Don’t confuse good outcomes with a good decision-making process


poker hand

How many times in business have we over-attributed our success to our good decisions instead of luck? 

This article is building on last week’s about focusing on the process and not specifically focusing on the home runs from innovation programs, but on the process and the data inputs.

Sometimes good companies will do a post-mortem of a product launch or innovation project, and they will take a look at the feedback they are getting from customers, find out where the negative feedback is and fix it.  Seems like a natural and smart thing to do.  It is. But for those companies that want to build a system for innovation, not just a series of projects, they need to take it up a few notches.  Companies need to build a system-thinking approach to innovation.

So often organizations get focused on simple measurements of success.  Not necessarily because they are good ones that measure the actual success, but because they are easy to measure.  The most adaptable organizations are the ones that look at the system behind the outcomes, and measure impactful, and difficult to find, metrics that look at the system as a whole, not just one phase.  How can companies build this thinking into an organization’s culture and management process?  Here’s an example and how it can apply to any business.

Many of us have played a few games of poker.  Whether it’s a regular Friday night with some friends and neighbours, or just the odd game.  What’s always interesting is to talk about how much luck, or lack of luck, is involved with each hand.  The less experienced the player, the more often they believe luck has more to do with it, because they don’t think of the game as a system.  They are focused on each card, and that hand.  System players spend the entire game analyzing how the game is going.  How is each player playing?  What can they learn from each player?  What cards have landed on the flop for the past three hands, and what can that tell them for the next hand?

So if a beginner makes a big bet to scare the experienced player, the experienced player has watched all night, seen how the other players have played, and can make a pretty educated guess as to whether it’s a bluff or not.  The hand still has the river card left.  The inexperienced player is begging for a heart to get his flush, the experienced player has three of a kind and knows that the chances are low that there is a heart coming up next.  The river card comes and it’s a heart.  The inexperienced player has won, but only had a 10% chance of winning, where the experienced player was sure the odds were on her side.

The inexperienced player has now won, and most likely over-attributes the win to skill and not good luck, because he doesn’t know the system of poker as well.  Next hand he goes for the flush again and gets taken out.  He focused on the outcome to drive whether that was a good decision or not.  He was successful therefore he made the right decision.  No, he got lucky.

How many times in business have we over-attributed our success to our good decisions instead of luck?  Probably more often than we should have.  Mostly because we don’t do post-mortems on our best outcomes, and if we do, we don’t look at it from a systems point of view.  We look to replicate the good outcomes by looking at what worked, not what led to the decisions that impacted the outcome, and finally doing an honest assessment about the real determinant of success.

There are a few ways companies can think more like a system to make better decisions more often, and ultimately reduce the impact that luck has.

  1. Build an independent system to evaluate the determinants of the outcomes of each project?
    1. This seems daunting at first, and it is, but once you have that system in place, each evaluation becomes faster and easier. After a while, it will be less important to do formal assessments because the team will be doing them throughout projects.
    2. Your evaluation should be different for successes and failures. The assessments should be more thorough and more challenging for your successful outcomes vs your unsuccessful ones.
  2. Go 5-Deep on your Why questions.
    1. Go back at least five steps from the outcome to find out where key decisions were made, how those decisions were made, by whom, and with which data. Going 5-Deep is difficult and requires some level of documentation throughout the process to eliminate assumptions during the evaluation process.
  3. Look for ways to improve the system each time
    1. This is relatively simple for systems directly related to the projects, but can the lessons be applied in other systems?
    2. If you can do this on a regular basis, it shows the power and impact systems thinking can have over outcome thinking. It’s more difficult to translate outcome learnings because the outcomes are specific to the context.
  4. Build system thinking into compensation
    1. Employees are motivated by compensation, and will change behaviour based on incentives.
    2. Too many times our incentive programs are only based on outcomes, not on system thinking. When the outcome works, but the system is broken, those positive outcomes are impossible to repeat.

By thinking like a system, innovation teams can have a much larger and broader effect on the company, regardless of how small or how large.  It also reduces the risk of ‘Black Swan’ or “lucky’ events because a good system will build contingencies to deal with negative or positive surprise events.

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