Friday, March 14, 2014

Strategic Planning Analogy #523: Why Let Facts Get in the Way?

A retailer once asked me to look at the data to see how much sales increased after his stores were remodeled. After examining the data, I concluded that for most of the remodeled stores, sales did not change at all as a result of the remodel.

The response by the CEO of the retailer? “I don’t believe the data.” He went on to spend a bunch of money on further remodels.

Another retailer asked me to study their idea to add a new product category to their stores. I wrote a memo—with lots of facts and numbers—showing that adding this product line would be an incredibly stupid idea.

The response of the retailer. “We had no intention of ever not adding this category. We already signed the deal and are going to do it anyway. We just wanted some paperwork in the files to help justify the deal we already intended to do. If your paperwork won’t support the project, then we’ll just do it without support documents on file.”

I’m reminded of the Mark Twain quote, “Never let facts get in the way of a good story.” Or in this case, it should read “Never let facts get in the way of a pre-conceived notion.”

Business leaders have to make a lot of decisions. Most claim they want their decisions to be based on facts. The problem occurs when those “facts” contradict the pre-conceived notions of the business leader.

Do you ignore the facts and go with your gut (as they did in my stories)? Or do you ignore your gut and go with the facts?

As we will see in this blog, there is no automatic answer that works in all cases, but there is a process to figure out what to do in every case.

The principle here is that there is a difference between facts and insight. A fact is an isolated nugget of truth. Insight is having sufficient understanding of the situation in order to make the proper decision.

Not all facts lead to insight. For example, I might have a fact that my grass is tall. From that fact, I might conclude that it is time to cut the grass. But true insight would have also known that at that very moment my grass was wet, the ground was soft & mushy, and that it was a pitch-black night outside. Under those conditions, it was not a good time to cut the grass.

Was my fact on grass length incorrect? No, but that fact did not give enough insight to make the right decision.

My gut intuition can also be insufficient for insight, particularly if my experience is not very relevant for the current decision.

So how do I gain insight when facts and intuition disagree? Here are three suggestions.

1) Question the Fact-Giver
There’s a Samuel Butler quote which says “Figures never lie, but liars often figure.” In other words, a person with a personal agenda can selectively use facts to promote their agenda rather than true insight. They present a false insight, distorted by what they choose to disclose and what they choose not to disclose.

It has been said that you can prove just about anything with the Bible if you are willing to take the words out of context. And that’s what these “liars” (people with an agenda) do. They start with their preconceived agenda and let that bias dictate how they present the facts. Their goal is to sell their position rather than provide true insight into what is going on.

You see this all the time in politics, where each extreme position uses facts to “prove” their agenda is true. How can the use of so-called “true facts” come to such different conclusions? It’s all in the packaging.

Several decades ago, U.S. News and World Report Magazine looked at some of the political hot-buttons of that time, like abortion and gun control. They showed that, depending upon how a survey question is worded, you can get a majority of the people to agree with either extreme.

Therefore, when the facts contradict your gut, one can start by questioning the motives of the one presenting the facts. Do they have a hidden agenda? Is their objective unbiased insight or something else?

Ask yourself these questions:
  1. Are ALL the facts clearly moving in only one direction? (Rarely is the world that neat and tidy—there are probably relevant facts not being shown)
  2. What does this individual gain or lose personally depending on how the decision goes?

Actions you can take:
  1. Ask for all the data collected (not just what is in the Powerpoint deck).
  2. Have an independent third party (with no agenda) look at the data.
  3. Spend less time discussing the conclusions in the deck and more time discussing the assumptions behind those conclusions.

2. Question the Fact Receiver
The feelings of your gut are based on a lifetime of experience. This experience has exposed you to a lot more facts than just what is in front of you with today’s Powerpoint deck. This experience can help expand your insight and provide a better context for making decisions than just dealing with facts presented at the moment. The gut may indeed be more insightful than the facts.

But, then again, your gut may be way off base. You may have your own hidden biases, which impact your gut (even if you are not aware of them). Perhaps your experiences are irrelevant to the question at hand. Perhaps you’ve spent so much time living detached from the real world and surrounded by “yes-men” that you are out-of-touch with how your customer really lives (I spoke more about that here).

Often times, situations when facts and intuition are add odds with each other occur when a company is going through a crisis. Things are going badly. The old approaches aren’t working any more. Is this really a good time to rely on past-based intuition when the successes and tricks of the past don’t appear to be working?

Therefore, before going with your gut, ask yourself these questions?
  1. Is my past experience really relevant for today’s decision?
  2. Have things changed enough that the rules of the past no longer apply?
  3. Do I have a hidden bias? Does my personal situation change depending upon how I decide?
  4. Is my gut based on true insight or desperation and panic?

Actions you can take:
  1. Have some confidants outside the industry that you can bounce ideas off of.
  2. Spend more time out in the field talking to customers and seeing how the world works out on the front lines where your business interacts with the marketplace.

3. Look for the Story Behind the Facts
An individual fact is like an individual word. It can only tell you so much by itself. However, if you can string a bunch of words together into a story, then you really have something—insight.

All of that intuition you have has been strung together into a wondrous story of how the world works. The problem occurs when the new facts don’t fit into your story of how things work.

The problem may be that the facts have been distorted (as mentioned earlier). In that case, it may make sense to stick with the story in your gut.

However, times may have changed and your story may no longer fit how the world of today (or tomorrow) works. It may be time for a new story of how the world works.

So, when looking at facts which don’t conform with your story, ask yourself these questions:
  1. Is there sufficient proof that times have changed enough to make old assumptions irrelevant?
  2. Do the new facts string together to make a coherent and believable alternate story more in tune with the times? (or is there no story found within the facts).

Actions you can take:
  1. Try to build an alternative story that holds the new facts together and compare that story to your old story.
  2. Spend more time discussing what has changed in the environment and WHY.

I knew a company who held a story that the disgruntled customers who complain a lot are at high risk to leave because they are the ones most frustrated. They ran their business based on that story. However, facts showed that it was more often the quiet customers who left. This puzzled them until further analysis came up with a new story. They discovered that the noisy customers really wanted the relationship to work and were actively making noise in order to make the relationship better. The quiet ones had given up on the company and were ready to move on to the competition. Since the new story better fit the facts, they adopted the new story and ran their business accordingly.

Many times, decision makers are faced with facts that disagree with their gut. Rather than always going with the gut or always going with the facts, do some further investigation. Check to see if the fact-presenter has a biased agenda. Check to see if your intuition is relevant to the situation at hand. Check to see if the facts tell a better story than the story you already cling to. Based on this further analysis you can determine when to go with the guts and when to go with the facts.

In the case of the store remodel research mentioned earlier, the CEO had a story in his head that if you make a store better, customers will like you more and reward you with more sales. In most cases this is true. And that is why he stuck with his gut and ignored the facts. But times had changed and this store concept was becoming irrelevant. This created the need for a new story: When you make an irrelevant store nicer, you don’t make it relevant. You just have a prettier irrelevant store. This new story fit the facts. Today, this retailer no longer exists because of its irrelevance.

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