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A Hedge Against Overconfidence

May 30, 2016

TL;DR: Leaders can gain more from understanding how things work than from learning how to do something.

 

I read a post by Tendayi Viki this morning where he argued back against the reluctant clients who claim his corporate innovation guidance is 'too academic'. 

 

In one of his three points I picked up the quote below:

 

As an example, most managers who invest in R&D want to know how much the competition is also investing. How much do they spend? What proportion of their revenue etc? But they are asking the wrong questions.

 

A 2014 report by Barry Jaruzelski and colleagues from Strategy&, showcases ten years of research that shows that there is no statistically significant relationship between R&D spending and sustained financial performance. This finding applies to total R&D spend, as well as R&D spending as a percent of revenues. Spending on R&D is not related to growth in sales or profits, increases in market cap or shareholder returns.

 

It is more important that companies have an innovation framework that allows them to do things the right way. Its not really about the exact amounts of money spent.

 

Tendayi was writing about 'uninformed practice'. As Icarus was strong, confident and had new wings, leadership at companies have confidence in their management approaches and end up getting burned.

 

My first thoughts were of my MBA class where we did a global competition using an online tool much like excel to compete on a tennis shoe company strategy. I saw what worked (games are designed to have a way that works) yet I couldn't stop thinking that 'total spend' on celebrity endorsements was not the right formula to win, even though it was. Wouldn't it mattered who endorsed, specifically? And HOW the endorsement was promoted? The game was full of these kinds of narrow-minded levers and switches to tinker with to win. I did learn a lot (I did not win) and part of what I learned was that assumptions hide ticking time bombs under a false, and vehemently defended, sense of security.

 

This is probably part of why in 2007 I found the approach of iterations within Agile to be reasonable, then later the practices of Design Thinking and Lean Startup to be useful - even before I used them. These approaches made sense. I had seen people substituting certainty with confidence. Especially appeals to authority, but often past experience was used as justifications for proceeding with a strategy that could not, and eventually didn't, work. But I wanted to be certain.

 

Tendayi is making an important point in the whole post, but I'm picking out #2. I'm working with people whose job it is to find a way for their company to innovate, or 'create new business' as they'll say. What I see is people looking over their shoulders at others to figure out what to do - like students cheating on a test. They might get an answer right but they won't know why, so when the essay questions begin they'll be lost. 

 

Those leading people in their organizations will be of better service when they start looking into how work is getting done and studying cause and effect. If only they could value understanding how things work more than knowing what worked for somebody else. Understanding principles, like having an 'innovation framework' as Tendayi suggests or having guidelines like within the Kanban Method, will enable leaders to sustain success much more reliably than learning how your'e supposed to do something.

 

In my role as a management consultant I see it as my job not to give confidence to clients, but to work with them to develop an understanding of how and why things work. Then they won't need me anymore.

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