Making better decisions

05Jul19

TL;DR

Decision making is at the heart of an organisation’s purpose, but it’s rare to see much effort being spent on improving the quality of decision making, and typical to see all decisions mired in time consuming bureaucratic process. We can do better, with a little coarse filtering, some doctrine and situational awareness, and a bias towards tightening feedback loops.

Background

Over the past few months this topic has come up in a few different places for me. First there was Sam Harris’s ‘Mental Models‘ podcast conversation with Farnam Street[1] blog founder Shane Parrish. Then there was Dominic Cummings‘[2] epic[3] ‘High performance government, ‘cognitive technologies’, Michael Nielsen, Bret Victor, & ‘Seeing Rooms’‘. All against a background of daily tweets from Simon Wardley about his mapping, culminating in this excellent explainer video from Mike Lamb:

Do good, or avoid bad?

My first observation would be that most organisations import the human frailty of loss aversion, and so the machinery of decision making (generally labelled ‘governance’) is usually arranged to stop bad decisions rather than to promote good decisions.

It’s also usual for the same governance processes to be applied to all decisions, whether they’re important or not. Amazon’s founder and CEO Jeff Bezos is a visible example of somebody who’s figured this out and done something about it. Bezos distinguishes between irreversible (Type 1) and reversible (Type 2) decisions. In his 2015 letter to shareholders he writes in a section headed ‘Invention Machine’:

Some decisions are consequential and irreversible or nearly irreversible – one-way doors – and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that – they are changeable, reversible – they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgement individuals or small groups.

As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.[4] We’ll have to figure out how to fight that tendency.

And one-size-fits-all thinking will turn out to be only one of the pitfalls. We’ll work hard to avoid it… and any other large organization maladies we can identify.

Data driven decision making

If you torture your data hard enough, it will tell you exactly what you want to hear[5]

‘Data is the new oil’ has been a slogan for the last decade or so, and Google (perhaps more than any other organisation) has championed the idea that every problem can be solved by starting with the data.

Unfortunately data is just raw material, and data management systems (whether they’re ‘big’ or not) are just tools. Data driven decisions need the right data (scope), correct data (accuracy), appropriate processing and presentation, and a proper insertion point into the decision making process. The Google approach can easily become A/B testing into mediocrity; but most organisations don’t even get that far. They spend $tons on some Hadoops or similar and a giant infrastructure to run it on, then build what they hope is a data lake, which in fact is a data swamp, somehow expecting insight to squirt forth directly into the boardroom.

Strategy first, then a data machinery to support that strategy, not the other way around.

Being agile

Deliberate little a.

Whether we’re learning from evolution or OODA loops we know that the fastest adapter wins. So a relatively high level decision that an organisation might commit to is being adaptive to customer needs.

Agility, agility, agility – we want to adapt to ever changing customer needs, which means we need Agile software development, which means to need an agile infrastructure… buy a cloud from us. The latter part is a jokey reference to behaviour I saw in the IT industry a few years back, and I think most players have now figured out that clouds don’t magically impute agility, that you actually need to build something that provides end-end connectivity from need to implementation.

The point here is that you can’t just pick a single aspect of ‘agile’, like buying a cloud service, or choosing to do Agile development[6]. It has to be driven end-end. This means that leaders can’t just decree that somebody else (lower down) in the organisation will ‘do agile’, they have to get involved themselves, and the ‘governance’ processes need to be dragged along too.

The Wardley adherents following along will at this stage be struggling to contain:

But Chris, Simon says that Agile is only suitable for genesis activities, and we should use Lean and Six Sigma for products and commodities.

To which I respond, genesis is the only area of any interest. For sure products and services should be bought; and even if you’re a product or service company the only interesting things happening within those companies are genesis. It’s turtles all the way down for the Lean and Six Sigma stuff, and it’s not interesting for decision making because (by definition) we already know how to do those things and do them well.

Doctrine

Also don’t waste time on decisions that other people have already figured out the answers to. That’s what doctrine’s all about, and Mr Wardley has been kind enough to catalogue it for us. This is why he tells us that there’s no point in using techniques like Pioneer, Settler, Town Planner (PST) until doctrine is straightened out, because it’s like building without foundations.

Conclusion

Organisations function by making decisions, about Why, What and How, so it’s startling how bad most organisations are at it, and how easily organisations that get good at decision making find it to outpace and outmanoeuvre their competition (or even just the status quo for organisations that don’t compete). It’s also sad but true that some of the best brains for decision making are sat within investment funds, effectively throwing tips from the sidelines rather than getting directly involved in the game.

The first step is doctrine – don’t spend time and treasure on stuff that’s already figured out. The next step is it to categorise decisions by their reversibility (which is inevitably a proxy for impact) and stream different categories through different levels of scrutiny. Then comes the time to focus on making good timely decisions in addition to avoiding bad decisions.

Notes

[1] Named after Warren Buffett‘s residence in Omaha where he spends his time reading and thinking about how to steer the fortunes of Berkshire Hathaway.
[2] Cummings is a contentious figure for me. I despise what he did as the Campaign Director of Vote Leave (wonderfully portrayed by Benedict Cumberbatch in Channel 4’s ‘Brexit: The Uncivil War‘); but I find that I must admire the way that he did it. He ran a thoughtful 21st century campaign against a bunch of half-hearted nitwits who clearly struggled to drag themselves out of the Victorian era. No wonder he won. I should also note that he’s disavowed himself of what’s subsequently become of Brexit, as his vision and strategy has not been taken on by those now handling the execution.
[3] It seems every Cummings post is an example of ‘If I had more time, I would have written a shorter letter’. He’s obviously still keeping himself very busy.
[4] Bezos footnotes: “The opposite situation is less interesting and there is undoubtedly some survivorship bias. Any companies that habitually use the light-weight Type 2 decision-making process to make Type 1 decisions go extinct before they get large.”
[5] With apologies to Ronald Coase who originally said, ‘If you torture the data enough, nature will always confess’.
[6] For an excellent treatise on the state of Agile adoption I can recommend Charles Lambdin’s ‘Dear Agile, I’m Tired of Pretending



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