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October 18, 2006

A Beautiful Mind

Decision-making under uncertainty is the usual line item in the list of key management challenges, but the flip side is no less worth studying too. Our colleague Bruce MacEwen at Adam Smith, Esq. composed an excellent survey of the question, "How Do You Decide When To Decide?"

My immediate observation is a flashback on the old saying, "a work of art is never finished, rather only stopped..." This points directly at an underlying work dynamic of continuous consideration and reconstruction, in which potential components of "meaning" are arriving, examined, and accepted for their relevance to realizing an overall design. In art, the "stopping" question is, has enough of the design been realized to meet the purpose of the design?

In management, the two biggest fears about decisions are typically that they will be either counterproductive or inconsequential. Cutting right to the chase, being counterproductive devalues the investment of assets and resources, and being inconsequential devalues the credibility of the decision maker. This makes the manager's only "acceptable" output one in which there is a related effect that desirably differentiates the future conditions from the past. Here, the "design" at stake is this set of future conditions. But too often observers mistake the wrong thing as the design: decision-makers and their observers focus on some measurable "state" instead of on the new conditions that allow their desired state to occur. As a result, they too easily fail to determine whether the difference made by the decision is the "right" difference until they see the desired result (if they ever do). In looking for the ultimate desired after-effect of the decision, they fail to actually grasp the value of the decision itself. No wonder decisions remain mysterious to many observers.

What must instead be understood is that decisions don't create the target state; instead, decisions enable the conditions that allow or create the target state.

To be fair, a proven business approach to establishing this perspective is to require "justifications" as part of the decision-making process. The justifications call out the terms by which the desired ultimate outcome is reasonable to expect from the circumstances that will prevail if the proposed decision is made. This degree of foresight is wonderful if there is the time to develop it, and MacEwen's article points out the value of prior experience and rehearsal as a critical path to the competency for rapid envisioning.

That's a lesson every good football quarterback or basketball point guard has already learned -- and their practice is a great one to consider here. When using a pass to improve field position, what they are doing in their on-the-field work is envisioning multiple possible future states, setting certain events in motion towards those states, and in the heat of the subsequent flow of moments they examine incoming "data" and make reactive adjustments to raise the probability of the "still most feasible" desireable state to its maximum. The final pass, also presumably caught, locks in the conditions for that state.

How do they get that competency to an effective level? By having to do it again and again. But the bigger point is this: what causes them to decide is a moment at which they recognize a high correspondence of probable conditions to the prescribed conditions they expect will be necessary to their goal. Put simply, they compare "reality" to their design.

At this point, another major factor kicks in -- the issue of whether the correspondence seen is "as good as it will get"... Here, I'm always reminded of the the saying "perfect is the enemy of good enough" and it points to another common but correctable mistake. The mistake here is in failing to evaluate the design independently of evaluating the means of execution. To dramatize the fault in this, consider that perfect execution of a bad design is probably pointless. The exception to that is those occasions in which perfect execution is necessary for actually determining in the first place whether the design is even valid (i.e., "good") for its own purpose. A normal management scenario, however, recognizes the difference between "testing" and "live production", even if it sometimes has to be producing "live" but experimentally.

Even with that exception included, the most important point is that decisions are made in two different dimensions: one in which a design is accepted, and another in which execution of the design occurs. Some decisions may improve execution, but others may actually improve (and/or replace) the design. If execution is already good enough to realize a great design, then execution really is good enough -- and the decision to have that level of execution is probably a pretty good one. The real challenge here is to have great designs in the first place.

In science, Thomas Kuhn explained the phenomenon of "The Structure of Scientific Revolutions", an ongoing story of how a current theory holds sway until evidence (and politics!) forces it to change or be supplanted, sometimes over a span of decades. In another story, Malcolm Gladwell talks about "The Tipping Point" as an event in which the speed of applying evidence against theory is almost literally electric and instantaneously completed, thanks to the availability of previous experience stored in the mind.These interesting stories about decision-making are not intended to portray clairvoyance, yet they both directly describe the importance of having foresight in the form of a design. The practical lesson: commit to a design, and decisions will follow.

Posted by Malcolm Ryder at October 18, 2006 9:13 AM

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