Decision making is a critical function in our personal and professional lives. None of us would be in positions of authority without demonstrated abilities to discern issues and make good choices. Our reputations and livelihoods depend on it.

Each day, however, intelligent people make mistakes, with devastating consequences. Why do good leaders make bad decisions? How can we reduce our margin of error?

Our daily decisions are generally small and innocuous. Others are incredibly important, affecting people’s lives and well-being. The daunting reality is that smart people make enormously important decisions with the best information and intentions, and they sometimes go terribly wrong.

Even great leaders make bad decisions:

• President Kennedy is famous for the Bay of Pigs blunder.

• President Hoover failed to inflate the economy after the Wall Street Crash of 1929.

Authors Sydney Finkelstein, Jo Whitehead and Andrew Campbell have studied how smart leaders make catastrophic decisions. In Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You (Harvard Business School Press, 2008), these experts show how the brain’s thinking processes can distort judgment. Think Again identifies four errors of thinking and four safeguards to help us avoid bad decisions.

Neuroscientists and experts in decision making now understand more about how the brain works and how we are prone to several types of faulty thinking when faced with a set of circumstances that require a decision.

The brain uses two processes that enable us to cope with complexities:

• Pattern recognition

• Emotional tagging

Both help us make excellent decisions most of the time. They have survived evolutionary selection precisely because they give us distinct advantages over lesser animals in the food chain.

But in certain conditions, these processes can mislead us, resulting in poor judgments and bad decisions.

Complex decisions always involve personal interpretations and judgment. That’s what makes them difficult to get right. You need debate and consensus — but even with both, two important questions arise:

1. How do you know when you or those debating your premise are coming from a biased position?
2. How do you know when your consensus is nothing more than groupthink?

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The complete 2,000 word article includes these important concepts:

Flaws of Decision Making
Old-School Decision Processes
The Brain Science of Decision Making
Pattern-Recognition Flaws
Emotional Tagging
Safeguards
Identify Biases and Implement Safeguards

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The business enterprise has two, and only two, basic functions: marketing
and innovation. It is not necessary for a business to grow bigger; but it is
necessary that it constantly grow better. ―Peter F. Drucker

The organization that fails to continually innovate new products and services
will not survive long. As competition becomes tougher and market challenges
increase, innovation is an imperative for business leaders and managers around the world.

A recent survey by Booz Allen Hamilton Inc. found that 90 percent of executives considered innovation to be crucial to growth and planned to improve innovation performance by an average of 30 percent.

But not all innovations produce commercial success. A new business idea must offer customers exceptional utility at an attractive price, while delivering a tidy profit. The uncertainties inherent to innovation are so great that even the most insightful managers have a hard time evaluating commercial readiness and potential.

Innovation and commercially successful new business ideas emerge partly from inspiration, but mostly from hard work. Managers must establish the right roles and processes, set clear goals, require relevant measures and review progress at every step of the way.

Most business opportunities emanate from methodical analysis of seven areas of opportunity, according to Peter Drucker (Harvard Business Review, 2002). Some exist within the companies or industries themselves:

1. Unexpected occurrences
2. Incongruities
3. Process needs
4. Industry and market changes

Others are based on broader social or demographic trends:

5. Demographic changes
6. Changes in perception
7. New knowledge

Astute managers focus clearly on all seven areas—but even the most seasoned executive may not recognize a good opportunity when it presents itself. What, then, can we learn about sources of innovation from both inside and outside the organization? How do you decide which bright idea to back and identify innovations that will yield commercial success?

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The full 2,000-word article covers the following concepts:

Finding Ideas
7 Sources of Innovation
Outside Sources of Innovation
Changes in Perception
Using New Knowledge
Recognizing a Winning Innovation
Creating Exceptional Utility
When Innovation Leads to Complexity
Resources

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