Just because we take in information doesn't necessitate we understand what it means. That is especially true when we encounter weak signals -- information that's ambiguous or not fully developed. We suffer from personal biases that cause us to ignore, distort or dismiss information that doesn't conform to what we already understand. In principle, groups should be better at detecting changes and responding to them. But groups, too, fall victim to narrow-minded analysis, tunnel vision and a false sense of consensus.
In organizations, we interpret information in a complex social environment. We hear what people say, but also evaluate who is speaking, considering the information as well as the source. So many factors come into play: status, past experiences, politics. And our biases become especially strong when we're considering information that is weak or incomplete. Therefore, we don't interpret that type of information well, which hinders our abilities to make sound decisions.
So how can management teams overcome their biases to improve their abilities to interpret information? Below are eight approaches managers can use to reveal, amplify and clarify weak signals.
First, tap local intelligence, and make use of local levels. Consider how in nuclear power plant control rooms, the key to safety and reliability is to spot problems early and share them among well-trained personnel. That requires procedures for real-time cognition in highly complex, volatile environments. To be able to access distributed intelligence means being alert and open across multiple social networks.
Second, leverage extended networks. Query partners, suppliers, customers and others in an organization's ecosystem. For example, in General Electric Co.'s early days, its research and development departments were deeply embedded in external government, academia and customer networks, as well as connected to other internal parts of the organization, which helped the company succeed.
Third, mobilize search parties. Senior leaders should identify weak-signal areas that merit separate further investigation. IBM Corp. has what it calls a “Crow's Nest” to scan peripheral areas and then share its insights with top management. These areas include customer diversity, globalization and networks. The group is responsible for rising above functional and product blinders.
Fourth, test multiple hypotheses. We are usually driven to find single interpretations, which means that we sometimes force-fit new data into already existing mental models. We have a limited tolerance for ambiguity and can be reluctant to devote time to developing alternative hypotheses. But organizations need competing hypotheses to escape getting stuck on a single view that might be wrong. The British Armed Forces deploy “red teams” to accomplish this. The red team is a parallel task force, made up of senior leaders and support staff, whose mission is to collect and synthesize information to prove that the current plan is wrong and needs to be changed.
Fifth, canvass the wisdom of the crowd. To handle the dangers of groupthink or the problems of distributed intelligence (where key information is dispersed around the organization), managers should pay more attention to the grapevine. Groups or markets often make far better judgments than individuals. One way to do that is to create anonymous opinion markets. In the 1990s, Hewlett-Packard Co. asked employees to participate in an opinion market to forecast its sales, show where they thought the sales trend was headed. That market's forecast beat traditional company forecasts 75% of the time.
Sixth, develop diverse scenarios. To challenge an organization's dominant view, create multiple scenarios about the issues under debate. For example, when a Houston credit union was doing terrifically thanks to Enron Corp.'s meteoric rise, the company forced itself to imagine a scenario in which it could no longer rely on Enron for growth and deposits. At first, people were reluctant to develop such a negative and unrealistic view. But they did develop some interesting scenarios and then, later, when Enron collapsed suddenly, the credit union was saved -- against the odds, according to regulators -- because the managers had taken pragmatic steps to be less dependent on Enron, launching their own e-mail system to communicate with members rather than using Enron's system, opening branches outside the Enron building and admitting non-Enron employees into the credit union.
Seventh, encourage constructive conflict. We need conflict to ascertain and interpret facts, but the conflict must be about ideas, not people, and remain within reason. Academic studies show that moderate conflict, as opposed to little or extreme conflict, leads to the best decisions. The result is better intelligence gathering, a wider exploration of options and a deeper examination of issues. Leaders should allow peripheral observations to enter discussions.
Eighth, trust seasoned intuition. Experienced managers often know more than they realize, especially when operating within their domains of expertise. They need to learn when and how to trust their hunches. One study has found that experienced nurses picked up the onset of septic shock in premature infants at least a day before the textbook symptoms appeared and a blood test could confirm the presence of a deadly bacterium. It takes many years of experience, coupled with good feedback, to develop reliable intuition, but once there, people should trust it along with more analytical information.
This article is adapted from “How to Make Sense of Weak Signals,” by Paul J.H. Schoemaker and George S. Day, which appeared in the Spring 2009 issue of MIT Sloan Management Review. The complete article is available at http://sloanreview.mit.edu/smr/.