5 Aspects That Make Our Intuition Unreliable and Inconsistent
5 Aspects That Make Our Intuition Unreliable And Inconsistent
Human Intuition or gut feeling is perceived to be reliable, accurate and that we should rely on this more to make our decisions predictions and run our businesses. I believe that in leading and managing in business it must be a synthesis of evidence and intuition. Not everything is in the data but nor can a business be completely lead or managed by intuition.
How our intuition works and it’s limitations have been researched at length. The research clearly shows some limitation that we need to be aware in leading and managing our businesses.
1. We apply intuiton inconsistently.
Even experts have been found to be inconsistent. It has been found that Doctors in determining how they diagnose patients those with a clearly defined model did a better job of diagnosing the new cases than humans whose knowledge was used rather than the evidence based models. In other words their intuition varied. Models though don’t have intuition. So the Doctors armed with models and being able to use their intuition within that framework had a better clinical outcome. The same is the principal in business that having the evidence or the model or framework allows us to operate business more efficiently and then applying the intuition within that framework.
2. It’s easier to make bad judgements quickly.
Our biases that we have affect us when we make decisions. There are plenty examples of this but to use an example that was in a recent Blog post on Harvard Business Review:- if you were to ask a group of people “is the average cost of German cars more or less than $100,000″ and then ask them to estimate the average price of German cars, they would anchor around BMW’s and other high end makes when estimating. If ask another group the same two questions but say is the average cost of German cars more or less than $30,000 instead they will anchor around VW and give a much lower estimate. How much lower? Well when this study was performed it turned out around $35,000 lower on average or half the difference between the two anchor prices. How information is presented affects what we think. This is powerful in that it shows the short coming of our intuition but it also shows the ability that if we present our information properly to our team then we can determine the decisions that assist in determining the decision that they will make.
3. Intuition only works well in specific environments ones that provide a person with good ques and rapid feedback.
A good que is a rapid indications on what is going to happen next. Feedback from the environment is information about what worked and what didn’t. So if the environment is perfectly suited up with these rapid ques and accurate feedback then intuition can work. Unfortunately the environments where this is the case are few and far between.
4 It takes a long time to build intuition.
Malcolm Gladwell talks of 10,000 hours rule. This is that it takes 10000 hours of application to become expert at a particular area. It is understood that chess players need approximately 10 years of studying competition to assemble a mental repertoire of patterns to allow them to compete at the upper level. It is only after many years that intuition can be fine-tuned to be consistently accurate subject to the correct environment as discussed above.
5. We don’t know where our ideas come from.
There is no way for even an experienced person to know if a spontaneous idea is the result of expert intuition or of a pernicious bias. In other words we have lousy intuition about our intuition.
These 5 reasons show the shortfall in relying on our intuition. What are your thoughts?
“Differentiation is the custodian of profits”
On Monday night I was at an Australia Institute of Company Directors dinner where Don Meij CEO of Dominos Pizza was the presenter.Don impressed me with his passion and enthusiam for the business. Also he knew the numbers. They put a lot of work into knowing what the consumer is likely to be eating next year and five years out. Through this investigation and knowing the numbers they are striving to make decisions with the best facts on hand. A great example of evidence based leadership rather than just relying on gut feel.
One of his slides was titled “Differentiation is the custodian of profits”. This is a great statement. Whilst we have heard this before in different contexts or way it is something that is often forgotten or neglected in business. Domino’s are the market leader in Australia and still they are after differentiation. For any business who is not the market leader in their sector it is even more paramount.
If people are given nothing else to compare you on then they will compare you on price. How does your product or service differentiate you from your competitors. Remember the point of difference often is the little things that surround the core product or service.
Another interesting fact was that the internet is driving 28% of their business. Eighteen months ago it was under 5%. Within that internet business though sales from the IPhone are responsible for 14%. Dominos have an IPhone app which has only been out a short while and is driving this much business to them.
We need to be more even more conscious of how the internet is affecting our business. Also not just the internet on a desktop or laptop computer but the mobile market. If the IPhone is responsible for that level of business to Dominos at the moment where it grow to you. Having these facts in front of you enables you to consider the future direction of the business.
For instance coffee shops, takeaway stores need to get onto the internet and also look at the IPhone application for their business. There are lots of other businesses that need to be mindful of this as well.
In all a great presentation and thought provoking. How do you differentiate yourself? Have you the facts on where your market is going in the next 12 months or 5 years.
Is the celebrity CEO dead? Lets hopes so.
Recently I saw an article about how the fact that there are not many celebrity ceo’s left has had an impact on the publishing industry. Last big celebrity CEO was Jack Welch. There is still Bill Gates and you could possibly count Warren Buffet. But Jack Welch retired a number of years ago. Whilst the current decline of the celebrity ceo has had a significant impact on the publishing industry the question of leadership is one which intrigues me.
Peter Drucker said “no institution can possibly survive if it needs geniuses or supermen to manage it”.
How could I argue with Peter Drucker. To me leadership is about creating the environment for everybody to succeed. It is not about being the celebrity to the world. The effective leader focuses on everybody else and not him or herself. They focus on what they can control which is the vision of the business, creating the environment to allow others to succeed, being decisive and being dedicated to delivering value to employees and customers.
Businesses with effective leaders are boring. They don’t grandstand. They want all their team to be engaged in creating and delivering value.
So the businesses with the most effective leaders are often growing and developing under our noses, quietly and efficiently without fanfare.
I would love to hear from you of businesses large and small who you believe are being effectively lead.
ROI of Leadership Development
At the moment the question of determining a correct and usable ROI of Leadership Development has been on my mind.
Worldwide organisations spend enormous amount of money and effort on Leadership Development. Are they getting a good return on their investment? Is it like the old adage about advertising – I know only half of the advertising works but I don’t know which half.
Just because leadership is an intangible item and thus leadership development is intangible this does not mean that its results can not be measured. But precisely how?
Firstly we need to start with what is “leadership.” There has been much written on this question however I would believe that it can be summarised in the following points:-
- creating an environment for everyone to succeed
- decisiveness
- setting the vision and formulating the environment to ensure execution of the strategic aims
- honesty
- dedication.
I realise that there are many other definitions but this will suffice as the starting point. From this point we need to examine the strategic aims of the business. Once this has been clarified we can then determine the leadership challenges that are likely to be encountered in achieving this aims.
This is where leadership development then comes into the equation. However it would be incorrect to undertake leadership development without first considering the leadership challenges that the strategic aims create.
From this macro level we need to then determine the leadership objectives, challenges that we are desirous of seeing the people who are or have undertaken a program of leadership development meet. These could be the short-term outputs we are seeking from the development program.
Then we determine what the people or person who engaged in the leadership training can directly effect. It is no use measuring something that they only partially affect. It would be unfair, disheartening and generally counter productive.
Then we move towards determining the value driver and builders. With these mapped we can then determine the appropriate metrics.
These are my initial thoughts. If you have any comments, thoughts or questions please leave them as I wish to come up with a solid approach to measuring the ROI of Leadership Development.
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