As a leader, scanning the environment is necessary but insufficient; you should be able to make sense of the signs, says Michael Jarrett in Changeability: Why some companies are ready for change – and others aren’t ( www.landmarkonthenet.com).
While the detection of new trends and subtleties in the environment is often a stimulus for change, those at the top must have the ability to interpret the information they pick up in corporate corridors or through industry networks and grapevines, Jarrett insists.
He cites experiments conducted by Nobel economist, Daniel Kahneman and Amos Tversky, on how far people are willing to explore ideas outside of their personal mindsets.
“When presented with puzzles to stretch their critical thinking, most subjects tended to choose options that confirmed their ‘natural’ or untested bias rather than those that offered disconfirming information. It seems we naturally operate with blinkers on most of the time.”
The majority of leadership teams fail to recognise or remove these blinkers, the author rues. “They remain trapped by their collective mental models and psychological anchors; they encounter the problems of bounded rationality, where knee-jerk reactions lead to poor decision-making.”
(For starters, Wikipedia informs that in game theory, ‘bounded rationality’ is a concept based on the fact that the rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make decisions.)
An example, Jarrett mentions, is of the iconic IT company, the elephant! “IBM’s arrogant view that no one got fired for buying Big Blue led to its downturn in the 1990s as the PC world took over mainframes. It took years for the company to recover.”
Recommended read for managers.