This article was written in collaboration with Larry Schmidt and Steve Schwartz of The Inovo Group – strategic innovation consultancy.
At the beginning of 2021, Zoom Video Communications (Zoom) had a market capitalization of $116B. Zoom was the result of the inability of Cisco Systems (market cap $189B), to recognize a huge, new opportunity. Eric Yuan, the founder of Zoom, was one of the first 20 employees of WebEx that was acquired by Cisco Systems in 2007. Yuan was Cisco’s vice president of engineering and in 2011 he pitched a new smartphone-friendly video conferencing system to Cisco management. The idea was rejected. In frustration, Yuan left Cisco to establish his own company, Zoom Video Communications. Cisco’s WebEx is now struggling to catch up.
Everyone who has tried to get support (and resources) for a new concept within their large company will undoubtedly have their own story of an idea that their company declined to pursue and eventually was a great business success…for someone else.
SORTING THE WHEAT FROM THE CHAFF WHEN UNCERTAINTY IS HIGH
Making decisions about a future concept that does not yet exist is fraught with uncertainty. In the face of uncertainty people’s opinions and biases come through. Of the different types of uncertainty facing a new concept, organizational uncertainty is by far the most pernicious and the most underappreciated. Companies can deal with technological and market uncertainty, even ecosystem uncertainty, using innovation processes, methods and tools developed over the decades. But navigating the internal webs of support and resistance within a large company is what almost always makes or breaks the success of a good new concept.
A good decision support system helps address organizational uncertainty. It consists of processes, methods and tools that support making decisions inside complex organizations. It increases the quality of decision making by reducing the overall error rate – both chasing losers (false positives) and passing on winners (false negatives). In addition, a good decision system provides support for making decisions in the face of deep uncertainty, when there are many different perspectives, opinions and biases that come to the fore.
It is no longer enough for a decision system to just indicate if an idea is good or not – a go or no-go. It is increasingly necessary for a decision system to help an idea navigate the complex intra-company dynamics that can make or break its coming to fruition.
COLLABORATIVE CONCEPT EVALUATION TO ENHANCE DECISION MAKING UNDER UNCERTAINTY
In the course of working with hundreds of companies on multiple innovation initiatives, the difficulties of getting a transformational new product, service or business model accepted within a company is a matter of fact.
The reason for this is understandable. Many companies have been burned by ‘great ideas’ that haven’t lived up to their promise. It is much easier to say no (and not realize the idea was great until someone else does it) than it is to say yes, spend a lot of time, effort, and money, only to have the new concept fail. The reaction is so common it is even enshrined as one of the many cognitive biases afflicting decision makers: the Status quo bias. This bias surfaces when we are faced with ideas for new offerings, business models or strategies that the company is not used to. This is especially true for those that are farther from the core competency of the company, but which have the potential to be disruptive.
This approach of soliciting group input often goes under the name “the wisdom of crowds” and it is a proven way to evaluate alternatives. In James Surowiecki’s book of the same name, he cites four conditions required to achieve ‘wisdom’: (1) independent opinions, (2) diverse opinions, (3) decentralized input, and (4) a way to aggregate the results. While his focus is on the merit of the ideas, if you approach the fourth point, aggregating the results, in the right way, you can cast a mirror to the crowd and, for a business, use that to reduce organizational uncertainty.
USING COLLABORATIVE CONCEPT EVALUATION
Not all input aggregators and crowd voting systems focus on both the idea and the crowd. A collaborative concept evaluation tool like Rationalize is one of the exceptions. It provides the base “wisdom of crowd” on the alternatives, but also allows one to gauge the “Mind of the Company” in all its complexity and diversity. With a window into the Mind of the Company you can see where the organizational thoughts on the matter differ and have a means to figure out why. Having an idea the company can say “yes” to is more important as having an attractive idea the organization will tacitly reject sooner or later.
A collaborative concept assessment system requires four key components.
- A set of concepts to be evaluated. These can be any type of concept – a strategy, a design, an idea for a new offering, etc. – but the set of concepts should be plausible alternatives to each other. In other words, evaluate like against like.
- A set of criteria upon which the concepts should be evaluated. These criteria can be anything that can be ranked on an ordinal scale (e.g., 1 to 10) based on the evaluative opinion of an individual. In the above example, one criterion may be “Potential for significant revenue within 3 years” with 1 being “no potential” and 10 being “it’s certain to happen”.
- A group of individuals to do the evaluation. These are people, usually within the organization but not necessarily limited to that, who have the requisite knowledge and expertise in their respective areas to render a reasonable evaluation. They all do not need, and indeed should not have, the same perspectives, mindsets or even types of expertise and knowledge. The larger and more diverse the group the better.
- A means of categorizing individuals doing the evaluation. Classifying every individual according to specific criteria, for example seniority, geography, and function, is key to figuring out the patterns of thought within the company. Does executive leadership see things differently than individual contributors? Does Europe have a different perspective than the US, does marketing know things that R&D does not or vice versa.
A tool like Rationalize has all these components, as well as many other features that provide even more sophisticated analysis, to collect the respective evaluations of a selected ‘crowd’.
DECISION MAKING IS KNOWLEDGE DISCOVERY
The impact of the insights that collaborative concept assessment can provide for decision-making are far-reaching. By being able to specify any number of categorization criteria, setting relative weights on specific criteria, or assigning different weights to individuals assessments, a wealth of information can be gleaned down to the individual level.
