You would not believe how much intuition takes place in business decisions. Intuition is and must be a part of the business as we cannot know everything. Yet, you can be more certain in situations where there should be evidence.
Decision-making is often likened to navigating through a dense fog. Visibility is limited, and the path forward is obscured. To make informed choices, we must employ a systematic approach that illuminates the way.
This process can be broken down into three crucial steps: What, So What, and Now What.
The first step is to gather information and create a map of our surroundings. This involves identifying all relevant data points, from financial metrics to customer feedback. It’s like using radar to detect objects in the fog. While radar provides a general picture, it doesn’t reveal the nature of those objects. Therefore, it's essential to collect data from various sources to create a comprehensive map.
However, not all data points are equally valuable. It’s like differentiating between landmarks and random objects in the fog. Irrelevant information can clutter the map, obscuring critical details. The challenge lies in identifying the landmarks that will guide our journey.
Once we have a basic map, the next step is to interpret the data and understand the underlying landscape. This involves asking probing questions, identifying patterns, and uncovering hidden connections. It’s like using ground-penetrating radar to examine the terrain beneath the fog.
A simple increase in sales might seem positive, but a deeper analysis reveals a more complex picture. Perhaps the increase is driven by discounts, leading to lower profit margins. Or maybe the product mix has shifted towards lower-priced items, impacting overall revenue quality. It’s like discovering a hidden river or a steep cliff beneath the fog.
This phase is about understanding the connections, root causes, and broader context. It’s where you analyse not just the “what,” but the “why”. Are there external factors at play, like a new competitor or a macro economic crisis, that are out of your control, or the challenge you are facing is purely internal you can cope with? The key here is to evaluate both the quantity and quality of the changes you’re observing.
With a clear understanding of the terrain, we can confidently chart our course. This involves setting goals, developing tactics, and allocating resources. It’s like creating a clear map as our guide so we can get through the fog.
Many decisions are made prematurely, based on limited visibility. By investing time in understanding the landscape, we increase our chances of making sound choices. It's like planning a route based on a detailed map rather than relying on intuition alone.
The three-step approach is valid for both minor and major steps in business.
Reacting to sales figures or customer satisfaction can be the adjustments you need to take to keep your business on the right track. However, revealing the fog results in understanding and explaining your entire business on a strategic level as well.
Investing time in understanding what’s going on is rarely done. Why is it so? The management is to deliver results in the short run and they need to show that they are eagerly doing something for it.
No wonder that often, companies create a list of challenges or opportunities that seem logically sound. Though they miss the concrete evidence, plausible explanations remain mere hypotheses, like mirages in the fog. And they act in spite of the lack of proper investigation.
However, to transform these hypotheses into actionable insights, we must ground them in reality. This involves translating abstract logic into tangible business metrics.
For instance, if we hypothesise that improving customer service will increase loyalty, we need to define customer satisfaction metrics and start measuring the results to see if actions and interventions take us into the right direction.
Many are good at developing hypotheses, but only a few can translate them into action. And even fewer can understand that validating the hypothesis takes some time, taking into consideration the lead time of implementing measures and proceeding on the learning curve to see the necessary impacts. That’s why you can see intuition in action a lot.
If you take the effort to validate the initial thoughts, you’ll make a giant leap towards conscious business development.
Remember, acting purely on intuition can easily get you off the track. Acting on data can also mislead you since correlation doesn't always equal causation. Just because two factors are related doesn't mean one causes the other. Careful analysis and experimentation are essential to establish causality. By rigorously validating our assumptions, we increase the likelihood of making sound decisions.
Effective decision-making requires a systematic approach. By mapping the terrain, understanding the landscape, and charting a course, we can navigate through the fog of uncertainty and make informed choices that drive success.
How do you typically approach decision-making? Do you find yourself often skipping the "So What" phase or relying too much on hypotheses?
