Tuesday, August 25, 2020

How to Consider Unknown Unknowns: Hints from McKinsey

Our July 31, 2020 post on medical errors discussed the importance of the “differential diagnosis” where a doctor thinks “I believe this patient has X but what else could it be?” We can usually consider that as a decision situation with known unknowns, i.e., looking for another needle in a haystack based on the available evidence. But what if you don’t know what you don’t know? How do you create other possibilities, threats or opportunities, or different futures out of thin air? A 2015 McKinsey article* provides some suggestions for getting started. There is nothing really new but it reiterates some important points we have been making here on Safetymatters.

The authors begin by noting executives’ decision making processes often coalesce around “managing the probable,” i.e., attempting to fit a current decision into a model that has worked before. The questions they ask and the data they seek tend to narrow, not expand, the decision and its context. This is an efficient way to approach many everyday decisions but excessively simple models are not appropriate for complicated decisions like how to approach a changing market or define a market that does not yet exist. All models constrain the eventual solution and simple models constrain it the most, perhaps leading to a totally wrong answer.

Decision situations that are dramatically different, complex, and uncertain require a more open-ended approach, the authors call it “leading the possible.” In such situations, decision makers should acknowledge they don’t know how uncertain environmental conditions will unfold or complex systems will evolve. The authors propose three non-traditional mental habits to identify and explore the possibilities.

Ask different questions

Ask questions that open up possibilities rather than narrowing the discussion and constraining the solution. Sample questions include: What do I expect not to find? How could I adjust to the unexpected? What might I be discounting or explaining away too quickly? What would happen if I changed one or more of my core assumptions? We would add: Is fear of missing out prodding me to move too rashly or complacency allowing me to not move at all?

As Hans Rosling said: “Beware of simple ideas and simple solutions. . . . Welcome complexity.” (see our Dec. 3, 2018 post)

Take multiple perspectives

Decision makers, especially senior managers, need to escape the echo chamber of the sycophants who surround them. They should consider how people who are very different from themselves might view the same decision situation. They can consult people who are knowledgeable but frustrating or irritating, or outside their usual internal circle such as junior staff, or even dissatisfied customers. Such perspectives can be insightful and surprising.

Other thought leaders have suggested similar approaches. For example, Ray Dalio proposes thoughtful disagreement where decision makers seek out brilliant people who disagree with them to gain a deeper understanding of decision situations (see our April 17, 2018 post) or Charlan Nemeth on the usefulness of authentic dissent in decision situations (see our June 29, 2020 post).

Recognize systems

The authors’ appreciation for systems thinking mirrors what we’ve been saying for years. (For example, see our Jan. 6, 2017 post.) Decision makers should be looking at the evolution of the forest, not examining individual trees. We need to acknowledge and accept that “Elements in a system can be connected in ways that are not immediately apparent.” The widest view is the most powerful but people have “been trained to follow our natural inclination to examine the component parts. We assume a straightforward and linear connection between cause and effect. Finally, we look for root causes at the center of problems. In doing these things, we often fail to perceive the broader forces at work.”

The authors realize that leaders who can apply the new habits may have different attributes than earlier senior managers. Traditional leaders are clear, confident, and decisive. However, their preference for managing the probable leaves them more open to being blindsided. In contrast, new leaders need to exhibit “humility, a keen sense of their own limitations, an insatiable curiosity, and an orientation to learning and development.”

Our Perspective

This article promotes more expansive mental models for decision making in formal organizations, models that deemphasize reliance on reductionism and linear, cause-effect thinking. We applaud the authors’ intent.

McKinsey is pretty good at publishing small bite “news you can use” articles. However, they do not contain any of the secret sauce for which McKinsey charges its clients top dollar.

Bottom line: Some of you don’t want to read 300 page books on management so here’s an 8 page article with a few good points.

* Z. Achi and J.G. Berger, “Delighting in the Possible,” McKinsey Quarterly (March 2015).

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