Key Takeaways
§ Entrepreneurial thinking is key to exploring new areas.
§ While science can assist in analysing data, when data is scarce, logical thinking can have its shortcomings.
§ Intuition is often frowned upon.
§ While intuitive thinking cannot replace the scientific method, it offers a perspective when data is limited.
If you have received management education, you might have been taught to use rational decision-making grounded in the scientific method. There is no other way but making choices underpinned by facts and data. When managers and entrepreneurs face uncertainty and new situations with limited data, what do they do? This situation is common when you are asked to start a new venture or create a new market space. There is no data, and it's the military equivalent of the fog of war.
Scientific method
Without a doubt, science has lifted humankind from caveman to spaceman, and it has a good track record. If we had not discovered the scientific way of doing things, we would still be hunting and fishing and gazing up in awe at the night sky. In business, we use fact-based decision-making.
Roger Martin and Tony Golsby write in the Harvard Business Review that there is an alternative to traditional strategy-making and innovation. This thought process, they argue, is based on imagination and experimentation rather than on data analysis.
The company's conventional approach to product development is to follow a process. Managers first develop a plan; second, they analyse the market and design the product; third, they implement the product; and finally, they evaluate the product in the marketplace. This process is the traditional rational decision-making style of management. It assumes that things are predictive.
Throughout the process, data is collected and verified as a scientist would. However, entrepreneurs seem to use another method to determine whether their ideas will fly, at least in the early stages of experimentation.
Intuitive decision making
In the world of scientific management and big data, how does one decide with very little information? The answer could be intuitive decision-making. It recognises that when there are no definite facts, there are still possibilities that could arise. We know that even in a recession, there is potential to shift markets and enter new industries as the economy transitions into an after-oil one. However, what are these? No one knows for sure.
Intuitive decision-making is a type of decision-making that relies on hunches and unstructured thinking. It's about moving from the specific to the general and thinking about the whole and not the parts.
Let's say you live in the early 20th century and have an excellent idea for mass-producing cars for the middle class in America. You know that people are accustomed to using horses to get around. How do you find out if automobiles would be a better option? There is no data on this, and asking people might not make sense.
Henry Ford faced this dilemma, and he said that asking people about better alternatives would have yielded answers rooted in their lives. People would say they needed a faster horse! This method describes what traditional market research would have shown. Ford's gut feeling led him to research how to make a car cheaper, and he turned to the meatpacking industry to understand the moving assembly line.
What Ford did was test a prototype and, as all successful entrepreneurs do, look for feedback. Ford faced tremendous uncertainty. Not knowing the market size, not knowing what product is needed, or what prices they will pay, he had big unknowns that required a more gut approach.
Learning from failure
Blank and Dorf propose that when entrepreneurs discover an idea, they should form a hypothesis and test all assumptions. They should build a minimum viable product and gather customer feedback. Most of the time, business experiments do not yield the expected results, which could explain why many business start-ups fail. However, there might be hidden gems in failure.
Even in failure, there could be an opportunity, and sometimes entrepreneurs miss the lessons. Jonah Lehrer writes in Wired magazine in an article titled, "The neuroscience of screw up", some tips to benefit from these failed business experiments.
First, check your assumptions—the things we take for granted—and in a changing world, they could quickly become invalid. If you assume that people will always want fast, unhealthy foods, you will not see the need for sub sandwiches.
Secondly, seek out the ignorant for feedback. People outside your field may have a different perspective, and that inspiration may lead to a different outcome. The story of how 3M created the Post-It note was accidental, as the glue lacked strong adhesive strength. This glue led a researcher to develop a new way to communicate.
Expect the unexpected
There is the story of how two radio astronomers set out in 1964 to map the vast expanses of the Milky Way and found something entirely different. Arno Penzias and Robert Wilson of Bell Labs pointed their radio telescope at the sky and kept hearing an unusual signal. At first, they thought the sound was due to faulty equipment design and checked it over, but it wasn't the cause. They thought it was background noise from New York City and pointed their scope toward Manhattan, but the sound did not get any louder. They guessed it was pigeon poop and cleaned the equipment, but the noise continued.
They were puzzled and turned to nuclear physicist Robert Dicke, who was not an astrophysicist like them. Dicke had been exposed to the Big Bang theory and was able to make the connection for them. He rightly argued that, after the universe began, the explosion of matter left behind immense amounts of radiation. This shrapnel from the beginning of the universe was what these astronomers were hearing.
They started looking for one thing and found something bigger. This evidence supports the Big Bang theory, and the background noise was the evidence. In 1978, they received the Nobel Prize for Physics.
The intuitive method of decision-making for exploring the viability of a new venture is based less on data. At the same time, this sounds counterintuitive, but it makes sense, as the entrepreneur is on a journey of exploration that may not yield the expected value.
While intuitive decision-making does not replace scientific decision-making, the former is essential at the earliest stages of exploration, when hunches can first launch a new initiative. When intuitive and rational decision-making is combined, it can make decision-making more successful.
Sajjad Hamid is an entrepreneurship educator who supports entrepreneurs in expanding their ventures. In his free time in Trinidad and Tobago, he tries to cultivate organic tropical fruits and vegetables, practising sustainable farming in his home garden. He is the author of Build Your Legacy Business: Solopreneur To Family Business Hero. Sajjad is a fellow of the Family Firm Institute. You can contact him at [email protected] or visit www.entrepreneurtnt.com.
Responses