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.Let s consider two prominent shortcuts: availability andanchoring.Individuals typically do not conduct a thorough statisticalanalysis to assess the likelihood that a particular event will take placein the future.Instead, they tend to rely on information that is readilyavailable to them to estimate probabilities.Vivid experiences andrecent events usually quickly come to mind and have undue influenceon people s decision making.This availability heuristic usually servespeople well.However, in some cases, easily recalled information doesnot always prove relevant to the current situation and may distort ourpredictions.When making estimates, many people also begin with an initialnumber drawn from some information accessible to them at the time,and they adjust their estimate up or down from that starting point.Unfortunately, the initial number often serves as an overly powerfulanchor and restrains individuals from making a sufficient adjustment.Researchers have shown that this anchoring bias affects decisionmaking even if people know that the initial starting point is a randomnumber drawn from the spin of a roulette wheel! In sum, many dif-ferent rules of thumb provide a powerful means of making decisionsrapidly, but they also impair managerial judgment when people donot recognize their drawbacks and limitations.28ImitationSome business leaders emulate the strategies and practices of otherhighly successful firms when faced with contentious and complexdecisions.After all, why reinvent the wheel one way to simplify acomplex problem is to find someone else who has already solved it. CHAPTER 6 " THE DYNAMICS OF INDECISION 159Learning from others can pay huge dividends.At General Electric,former CEO Jack Welch launched a major best practices initiativein 1988.He credits this initiative with fundamentally changing theway that GE does business and producing substantial productivitygains.Welch and his management team identified approximately 20organizations that had long track records of more rapid productivitygrowth than GE.For more than a year, GE managers closely studieda few of these firms.They borrowed ideas liberally from these organi-zations and adapted others strategies and processes to fit GE s busi-nesses.For instance, they learned quick market intelligence fromWal-Mart and new product development methods from Hewlett-Packard and Chrysler.Over time, imitating others became a way oflife at GE, and it produced amazing results.29All this learning sounds wonderful, but imitation has its draw-backs.In many industries, firms engage in herd behavior. Theybegin to adopt similar business strategies, rather than developing andpreserving unique sources of competitive advantage.Take, for exam-ple, the credit-card industry.Many firms have tried to emulate thehighly successful business model developed by Capital One.Overtime, company marketing and distribution policies have begun tolook alike, rivalry has intensified, and industry profitability haseroded.Consider too the many instances in which a leading firmdecides to merge with a rival, touching off a wave of copycat acquisi-tions throughout an industry.30At times, executives may feel safe imitating their rivals ratherthan going out on a limb with a novel business strategy.However, theessence of good strategy is to develop a unique system of activitiesthat enables the organization to differentiate itself from the competi-tion or to deliver products and services at a lower cost than its rivals.Simply copying the strategies and practices of rival firms will not pro-duce a unique and defensible strategic position.31 It takes greatcourage to stand alone when rivals engage in herd behavior, but it canpay huge dividends.Being different does not mean that a firm refuses 160 WHY GREAT LEADERS DON T TAKE YES FOR AN ANSWERto learn from others.For instance, General Dynamics studied itsrivals very closely during the turmoil in the defense industry in theearly 1990s, and observed that many firms had decided to pursuecommercial diversification to compensate for diminishing militaryspending.The company s historical analysis indicated that aerospacefirms had not fared well during past diversification efforts.Therefore,it chose to focus on defense despite the precipitous decline in indus-try demand.Many rivals ridiculed this strategy at the time, yet for thepast decade, General Dynamics has generated shareholder returnswell in excess of most large competitors.32Failing to Solve the Underlying ProblemThese decision-making shortcuts reasoning by analogy, applyingrules of thumb, and imitating others clearly have their merits.Despite some limitations and pitfalls that we have identified, thesestrategies often serve a useful purpose for managers trying to makecomplicated decisions with incomplete information.However, thesetechniques do virtually nothing to alter the culture of indecision thatoften proves to be the true barrier to timely and effective executionwithin organizations.Tackling a culture of indecision requires leadersto focus not simply on the cognitive processes of judgment andproblem-solving, but also the interpersonal, emotional, and organiza-tional aspects of decision making.Leaders need to change the funda-mental way that people interact with one another, both in and out ofmeetings, if they want to change a culture of indecision.They mustteach others how to engage in more constructive and efficient dia-logue and deliberation.They also must lead the decision process in away that fosters commitment and shared understanding a criticaltopic that the next chapter addresses. CHAPTER 6 " THE DYNAMICS OF INDECISION 161The Origins of Indecisive CulturesThis chapter discussed the different patterns of behavior that consti-tute cultures of indecision.Leaders should keep in mind that thosebehaviors may contribute to poor performance in the present, but theroots of a culture of indecision often can be traced back to a timewhen the organization performed remarkably well.Indeed, the verysame behaviors that contributed to the firm s past achievements mayhave become problematic as internal and external conditionschanged [ Pobierz całość w formacie PDF ]
