Blinkered leaders can be ignorant or inept
As a leader, scanning the environment is necessary but insufficient; you should be able to make sense of the signs, says Michael Jarrett in ‘Changeability: Why some companies are ready for change – and others aren’t’ (www.landmarkonthenet.com). While the detection of new trends and subtleties in the environment is often a stimulus for change, those at the top must have the ability to interpret the information they pick up in corporate corridors or through industry networks and grapevines, Jarrett insists.
He cites experiments conducted by Nobel economist Daniel Kahneman and Amos Tversky on how far people are willing to explore ideas outside of their personal mindsets. “When presented with puzzles to stretch their critical thinking, most subjects tended to choose options that confirmed their ‘natural’ or untested bias rather than those that offered disconfirming information. It seems we naturally operate with blinkers on most of the time.”
The majority of leadership teams fail to recognise or remove these blinkers, the author rues. “They remain trapped by their collective mental models and psychological anchors; they encounter the problems of bounded rationality, where knee-jerk reactions lead to poor decision making.”
(For starters, Wikipedia informs that in game theory, ‘bounded rationality’ is a concept based on the fact that rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make decisions.)
An example Jarrett mentions is of the iconic IT company, the elephant! “IBM’s arrogant view that no one got fired for buying Big Blue led to its downturn in the 1990s as the PC world took over mainframes. It took years for the company to recover.”
He reports of research that has found organisations scoring higher on ‘reading the signs’ when a greater faith is reposed in “senior managers’ insights, judgment, and decision-making ability.”
Of great value is a grid presented in the book, with ‘insight’ on the horizontal axis and ‘strategic scanning’ on the vertical. The ‘low-low’ quadrant, down left, is labelled ‘introspective,’ and the diagonally opposite quadrant, ‘insightful.’ The other diagonal has ‘inept’ on the left (that is, low on insight, but high on scanning), and ‘intuitive’ on the right.
The ‘introspective’ cell may be politely called ‘ignorant,’ the author notes. “The group is inward-looking. Forty per cent of organisations fell into this category. The Bay of Pigs debacle during the Kennedy administration serves as an example. Comparable corporate examples of hubris and poor planning range from Pan Am’s sense of invulnerability to Enron’s arrogance and misreading of its future fortunes.”
Cell two, comprising organisations that are high on scanning capability but low on insights, is characterised by a state of denial, Jarrett describes. “Despite the extensive information that is available, management’s insights are based on ‘erroneous assumptions,’ and thus the actions that follow are also risky. Fifteen percent fell into this category.” As example of ‘erroneous assumption’ he mentions again IBM, which believed that ‘PCs were going to tap into mainframes; they saw PCs as upgraded terminals rather than desktop computers in their own right.’
The ‘intuitive’ type of leaders, making up twelve per cent in the sample studied, extrapolate from a small amount of data, though risks and consequences of going by gut instinct can be high and unknown.
And the balance, a little more than a third in the sample, was in cell four, high on both scanning behaviours and insights; that is, ‘being cognitively competent and providing on insightful strategic leadership function.’
Microsoft’s far-sighted web-based strategies, and its responses to threats from Sony’s PlayStation, Apple’s iPod, and Google’s search tools with competitive products, fall into this box, says Jarrett. On the critics’ argument that if Microsoft was all that good, it should have anticipated these events, he concedes, thus: “That’s a fair point, and it further demonstrates that companies that do have a capability to change do not always stay on top. You have to earn the right to do so.”
As a leader, scanning the environment is necessary but insufficient; you should be able to make sense of the signs, says Michael Jarrett in ‘Changeability: Why some companies are ready for change – and others aren’t’ (www.landmarkonthenet.com). While the detection of new trends and subtleties in the environment is often a stimulus for change, those at the top must have the ability to interpret the information they pick up in corporate corridors or through industry networks and grapevines, Jarrett insists.
He cites experiments conducted by Nobel economist Daniel Kahneman and Amos Tversky on how far people are willing to explore ideas outside of their personal mindsets. “When presented with puzzles to stretch their critical thinking, most subjects tended to choose options that confirmed their ‘natural’ or untested bias rather than those that offered disconfirming information. It seems we naturally operate with blinkers on most of the time.”
The majority of leadership teams fail to recognise or remove these blinkers, the author rues. “They remain trapped by their collective mental models and psychological anchors; they encounter the problems of bounded rationality, where knee-jerk reactions lead to poor decision making.”
(For starters, Wikipedia informs that in game theory, ‘bounded rationality’ is a concept based on the fact that rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make decisions.)
An example Jarrett mentions is of the iconic IT company, the elephant! “IBM’s arrogant view that no one got fired for buying Big Blue led to its downturn in the 1990s as the PC world took over mainframes. It took years for the company to recover.”
He reports of research that has found organisations scoring higher on ‘reading the signs’ when a greater faith is reposed in “senior managers’ insights, judgment, and decision-making ability.”
Of great value is a grid presented in the book, with ‘insight’ on the horizontal axis and ‘strategic scanning’ on the vertical. The ‘low-low’ quadrant, down left, is labelled ‘introspective,’ and the diagonally opposite quadrant, ‘insightful.’ The other diagonal has ‘inept’ on the left (that is, low on insight, but high on scanning), and ‘intuitive’ on the right.
The ‘introspective’ cell may be politely called ‘ignorant,’ the author notes. “The group is inward-looking. Forty per cent of organisations fell into this category. The Bay of Pigs debacle during the Kennedy administration serves as an example. Comparable corporate examples of hubris and poor planning range from Pan Am’s sense of invulnerability to Enron’s arrogance and misreading of its future fortunes.”
Cell two, comprising organisations that are high on scanning capability but low on insights, is characterised by a state of denial, Jarrett describes. “Despite the extensive information that is available, management’s insights are based on ‘erroneous assumptions,’ and thus the actions that follow are also risky. Fifteen percent fell into this category.” As example of ‘erroneous assumption’ he mentions again IBM, which believed that ‘PCs were going to tap into mainframes; they saw PCs as upgraded terminals rather than desktop computers in their own right.’
The ‘intuitive’ type of leaders, making up twelve per cent in the sample studied, extrapolate from a small amount of data, though risks and consequences of going by gut instinct can be high and unknown.
And the balance, a little more than a third in the sample, was in cell four, high on both scanning behaviours and insights; that is, ‘being cognitively competent and providing on insightful strategic leadership function.’
Microsoft’s far-sighted web-based strategies, and its responses to threats from Sony’s PlayStation, Apple’s iPod, and Google’s search tools with competitive products, fall into this box, says Jarrett. On the critics’ argument that if Microsoft was all that good, it should have anticipated these events, he concedes, thus: “That’s a fair point, and it further demonstrates that companies that do have a capability to change do not always stay on top. You have to earn the right to do so.”
