Making Decisions Under Uncertain Circumstances
Fail fast. The refrain that echoes throughout Silicon Valley champions the idea of trying and failing — quickly, in order to reiterate faster. Decision-makers in organizations face the pressure of choices that have real, and oftentimes, rapid consequences for them. Some have developed an intuition keen enough to forge ahead even in the face of naysayers and investors, while others become paralyzed by the fear of making the wrong choice. The hesitant actors fail to recognize that indecision itself is a decision. As the clock moves forward, failure to timely act on information removes the agency to influence an outcome. Hesitation is the proverbial nail in the coffin.
In business, people make errors. Until things go wrong, sometimes companies cannot develop new insights. Deliberate practice and preparation do not always avoid unknowns. Uncertainty can be powerfully intimidating. The following three approaches are designed to help guide companies in their uncertainty by building intestinal fortitude, engaging in discovery while welcoming accidents and creating a framework for decision-making.
1. Get comfortable with being uncomfortable.
In 1926, Graham Wallas, cofounder of the London School of Economics, published The Art of Thought, where he outlined one of the earliest models of using the creative process to develop insights. He laid the foundation for deliberate practice as a method to cultivate perception. Almost a century later, his ideals predominate thinking on using discernment to make decisions. His formula — preparation, incubation, illuminatiom and verification — highlights the foundation of problem-solving.
Mihaly Csikszentmihalyi expanded on Wallas’s work in Creativity, published 70 years later. Csikszentmihalyi developed illumination as insight, verification as evaluation and added the concept of elaboration. Their body of work provides the basis for connecting process to decision-making. Developing ideas through practice, which produces possible solutions, however, is a lot easier when solving for known problems. What happens when a company doesn’t know its problem or how to solve it?
When New Yorker editor-in-chief David Remnick interviewed Netflix CEO Reed Hastings in last year, he asked Hastings what kept him up at night. His response: “Nothing.” Hastings said that they had disrupted the Blockbuster model and would most likely face disruption themselves in another 10 to 15 years. For Hastings, the company’s current concern as a network is to focus on converting their “customers’ dollars into joy” — not lamenting the unknown.
Hastings’ comfort in uncertainty might also reflect his philosophy on strategy. Netflix decided not to pursue sports because they are a network, not a cable replacement. According to Hastings, “strategy is all of the things you are not doing.” Because of his firm conviction in their vision in one respect, Netflix can afford uncertainty in another.
While Netflix’s spending on original content has been much-debated, its coup in acquiring talent like Shonda Rhimes bolsters its commitment to customer joy. Rhimes’ Shondaland production company will continue the shows she currently has with ABC — Grey’s Anatomy, Scandal, How to Get Away with Murder and the upcoming Grey’s Anatomy spin-off. She ended her most recent contract early to start at Netflix.
2. Explore available options, but be open to unexpected insights.
Comfort with uncertainty can benefit decision-making because it builds intuition. Intuition in this sense is an assessment of approaches that might function and a framework for predicting probability. Some firms call them forecasting models and others call them tools. Tools are useful, but exhaustive predictions of scenarios leave little room to anticipate Eureka moments or increase the incidence of unintentional insights. Being comfortable with uncertainty lays the groundwork for being open to happenstance.
Martin Chalfie won the Nobel Prize in Chemistry in 2008. In Gary Klein‘s 2014 work Seeing What Other’s Don’t, Chalfie recounts how he sat in on a lunch lecture in 1989 at Columbia, that serendipitously gave him a key piece of the insight he was missing in his methodology. At that time, he conducted research on worms’ nervous systems, and his assistants killed them to study their tissue. When the speaker talked about the bioluminescence of jellyfish, Chalfie realized that the worms he used were translucent and that he could use the GFP protein and ultraviolet rays to make the worms produce light and better study their cells while they were living. The unintended consequence of being exposed to other ideas informed his imagination and changed his methodology.
3. Use decision rights.
Decision rights allow companies to clarify who makes what decisions, thereby increasing economy and efficiency. Bain & Company in an Insights Management Tools guide that describes the decision rights framework as tools that help companies to organize their decision making and execution by setting clear roles and accountabilities and by giving all those involved a sense of ownership of decisions. It’s basically an outline of when to provide input, who should follow through and what is beyond their scope.
Instituting decision rights is important because it give ownership of tasks to the people within companies who are most capable of completing them. Ownership inspires confidence in team members and increases their accountability and interest. When the most-informed people use their insights and information and are unafraid to fail fast, companies win.
Appropriate selection of people and departments is critical for organizations. In his Harvard Business Review article, Peter Jacobs interviewed Harvard Business School Professor Emeritus Michael C. Jensen, who noted that decision rights as a process that is too centralized could often fail to capture critical information. Jacobs also noted that where decision rights are too democratized, companies fail to make timely choices. The article further encourages teams to routinely revisit allocation of decisions to ensure that decision-placement makes sense, and to not conflate bad outcomes with a bad process. Teams are selected because they share the same vision, culture and values — trust them to make the right decisions and know that when they are empowered, they can be accountable.
Innovating in companies — especially large ones — is challenging enough. Having strong teams and leaders that focus, move tasks along in a work stream, deliver and win is essential to company growth. Their performance is contingent upon them being able to make decisions within their parameters. When they do, they can lead integrally within their groups and put products and services into the marketplace, even while uncertain.