By Dirk Verburg
One of the most inspirational videos I have ever seen is the Apple commercial ‘Think Different’. This video shows footage of several leaders from the worlds of business, arts, politics, sports and science, such as Richard Branson, Pablo Picasso, Albert Einstein, Martin Luther King, Mohammed Ali and Mahatma Ghandi. The key message of the commercial is that these people were able to change the world, because they were thinking differently. The suggestion is, of course, that people who purchase Apple products also ‘Think Different’.
The ability to ‘Think different’ is extremely important, but unfortunately not something that comes ‘naturally’ to us as human beings. There are several reasons for this. The most important ones are our ‘Bounded Rationality’, reliance on ‘Heuristics’ and ‘Theory-Induced Blindness’.
- Bounded rationality – As humans beings, we have to take a large number of decisions in a short amount of time on the basis of limited information and with limited cognitive abilities. Nobel Price winner Herbert Simon described this phenomenon as ‘Bounded Rationality’. This concept explains why we have a tendency to chose satisfactory solutions, instead of optimal ones.
- Heuristics – Heuristics are simple and efficient rules we can use to take decisions (‘If I see clouds, I take an umbrella with me.’). According to Daniel Kahneman c.s., human beings can consciously decide between using heuristics to take decisions or thinking decisions through. In his view, we rely on heuristics too often, and use heuristics for decisions which we should really think through. The reason for this is that human beings are inclined to choose the least demanding thinking process to arrive at a decision.
- Theory-Induced Blindness – This notion also stems from Daniel Kahneman. It implies that, once we accept a theory or paradigm and have used it to evaluate data and take decisions, we internalize it, and ‘unlearning’ it becomes incredibly difficult.
To put it bluntly: as a result of our limited brain power and laziness, we are unable to think our decisions through properly. Moreover we also have trouble to change the way we think about a number of topics, once we have made up our minds.
Implications for organizations
So how are these limitations in our thinking translated into the way businesses are run? On an industry and organizational level, these limitations are usually translated into decision-making on the basis of the following factors:
- Best practices – The way other companies in the industry deal with a particular issue.
- Experience – The experiences of the people involved in the decision making process. Most often this will at least include the leadership team of the business leader who is tasked with taking the decision.
- Expert advice – The advice of one or more recognized experts in a particular field.
- Conventional wisdom – The opinion of the majority of experts in a particular field.
- Process – The advice of one of more committees that have reviewed the proposal or issue (e.g. Capital Investment, Risk Management and IT committees).
From an efficiency perspective, a decision-making process on this basis is great. It ensures that business leaders and their teams can take a large number of complex decisions in a relatively short time and in a more or less standardized and predictable way. It also ensures that checks and balances are in place and that (ideally) diverse views are being brought to the table.
The problem is, however, that this way of working often merely elevates the limitations of individual decision making processes to a collective level. Most of the time this will lead to conservative decisions; if only because best practices, conventional wisdom and experience look by definition backwards.
There is no doubt that these decision-making processes prevent companies from taking extremely risky decisions that could harm the continuity of the business. On the other hand, it is also one of the reasons why a number of established companies (e.g. DEC, Motorola and Kodak) have not been able to develop or release innovative products and services that were commercially successful, with equally fatal consequences.
Contrarian thinkers
Fortunately enough, however, some business leaders are able to ‘think different’, and dare to ignore conventional wisdom, best practices, the opinion of their teams, as well as the advice of committees and experts. Examples of these ‘contrarian thinkers’ include Henry Ford (who disrupted the car industry with his advanced assembly line concept), Steve Jobs (who disrupted conventional business models in the music and telecommunications industry with iTunes and the iPhone), Stelios Haji-Ioannou (who disrupted the European airline industry with low cost carrier Easyjet), Jeff Bezos (disrupting the publishing industry with Amazon.com) and also Elon Musk (who disrupted the payment, car and space industry with PayPal, Tesla and SpaceX).
The contrarian thinking of these leaders lead to huge successes for their businesses and our lives look different because of it.