A collaborative decision support tool such as Rationalize is more than just a way to ‘pick the winner’, it is a tool for discovering the “Mind of the Company”. It is a way to discover how people think about alternatives. These insights are not always easy to get at. It is a means for fostering more in-depth and nuanced discussions than would otherwise happen. It is a tool that should be a part of a decision-making process, especially for decisions where uncertainty is high. The benefits are:
- Overcome biases and combat groupthink by bringing in diverse perspectives. Use collaborative assessment tools, such as Rationalize, to tap into the ‘wisdom-of-crowds’.
- Understand how the organization sees the world. Categorize individuals and groups to see patterns that are not obvious.
- Identify critical follow-up engagements to make sure everyone is heard.
- Identify pockets of support and resistance and potential paths to gain alignment.
Understanding the ‘Mind-of-the-company’ is one of the most important and effective things leadership can do when deciding to pursue something that is inherently uncertain.
THE MIND-OF-THE-COMPANY IN PRACTICE
A company is considering entering a new market with a new product and business model. The new product and business model is quite different than anything the company has previously done, and it has the potential to cannibalize at least some of the company’s existing business. Senior leadership needs to decide how to proceed. Note that even getting to this point would have involved many prior decisions about which new product idea to focus on and details about the jobs-to-be-done, value propositions and technologies behind the product concept and its business model. But assuming that this path has been successfully navigated, the current decision the company must make is among the following four options.
- Enter the new market by developing a new product and business model
- Enter into a joint venture with another organization that has the relevant expertise to develop a product and enter the market
- Acquire a smaller organization with an established presence in the target market
- Decide not to develop a new product or enter the market
This decision would inevitably involve weeks or months of detailed analysis and preparation of documents and slide decks, involving multiple reviews and iterations, leading up to a presentation to executive management who would then carefully consider these options and render a decision.
However, while being quite enthusiastic about option #1, the new product and business model development path, the leaders understand that the deck they were presented with is a highly processed document that necessarily hides a lot of detail and differences of opinion and perspective. They decide to take an additional step to understand how the rest of the company feels about these options. Perhaps different groups within the firm see the proposed options differently and there are pockets of support and resistance within the company that could affect how well one option, or another, could succeed or fail.
They reach out to a group of 35 people within the company to get their assessment. In a matter of days they get back is the following.
There is a stark difference between the decision the executive leadership is leaning towards and how the rest of the company sees things. While the leaders clearly see new product development as the best market entry strategy, that sentiment is clearly not shared by a large majority of others within the organization. Overall, joint venture and acquisition are the preferred entry strategies for many.
If this were the only information that the results of the assessment provided, then it would not be much use. There is no clear winner. Joint venture and acquisition are relatively close to each other. In addition, the overall results hide some important insights which can be gained if the group was segmented into several categories.
Because a tool like Rationalize allows for secure, individual, independent, cloud-based interactions, it can gather much more information about the individual assessors. In this case, each person who was solicited for their assessment was classified according to the following categories.
|North AmericaEuropeAsia||Research & EngineeringBusiness Development & SalesMarketingOperations||Individual ContributorsMid-managementExecutive Management|
With the group segmented in these ways, more interesting insights into how the organization feels about the alternatives are available.
Looking at the geographic breakdown, not all regions are aligned. The European office seems to favor a joint venture while North America is in favor of acquisition. Furthermore, each of the offices has a strong preference for one over another.
When looking at the results by department, there is not much difference between the four options. It is notable, however, that the total number of votes for the three alternatives that are not the leadership’s choice vastly outnumber those that think internal product development is the way to go.
Looking at results by seniority indicates that leadership is out of alignment with the rest of the company. While the executives believe new product development is the best path forward, it is the strategy least liked by the mid-management and independent contributors.
This information helps leadership navigate the internal dynamics that will, if left unaddressed, present challenges moving forward with any of the options. Understanding which exact individuals or groups might put up roadblocks to, or promote, a given strategy is crucial in generating alignment.
In the case of the four options presented, leadership realizes that they need to have conversations with several people with strong preferences for one strategy over another to understand their thinking. They schedule follow up conversations to understand what may not have been considered in the original decision. Some questions that were explored are:
- Are there potential roadblocks that might be put up by individuals with strong preferences for one strategy over another?
- Do the individuals with strong preferences going against consensus know something that others do not? How can leadership address their concerns before making the decision?
- Is there a target organization in the European market with the right expertise in the product development where a joint venture makes a lot of sense?
- Is there an organization which the North American office wants to acquire?
- What major problems does the North American office see with new product development?
The conversations immediately start providing insights. The leadership team gains a deeper understanding of other perspectives and their perspective gradually starts evolving. This helps the leaders understand the reasons why their initially preferred path could backfire and why an alternative path could be better. After productive and insightful discussions, leadership identifies a previously overlooked attractive company in the North American market and pivot to pursue an acquisition strategy.
Those interested in learning more about decision making under uncertainty can find further insights in the following resources.
- The Wisdom of Crowds by James Surowiecki – One of the original works and still one of the most popular pieces on when and how independent, distributed input can improve a decision.
- An explanation of the four types of uncertainty in “Uncertainty is the Innovator’s Friend”, Larry Schmitt, The Inovo Group
- The Society for Decision Making Under Deep Uncertainty (DMDU) – A community for those concerned with making plans and taking action under a backdrop of deep uncertainty.
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