SPOTLIGHT DECISION MAKING
The study of decision making spans highlyanalytic fields (think Bayesian statistics) to deeply psychological ones (thinkcognitive biases). This package, which includes a review of those perspectives,looks at how leaders can “nudge” employees into better choices and at howpeople can work around their own biases.
BEHAVIORAL ECONOMICS
Leaders as Decision Architects
John Beshears and Francesca Gino | page 54
Everyone from CEOs to frontline workerscommits preventable mistakes—for example, underestimating how long it will taketo finish a project or focusing too much on information that supports theircurrent view. It is extraordinarily difficult to rewire the human brain to undothe patterns that lead to such mistakes. But there is another approach: Alterthe environment in ways that encourage people to make decisions that lead togood outcomes.
Leaders can do this by restructuring howwork is performed, say Harvard Business School’s John Beshears and FrancescaGino. In this article, they offer a five-step process for mitigating theeffects of cognitive biases and low motivation on decision making:
1. Understand the kinds of systematicerrors people make and the factors that affect motivation.
2. Define the problem to determine whetherbehavioral issues are at play.
3. Diagnose the specific underlying causes.
4. Design a way to tweak the environment toreduce or mitigate the negative impact of cognitive biases and insufficientmotivation on decisions.
5. Rigorously test the proposed solution.
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MANAGING YOURSELF
Outsmart Your Own Biases
Jack B. Soll, Katherine L. Milkman, andJohn W. Payne | page 64
When making decisions, we all rely tooheavily on intuition and use flawed reasoning sometimes.
But it’s possible to fight these pernicioussources of bias by learning to spot them and using the techniques presented inthis article, gleaned from the latest research. They’ll open up your thinkingabout possible outcomes, objectives, and options and lead to better choices.
To broaden your perspective on the future,the authors suggest, you can use proven tactics for improving the accuracy ofestimates and preparing for contingencies. You’ll think more expansively aboutyour objectives if you come up with many possibilities before deciding what’smost important, get inputfrom others, and then carefullyexamine one goal at atime. Andyou’ll generate better options ifyou identify several and evaluate
them side by side. Don’t settlefor thefirst one that’s acceptable; imagine that you can’t pursue it,and you mightfind an even strongeralternative.
Strong emotional attachments or investmentsmake cognitive biases even harder to overcome. When that’s the case, usechecklists and algorithms to stay focused on the right things, and set “tripwires” to trigger planned responses at key points in the decision-makingprocess.
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DECISION MAKING
Fooled by Experience EmreSoyer and Robin M.Hogarth | page 72
We interpret the past—what we’veexperienced and what we’ve been told—to chart a course for the future. It seemslike a reasonable approach, but it could be a mistake.
The problem is that we view the pastthrough filters that distort reality. One filter is the business environment,which focuses on outcomes rather than the processes that lead to them andcelebrates successes while ignoring failures, thus making it hard for us tolearn from mistakes. Another is our circle of advisers, who may censor theinformation they share with us. A third filter is our own limited reasoningabilities. We tend to focus on evidence that confirms our beliefs and glossover information that contradicts them, and we read too much into our personalexperience, which inevitably involves a small sample of incidents.
We can base our decisions on a clearer viewof the world if we study failures and near misses— especially the processesbehind them; encourage all employees to pursue preventive measures instead ofjust solving problems; surround ourselves with people who will speak frankly;search for evidence that our hunches are wrong, and encourage employees, datascientists, and consultants to do the same; and broaden our perspective inorder to give new meaning to our varied experiences.
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The Big Idea
STRATEGY
The 3-D Printing Revolution
Richard D’Aveni | page 42
The use of 3-D printing, also known asadditive manufacturing, has moved well beyond prototyping, rapid tooling,trinkets, and toys. Companies such as GE, Lockheed Martin, and BMW areswitching to it for industrial production at scale. More companies will followas the range of printable materials continues to expand. Already available arebasic plastics, photosensitive resins, ceramics, cement, glass, numerousmetals, thermoplastic composites (some infused with carbon nanotubes andfibers), and even stem cells. In this article the author makes the case thatadditive manufacturing will gainground quickly, given advantages such asgreaterflexibility, fewer assemblysteps and other cost savings, and enhancedproduct-design possibilities.
Managers, D’Aveni writes, should now beengaging with strategic questions on three levels: Sellers of tangible productsshould ask how their offerings could be improved, whether by themselves or bycompetitors. Industrial enterprises should revisit their operations todetermine what network of supply chain assets and what mix of old and newprocesses will be optimal. And leaders must consider the strategic implicationsas whole commercial ecosystems begin to form around the new realities of 3-Dprinting.
Many of the biggest players already in thebusiness of additive manufacturing are vying to develop the platforms on whichother companies will build and connect. Platform owners will be powerful becauseproduction itself is likely to become commoditized over time.
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How We Did It
LEADERSHIP
Cisco’s CEO on Staying Ahead of TechnologyShifts
John Chambers | page 120
In his youth Chambers had no interest intechnology—until an IBM recruiter suggested that he think of it as a tool forhelping customers transform their businesses. Then stints at IBM and Wangtaught him that even great companies are imperiled if they miss a markettransition, such as the shift from mainframe computers to minicomputers or fromminicomputers to PCs. In the 20 years since he became Cisco’s CEO, a wholeseries of transitions have occurred in the kinds of technology companies relyon and in how organizations consume solutions. Anticipating those transitions andgetting ahead of them has driven Cisco’s evolution from routers and switches tomobile and video technology to application-centric infrastructure and cloudcomputing.
The company has three ways to adapt. (1) Ifit sees a shift early enough, it develops the new technology in-house, as partof the traditional R&D process. In addition, its Entrepreneurs in Residenceprogram financially supports and mentors earlystage entrepreneurs working inareas where Cisco sees huge potential, such as big data analytics andenterprise security. (2) It may make an acquisition—as it has done 174 times.(3) It may use a “spin-in,” assembling some engineers and developers to work ona specific project outside the company, as if they were at a start-up.
“You have to be bold,” Chambers writes. Andyou need “a resilient culture with an appetite for change.”
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Managing Yourself
TheArt of Evangelism
Suzanne de Janasz and Maury Peiperl | page142
The author was Apple’s second software“evangelist” and is now the chief evangelist for Canva, an online design firm.He believes that all managers can adopt the practice, with great benefit totheir organizations and their careers. No matter what your company, it probablyoffers something valuable and differentiated and therefore worth evangelizingabout: if not goods or services, then corporate values, cutting-edge accountingpractices, or flexible work-at-home policies.
Kawasaki outlines three ways to effectivelyevangelize: (1) Schmoozing. This requires you to get out of your office, askquestions, unveil your passions, follow up with people, e-mail effectively,make it easy to get in touch with you, and do favors. (2) Public speaking. Youneed to deliver quality content, omit the sales pitch, customize the speech foryour audience, focus on entertaining your listeners, tell stories, circulate inthe audience beforehand, control scheduling and venue when you can, andpractice and speak all the time. (3) Social media. When posting you shouldoffer value, be interesting, take chances, keep it brief, be a mensch, adddrama, tempt with headlines, use hashtags, and stay active.
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