Although these examples seem to suggest that contrarian thinkers can only be found at the CEO level of organizations, this is actually not the case. Throughout my career I personally had the pleasure of working with a number of less well known and less senior leaders in organizations, who demonstrated the same kind of contrarian thinking. Leaders who introduced new business models and e-commerce initiatives in very traditional industries, leaders who implemented SaaS systems in extremely conservative companies, leaders who refused to believe that they could not grow their market share in Europe as a result of the credit crunch and leaders that implemented L&D programs despite the fact that they had no budget at their disposal.
These leaders also ignored the conventional wisdom, best practices and the advice of their experts and staff, and, in the process, often put their corporate careers on the line.
Not a recipe for success
Contrarian thinking on its own, however, is not a recipe for success. To quote Peter Thiel: ‘You cannot escape the madness of crowds by dogmatically rejecting them.’ Contrarian thinking is not required for every business decision and might even work counterproductive. Contrarian thinking for contrarian thinking’s sake often indicates a lack of focus, wastes energy and decreases motivation in organization. This happens for instance when leaders presume that their inability to understand proposals from their staff indicates that there is something inherently wrong with these proposals. In other words: they project their own incompetence. These leaders typically force their (in) direct reports to spend hours to substantiate easy and straightforward proposals, before they feel comfortable to take a decision.
When contrarian thinking is required
This means leaders need to make conscious choices on when to think and act contrarian. If they never do so, innovation in their organizations is likely to suffer and, as a result of this, their businesses will become irrelevant over time. If their contrarian thinking is ‘always on’ however, they risk not providing their organizations with a clear focus and wasting the energy, motivation and, in due course, the support of their teams.
The best strategy for business leaders to deal with this dilemma is to think carefully about what they want to achieve and how they want to achieve this.
The what question
The ‘what’ question requires a business leader to carefully select the ‘critical few’. Of all the thousands of decisions that need to taken in their organization, which ones make the ultimate difference between success and failure?
Quite often, this will only be a limited number of issues. Examples include for instance the development of a new generation of products, gaining entry to a new geographical market, an acquisition and/or the success of a strategic cost saving program.
In taking decisions regarding these critical few, business leaders have an obligation to dare to think and act contrarian: it is their job to get these things right.
The how question
At the same time, business leaders need to reflect on how they want to achieve these critical few. This is important because ‘how’ decisions can have huge legal and/or reputational implications. They have the potential to bring companies in serious trouble or even destroy them. Almost all corporate scandals in the past decades had to do with ‘how’ questions. It was not the ‘what’ that destroyed Enron and WorldCom, it was the ‘how’. Matt Nixon wrote a great book on this topic, and I can highly recommend it to anyone who is interested.
When business leaders are confronted with proposals or see practices and behaviors in their organizations that have the potential to damage their business, they have no alternative but to put their foot down and to intervene. They need to do so, even if these practices and behaviors do not seem to be unusual for the industry, were tolerated by predecessors, are generally accepted in the organization and never seemed to bother members of the leadership team, experts and trusted advisors.
No guts no glory
Following a ‘Me-too’ strategy makes companies extremely vulnerable nowadays. The combination of the ever-increasing speed of technological innovation, globalization of markets and pricing transparency seem to make business strategies based on differentiation a much safer bet. As the word differentiation already suggests however, this means doing something different.
At the end of the day the decision when to think and do something different is a decision every business leader needs to make for him or herself. Thinking and acting different requires courage and may cause business leaders to feel very lonely at times. This is especially the case if the leader has to take a decision against the opinion of ‘the team’. These leaders need to keep in mind, however, that they, and not their teams, are also the ones who are ultimately responsible and have to take the blame for failures vis-à-vis their boards, employees, shareholders and (sometimes) the courts.
As the examples of Henry Ford, Steve Jobs, Stelios Haji-Ioannou, Jeff Bezos and Elon Musk show, however, having this courage can lead to great rewards. As Peter Drucker said: “Whenever you see a successful business, someone once made a courageous decision”.
Originally published March 1, 2017 on LinkedIn.com
Dirk Verburg 