We all know that common sense is not common at all, especially within organizations that have the ‘optimization’ culture. Common sense tells us that reaching optimization is an illusion, which drives damaging behaviors and keeps us far away from even a good enough state.
What is the common sense way to assess the worthiness of a new idea?
The first common sense question is: what information is required to assess the idea?
Reminder, Goldratt defined information as “an answer to a question asked.” In a way it means that there are some things we need to know. So, when we have to make a decision there are several inputs we look for – and these are the necessary information items.
On behalf of your organization you look for a vendor for office supplies. You talk with the representative of a large office supplies company and also with the enthusiastic owner of a new office supply business. The large company rep. is a tired and not-too-bright fellow that just cite the normal sales-pitch text. The owner of the new business is definitely brilliant, and your intuition tells you he is going to be successful.
What information/answers-to-questions you have to look for?
- From whom you’re going to get better overall deal?
- From whom you’re going to get better overall service, especially better response to any urgent request?
The first question gets a precise numerical answer. Suppose the new business offers a cheaper price of 4% for the first 6 months. After that the prices would be the same. Let’s also lay down the data that the total expense on office supplies in your organization comes to .94% of the turnover.
The second question has to use intuition, as any question about the future has no precise number and I doubt whether you find any valid statistical model for this specific question.
Your intuition, based roughly on your life experience plus some emotions and biases, tells you the new business is going to give much better service. You don’t expect from a large business to do “favors”, but a new business with the wish for future growth is more open to respond to special requests.
Decisions are certainly impacted by emotions, and in this case the emotion and the intuition go hand-by-hand for making the new business.
So, is the decision obvious?
Here comes the important role of applying logic as a critical control mechanism and a mean to look at the bigger picture.
What might be the damage from failing to serve at the required level and is it likely to happen?
Large suppliers might miss items here and there. However, we do expect them to fix those in a day or two. A new business might face more difficulties, especially when the new business tries to grow too fast, like exhausting their resources and possibly suffer from low cash-flow. They could also suffer from less expertise in the area.
Let’s now inquire the question: what is the size of the damage and to whom?
Most organizations do not suffer too much from incidental lack of office supplies. However it creates a hassle and when there is a hassle there is a person who is responsible for the hassle. So, while the real impact on the performance of the organization is relatively low, the well being of the decision maker, the common-sense decision, is to take the safer alternative, which is the larger supplier!
The need for safety, in this case, is usually stronger than the very little impact on the cost. Well, this is my intuition even for organizations that are in the Cost World.
My general observation
Decisions involve emotions, intuition and logical analysis. To my mind the emotions have negative impact on organizational decisions. Intuition is critically necessary for the main information inputs. The final decision has to look at the bigger picture, consider the ramifications of the inputs on other aspects of the bigger picture, and for that you need logical analysis.
One thought on “Common sense – combining intuition and logic”
Just wanted to comment on the “safer alternatives”. In some of your presentations you mention that CEOs usually go with a specific ERP not because it’s the best alternative but because it’s the safest one and if the project goes wrong he won’t be blamed.
Last week I met with a lawyer who gave me an excellent example. He was saying that he asked the CEO of the biggest insurance company in Colombia why, even though he had an excellent team of lawyers when faced with some serious legal issues he prefered hiring the bigger and renowned law firms. His answer was that if they lost a lawsuit he wouldn’t be held accountable because he hired the top law firm.
I think the mistake is that people and companies evaluate a decision based on its outcome and this is wrong. A decision could lead to a negative outcome and still be the right decision.
Thanks for your posts and your never ending quest to share your knowledge.