The danger of common sense


A recently published book by sociologist Duncan Watts, ambitiously titled:  Everything is Obvious Once You Know the Answer:  How Common Sense Fails Us may turn more than a few executive heads.  This thought-provoking book challenges the universal belief that management decisions based on common sense – rooted in best practices, hunches and experiences – often lead to the best outcomes.  According to the book, the reality ends up being quite different.  Relying too much on common sense often leads well-intentioned and intelligent people to make poor strategic and tactical decisions in areas such as capital investments, product introductions, new market entry and advertising decisions.

Watt’s supposition is that people give too much credence to their prior and accumulated experiences, history in general and what they perceive as best practices when making decisions.  According to the research, a person’s common sense is faulty for a number of reasons:  it contains intrinsic bias; it is based on unproven or wrong assumptions and; it is too difficult to deduce clear-cut conclusions and action steps from an environment that is overly complex or unclear. 

Most people are hard-wired to depend on common sense on a daily basis. Once they recognize the outcome of a decision, all humans are biologically and psychologically programmed to rationalize why it has occurred.  This rationalization causes the individual to begin constructing their own paradigm of common sense which in turn is used to make decisions. 

Relying on common sense for decisions or to make predictions has dangerous implications.  For one thing, reality is usually very different from what was first imagined.  The future is quite complex and rarely reflects the same conditions that earlier decisions were based on.  As a result, it is highly unlikely positive outcomes will repeat themselves if the individual relies solely on history.  In my consulting experience,  the higher degree of uncertainty around a decision or potential outcome, the more likely senior executives will rely on subjective criteria like common sense or best practices as a basis for decision making.

If managers can not rely on common sense to guide them, how are they to make important decisions? 

Encourage contrariness

Organizations need to actively seek out contrary opinions and analysis, whether from internal or external sources, when facing key business choices.  To minimize bias and address informational blind spots, external experts should report directly to the management team or CEO.  Famously, the CIA undertook an external “Team B” analysis of the Soviet Union in the 1970s in order to better understand the nuclear threats facing the U.S.   

Shorten the action-reaction loop

Faster and more extensive customer and partner feedback reduces the need for companies to rely on subjective rationalizations like common sense.  Importantly, new technologies and tools such as CRM and social media can help by limiting uncertainty and delivering critical information to the decision makers.

Experiment

Dynamic companies like Google and Capital One often run quick and dirty pilot programs in order to gain concrete market data, gage the environment & competition and challenge internally held assumptions.

Put common sense in context

Experience and other intuitive factors can play an important role in making routine and mundane decisions where the likelihood and risks of failure are low.  Where the decision is strategic or involves sizable capital outlays, a more objective, fact-based approach would be best.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

 

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