The Cowboy vs. The Commander: Balancing Intuition and Analysis in Business
Originally published in MISC Magazine, 2014
3 MINUTE READ
In business, the stereotype of the entrepreneur is associated with intuition, while the stereotype of the CEO is associated with analysis. The former is the cowboy of commerce, the lone gun who makes decisions quickly, operating on hunches and embracing risk with gusto, not seeming to worry too much about the outcome because if the hunch turns out to be wrong, he can quickly learn from his mistakes and move on. The CEO is the commander of commerce, deliberate and risk-averse, patiently weighing the evidence until he has enough to make the call. The larger the organization, the more careful the deliberation. Turning on a dime is not an option.
The ‘cowboy’ approach is also stereotypically associated with creativity, and hence with businesses that offer creative services – ad agencies, design firms, marketing and PR firms. In these outfits, individuals are recruited and celebrated for their ideational skills, not their research and evidence-gathering skills. Here, imagination trumps investigation. Conversely the ‘commander’ approach tends to be associated with accountants, lawyers, managers and executives who are expected to weigh the evidence before committing their organizations to investing in new ideas.
But when you comb through the academic literature, what you realize is that much of the support for evidence-based decision-making has been driven by the view that – contrary to the stereotype – too many managers and executives in large organizations make their decisions intuitively, not deliberately. In a business culture that has been dominated by operational efficiency for so long, this realization comes as a bit of a shock.
Ironically, this same preoccupation with cost cutting has in turn increased the pressure on creative firms to be able to predict and produce a return on their clients’ marketing investments, a development that also tends to prioritize analysis over intuition. So now the creatives are expected to be more data-driven. The rise of big data, with its ability to automate the re-allocation of marketing investments towards targets that demonstrate the highest potential return is only making this more of an issue. The recent merger of ad giants Publicis and Omnicom – a direct response to the data-crunching capabilities of outfits like Google and Facebook – is a case in point.
At the same time, the growing awareness that cost-cutting alone is not an effective long-term strategy for competitive advantage has spawned a widespread acknowledgement of the need for innovation. Thus we have seen the concomitant rise in popularity of the practice of design thinking, which attempts to resolve the tension between tacit and deliberate reasoning by combining them in the same process. So now both the suits and the creatives are increasingly expected to be intuitive as well as analytical.
As it turns out, both approaches have their place, depending on the circumstances. According to Robin Hogarth, ICREA research professor at the Universitat Pompeu Fabra in Barcelona, the environment in which a decision must be made and the nature of the task at hand are indicators of which cognitive approach is best. He argues that decisions made on the basis of highly complex inputs will benefit from tacit (intuitive) processing, and those made on the basis of less complex inputs will benefit from deliberate (analytical) processing. The environment of the former is referred to as a wicked environment, one in which feedback is unclear or not available in a timely manner. The latter is referred to as a kind environment, one in which feedback is clear and timely.
Other research supports this. A 2004 study showed that unconscious (intuitive) thought is superior to conscious (analytical) thought when the task requires the holistic processing of highly complex stimuli (Dijksterhuis, 2004).
Thus in a wicked environment, intuitive processing has been observed as more effective. This may sound counterintuitive, but it has been found that the unconscious is better at determining the weights for numerous factors affecting the decision than the conscious system, which favors information that is more easily articulated and/or readily available. This validates the anecdotal notion of ‘analysis paralysis’, which occurs when the information is so incomplete and complex that it defies logic and thus paralyzes the decision-making process.
It makes sense when you think about it. You can’t possibly make an informed, deliberate decision with muddy or absent information. You need to make an educated guess – or an intuitive decision based on your experience. Since intuition is based on experience, it is affected by the degree of bias present in the environment in which the experience has occurred. It’s because of this that proponents of the analytical believe intuitive processing is more likely to cause errors in judgment, whereas evidence-based cognition will be less likely to do so.
But analytical processing and a preference for quantitative validation can produce failures too. The New Coke was a classic example (if you’ll forgive the pun). Surveys suggested that it would be a success. History tells us it was one of the biggest marketing flops ever. So was Chrysler’s CCV, the car designed for the Chinese market back in the 1990s. In both cases, the product logic seemed unassailable, and the survey data convincing. And in both cases, the results were disastrous.
Perhaps the most recently celebrated example of this line of thought is demonstrated in Malcolm Gladwell’s Blink, in which he sets out to prove that even with all the evidence and expertise at your disposal, an unconscious clue can completely deflate the veracity of the data.
The lesson is that neither cognitive style is more valid than the other, but that their suitability is determined by the circumstances and the task at hand. The key is to know when to be the cowboy and when to be the commander. You need to balance both. wn