11 Oct, 2012
How Perception Affects Important Business Decisions – Noam Kostucki
I have to admit that I was shocked when the BBC announced that Kodak had to file for bankruptcy in January 2012.
How do we explain a company that had been the number 1 in their industry for over a hundred years goes bankrupt?
I coach senior executives, who are often some of the smartest people I’ve met, yet they often seem to struggle to reach the results they want despite taking logical and rational decisions.
Take a look at the following 2 images:
1. Do you see the white triangle?
2. Do you see that the top grey square is darker than the bottom white square?
What if I told you that there is no triangle and that the two squares are the same colour?
Look again at the 1st image: what has been drawn is actually 3 black pies, but the vast majority of people (including myself) sees a white triangle.
Look again at the 2nd image: cover line of horizon with you finger and you’ll discover the 2 shades of grey are exactly the same. If you’re still dubious, make 2 hole in a piece of paper so that it covers the entire image but a spot on each square and you will discover that they are both the same colour.
Are you surprised?
Most business leaders are unaware of this effect called “cognitive biases”. These are evolutionary “glitches” of the brain that lead to distorted perception of reality.
The first imagine has been developed by a psychologist called Gaetano Kanisza to demonstrate the human mind’s ability to fill in the gaps: our brain has been programmed to complete the missing bits of information. This allows us to process information very quickly with only little details.
Imagine the consequences for your business if your brain were to fill in the gaps in the wrong way to make you see something that doesn’t exist like it did with the triangle?
The second image has been developed by a psychologist called Tom Cornsweet to demonstrate the mind’s necessity for context to make sense of what we perceive: if the environment changes, we believe that what we see has changed, too.
Take a few minutes to think about how bad it could be for your company if you believe two problems were different when they’re actually the same.
If you think this is strange, let me show you the strangest part: now that you know the first image is 3 black dots and that the 2 shades of greys are the same, look again at the two images.
If you are like most people (including myself), you still see the white triangle and the 2 shades still look different, despite knowing the 1st doesn’t exist and that the 2 shades are the same!
So why is this important when you’re taking important business decisions?
If we misjudge what is happening around us, we are bound to take the wrong business decisions because despite being perfectly rational and logical decisions, they are unfortunately based on inaccurate assumptions.
Scientists have already referenced over 150 cognitive biases that are divided into 3 categories:
1.Decision making biases
Most of these cognitive biases are influenced by survival and natural selection. They all have some beneficial evolutionary purpose when surviving in nature… but they often fail us when running a large business and taking important strategic decisions.
How can you prevent your important business decisions to be affected by distorted and inaccurate perception?
The method I have developed while coaching senior executives helps overcome these cognitive biases.
The technique consists in the range of lenses that allow you to look at your company through different perspectives. Each of these lenses have been distilled from successful businesses and give you a new way to look at your company, your employees and your competitors.
With each of these lenses, you will be able to run thought experiments to test your biases in a similar way as you did with the images above. I call these lenses SOP Technologies because they are the practical application of scientific knowledge from Social sciences, Organisational management and Psychology.
Let me share with you 2 of my favourite lenses:
1. Whatever you think, the opposite is true
2. You don’t know what you don’t know.
When you are facing with an important business decision, ask yourself the simple question “what should I do if whatever I think, the opposite is true?” and “what should I do if I don’t know what I don’t know”.
By passing your important decisions through these two lenses, you will already have 3 different perspectives to chose from. If you want to go a step further, get a coach to help you talk through these lenses because they can push you a step further in your reflection and therefore help you come up with more effective solutions.