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.Let s consider two prominent shortcuts: availability andanchoring.Individuals typically do not conduct a thorough statisticalanalysis to assess the likelihood that a particular event will take placein the future.Instead, they tend to rely on information that is readilyavailable to them to estimate probabilities.Vivid experiences andrecent events usually quickly come to mind and have undue influenceon people s decision making.This availability heuristic usually servespeople well.However, in some cases, easily recalled information doesnot always prove relevant to the current situation and may distort ourpredictions.When making estimates, many people also begin with an initialnumber drawn from some information accessible to them at the time,and they adjust their estimate up or down from that starting point.Unfortunately, the initial number often serves as an overly powerfulanchor and restrains individuals from making a sufficient adjustment.Researchers have shown that this anchoring bias affects decisionmaking even if people know that the initial starting point is a randomnumber drawn from the spin of a roulette wheel! In sum, many dif-ferent rules of thumb provide a powerful means of making decisionsrapidly, but they also impair managerial judgment when people donot recognize their drawbacks and limitations.28ImitationSome business leaders emulate the strategies and practices of otherhighly successful firms when faced with contentious and complexdecisions.After all, why reinvent the wheel one way to simplify acomplex problem is to find someone else who has already solved it. CHAPTER 6 " THE DYNAMICS OF INDECISION 159Learning from others can pay huge dividends.At General Electric,former CEO Jack Welch launched a major best practices initiativein 1988.He credits this initiative with fundamentally changing theway that GE does business and producing substantial productivitygains.Welch and his management team identified approximately 20organizations that had long track records of more rapid productivitygrowth than GE.For more than a year, GE managers closely studieda few of these firms.They borrowed ideas liberally from these organi-zations and adapted others strategies and processes to fit GE s busi-nesses.For instance, they learned quick market intelligence fromWal-Mart and new product development methods from Hewlett-Packard and Chrysler.Over time, imitating others became a way oflife at GE, and it produced amazing results.29All this learning sounds wonderful, but imitation has its draw-backs.In many industries, firms engage in herd behavior. Theybegin to adopt similar business strategies, rather than developing andpreserving unique sources of competitive advantage.Take, for exam-ple, the credit-card industry.Many firms have tried to emulate thehighly successful business model developed by Capital One.Overtime, company marketing and distribution policies have begun tolook alike, rivalry has intensified, and industry profitability haseroded.Consider too the many instances in which a leading firmdecides to merge with a rival, touching off a wave of copycat acquisi-tions throughout an industry.30At times, executives may feel safe imitating their rivals ratherthan going out on a limb with a novel business strategy.However, theessence of good strategy is to develop a unique system of activitiesthat enables the organization to differentiate itself from the competi-tion or to deliver products and services at a lower cost than its rivals.Simply copying the strategies and practices of rival firms will not pro-duce a unique and defensible strategic position.31 It takes greatcourage to stand alone when rivals engage in herd behavior, but it canpay huge dividends.Being different does not mean that a firm refuses 160 WHY GREAT LEADERS DON T TAKE YES FOR AN ANSWERto learn from others.For instance, General Dynamics studied itsrivals very closely during the turmoil in the defense industry in theearly 1990s, and observed that many firms had decided to pursuecommercial diversification to compensate for diminishing militaryspending.The company s historical analysis indicated that aerospacefirms had not fared well during past diversification efforts.Therefore,it chose to focus on defense despite the precipitous decline in indus-try demand.Many rivals ridiculed this strategy at the time, yet for thepast decade, General Dynamics has generated shareholder returnswell in excess of most large competitors.32Failing to Solve the Underlying ProblemThese decision-making shortcuts reasoning by analogy, applyingrules of thumb, and imitating others clearly have their merits.Despite some limitations and pitfalls that we have identified, thesestrategies often serve a useful purpose for managers trying to makecomplicated decisions with incomplete information.However, thesetechniques do virtually nothing to alter the culture of indecision thatoften proves to be the true barrier to timely and effective executionwithin organizations.Tackling a culture of indecision requires leadersto focus not simply on the cognitive processes of judgment andproblem-solving, but also the interpersonal, emotional, and organiza-tional aspects of decision making.Leaders need to change the funda-mental way that people interact with one another, both in and out ofmeetings, if they want to change a culture of indecision.They mustteach others how to engage in more constructive and efficient dia-logue and deliberation.They also must lead the decision process in away that fosters commitment and shared understanding a criticaltopic that the next chapter addresses. CHAPTER 6 " THE DYNAMICS OF INDECISION 161The Origins of Indecisive CulturesThis chapter discussed the different patterns of behavior that consti-tute cultures of indecision.Leaders should keep in mind that thosebehaviors may contribute to poor performance in the present, but theroots of a culture of indecision often can be traced back to a timewhen the organization performed remarkably well.Indeed, the verysame behaviors that contributed to the firm s past achievements mayhave become problematic as internal and external conditionschanged [ Pobierz całość w formacie PDF ]