well-documented cognitive biases that can influence intuition, but instead boilerplate attempts to demonstrate responsible due diligence or to support whatever one has already decided to do. Even when such analysis is entered into in a more open-minded way, it rarely changes anyone’s mind.

A far more constructive alternative approach is possible, one that permits useful analysis in support of intuition and judgment. It involves first acknowledging and embracing what your gut is telling you about a particular course of action. Jettison the old “stay objective” maxim. It’s too late. As soon as you hear of or consider a course of action, you have already jumped to a conclusion, even if you are not aware of it. By attempting to ignore your intuition, you are simply driving it underground. It will emerge later, often in still subconscious ways, such as finding all sorts of reasons to dispute analysis that runs contrary to it.

By getting intuition out in the open, an executive creates the possibility of targeting analysis at something that might actually accomplish something. Intuition is shaped by all sorts of assumptions — many subconscious — that executives (and all of us) make about the world. These assumptions are heavily informed by experience. While experience is generally a good thing, it can also be inhibiting.

Unfortunately, assumptions don’t feel like assumptions; they feel like facts, and hence not necessary to challenge. The second step in this alternative approach is to flesh out the assumptions behind one’s intuition. Because assumptions often feel like facts, this can be tricky. Techniques are available to help people identify these facts/assumptions, often related to beliefs about customers, ability to execute internally or the defensibility of the course of action as others respond to it.

Once identified, the next step is to find the assumptions most likely to prove invalid. One way to identify these is to ask oneself, “If I knew right now that despite my intuition this course of action was doomed to fail, what would be the most likely reasons?” These most critical assumptions then become the drivers of analysis, targeted at validating — or refuting — the critical assumptions on which the success of the course of action will ultimately hinge.

The challenge, however, does not stop with simply identifying the critical assumptions for analysis. It is here where the most important and least asked question in business becomes paramount. Whether comprised of data collection or proactive pilots or experiments, analysis must not only be targeted at the right issues, but actually capable of changing someone’s mind. A sophisticated, “correct” analysis is of no use in this regard if the consumers of the results — the decision-makers — do not buy into the appropriateness and interpretation of the analysis. This requires executives to work with analysts on the front end to make sure that the analysis performed is meaningful to the ultimate decision-makers, in the sense that it might cause them to change their minds. An excellent way to ensure this is for executives to be willing to put a stake in the ground before the analysis is conducted: “If you do this analysis and it shows this, then I am going to be willing to acknowledge that my intuition is possibly wrong and hence consider changing my mind.” Not only does this help ensure that analysis is meaningful and influential, but it makes it much easier for executives to change their minds without losing face.

If this smacks of the “scientific method” or “hypothesis testing,” that’s because it is, at a fundamental level. But because the totality of social phenomena, like business, is rarely able to be completely captured in a mathematical model, intuition/experience/judgment must invariably play a role in filling in the gaps. The “scientific method” must be adapted to a world in which intuition and judgment are going to play a significant part.

So, what can change your mind?

About the Faculty

Robert L. Carraway

Carraway, professor and former senior associate dean of the MBA program, is an authority on the appropriate and constructive use of quantitative analysis in making important decisions. He focuses on the relationship between intuition and rational analysis and how the two can complement one another, as well as on the... Learn More