How Do We Avoid Getting Caught by Surprise?

Why do we get caught by surprise at times? A competitor catches us off guard with an innovative new product launch. A new social trend emerges that shifts consumer tastes substantially. A sudden shift in workforce engagement and employee turnover stuns us. How can we avoid getting surprised by such changes?   

In a new study, Nir Halevy, Elizabeth Miclau, and Serena Lee argue that the traditional explanations may not suffice.  Conventional wisdom suggests that such surprises often occur because managers fail to gather, attend to, and evaluate information effectively.  They stick to pre-existing beliefs rather than adjusting their conclusions based on new data, or they dismiss those with dissenting views.  In short, people miss the signals because they are not processing information effectively.  Halevy and colleagues provide an alternative explanation.  In their paper, published American Psychologist, the researchers posit that, "strategic surprises emerge when individuals, organizations, and nations think too abstractly or too concretely during strategic interactions."  Stanford Leadership Insights summarizes the scholars' main argument:

"The researchers suggest that people and institutions can be caught off guard when they think too abstractly or too concretely about the information related to a particular situation. The quality of information matters, but so does the framework in which it is interpreted.  Overly abstract thinking relies on broad schemas that can lead decision-makers to apply poorly fitting mental models, misjudge possible threats or opportunities, or assume that others will behave in stereotypical ways. Concrete thinking, on the other hand, involves being deeply immersed in the minutiae of a specific situation, which can lead people to ignore broad trends." 

Thus, the scholars suggest that we shift between abstract and concrete thinking as we evaluate data about emerging trends, marketplace dynamics, and consumer preferences.  In so doing, we are more likely to arrive at robust conclusions.  You are less likely to get caught off guard.  

Overestimating What We Know: The Trap of Effortless Search

You would like to learn about a particular topic.  You have two options.  You can search online for information, which AI tools and search engines summarize quickly for you.  Alternatively, you could dig deeper, read an article or two, listen to a podcast, and... maybe even read a book on the subject!  How much do we rely on the easy route to knowledge, and how confident are we that we have become highly knowledgeable through our rapid search for information?

In her amazing book, Uncertain: The Wisdom and Wonder of Being Unsure, author and journalist Maggie Jackson explores this topic.  She writes:

After even a brief online search, information seekers tend to think they know more than they actually do, according to a decade of studies. In one set of five experiments, people were asked to study weighty topics, such as autism or inflation, before taking a quiz on the subject. Half the participants were told to find an online article on the topic, while others were simply given the same information without having to search for it.  People who searched online were far more overconfident going into the quiz.  In one round, they predicted that, on average, they would get two-thirds of the questions right, although they scored less than 50%. 

In contrast, people who had been given the information studied longer, absorbed more, and got about 60% of the questions right - about what they had expected.  Rarely if ever in life are just handed information. Searching and seeking are the human condition. But how we do so matters.  In the virtual realm, we seem to lose the ability to sense that we don't know, the starting point of discernment.  This false confidence blossoms even when people learn nothing from an online search, further studies show. By assuming we can know effortlessly, we close our eyes to our failings and so to chances to explore.  We run from the work of fully attuning to the here and now, finding in hubris a retreat from the challenges of facing up to reality as potent as that of outcome-oriented fear. 

This research suggests that we need to proceed with caution when we jump to conclusions based on a breezy online search or quick prompt on an AI tool such as ChatGPT, Gemini, or Claude.   Ask yourself: What do I actually know?  How deep and accurate is my knowledge?  Should I be making critical decisions based on this superficial knowledge?

Clarifying Information Priorities to Make Better Decisions

Source:  flickr

Former Army Colonel Robert Hughes, now a professor at the Kellogg School, has some great advice for leaders facing tough decisions. In a feature for Kellogg Insight, he argues that you have to identify and clarify your information priorities. According to Hughes, "This means determining the most important information they will need in order to decide—as early as possible—whether the plan is moving forward as intended, or whether it might need to be adjusted." He goes on to explain, "“The leader’s role is to define what success looks like for each operation. Then you think about what essential information is needed throughout the plan to achieve success.”

Establishing your information priorities is only a first step though. Hughes argues that you have to link those information priorities to decision points that you anticipate will occur moving forward. In other words, you have to anticipate key choices you will have to make and roughly when you might need to make them, and identify the data you will need to make those decisions effectively. 

Finally, Hughes argues that you have to communicate your information priorities clearly and concisely to your team. You have to encourage people to share key data, including problems or unexpected issues that arise. Moreover, you have to be willing to adjust your plans and priorities when things don't work out as planned.

Hughes' advice is terrific. I love the notion of anticipating the information you may need to make good decisions as you execute a plan of action. In addition, I think it's critically important to anticipate key decisions that you might have to make, and preparing yourself to make those choices as much as possible. Mountaineer David Breashears once told me that he played out many scenarios in his mind before beginning to climb a mountain. Moreover, he thought carefully about the types of tough decisions he might face, including whether to turn around himself or to direct a team member to return to base camp. Breashears argued that thinking carefully about the "exit decision" before you launch is critically important to helping make that challenging decision. He also argued that you have to discuss those issues with your team before you begin your journey. His advice is very consistent with Hughes' approach to planning and execution. Both men have offered good lessons applicable to business leaders.

Investors vs. Competitors: Disclosing Information Involves Key Tradeoffs

Companies face important tradeoffs when thinking about how much information to disclose about their business.  Investors, of course, want a great deal of information about the nuts and bolts of a business.  They want detailed segment information for diversified firms. They would like to see more detailed operating metrics about performance that might serve as leading indicators of financial performance in upcoming quarters.  They want to understand customer satisfaction, product pipelines, etc.  Companies face a delicate balancing act though. The more they disclose to investors, the more that they are also disclosing to competitors.   For instance, many diversified firms provide frustratingly little segment information in their 10K reports.  Of course, they can get away with this limited disclosure as long as they are performing well overall.  When the numbers decline, investors begin to wonder if the whole is worth less than the sum of the parts.  To complete that analysis, investors push for more detailed information about segment performance.   The diversified company may resist such calls though, not simply because they wish to rebuff activist investors.  They also may not want to offer critical data to competitors.  

The Wall Street Journal's Heard on the Street column demonstrated this conundrum that firms face when describing the situation at Netflix these days.  Investors would like to know how many people are viewing the company's original content.  They are, after all, used to seeing ratings information for broadcast andcable networks. On the other hand, Netflix may have good reason to resist investors' push for more disclosure. In fact, investors should understand that less disclosure may be very good for the bottom line. Here's an excerpt from this week's Heard on the Street column;

As much as Netflix’s investors might also want to know that, there is an important strategic advantage for the company in keeping everyone in the dark. Not only does having all the data allow Netflix to continue to tout the success of its originals, it also means more leverage over media companies in licensing negotiations. If the companies don’t know how many people are watching their shows on Netflix, they don’t know how much to charge for it.