Managing the ‘Institutional No’: Can the Monty Hall and Wild Problems Perspectives Help?
The purpose of this article is to provide some ways of thinking about a common organizational challenge: do you stay focused on existing priorities, or do you pursue a promising new idea when it comes along?
Context
The book, Working Backwards, tells the story about the launch of Amazon Prime, which obviously turned out to be a complete game changer for the company.
Of course, no one knew at launch it would have the staggering impact that it had. In hindsight, like all decisions, it looked obvious.
At launch, not only did they not know the outcome, but it actually looked like a really stupid idea. Bezos was asking them to launch it less than60 days away from the holiday season, the busiest time of the year for the fledgling distribution company that was still having plenty of execution challenges.
The authors referred to the chorus of howling “No ways” and “You’ve got to be kiddings” arising from internal stakeholders as “the institutional no.”
The institutional no was defined as the “tendency of well-meaning people within large organizations to say no to new ideas.”
The tendency of companies to stick with inertia…saying “no” to innovation (an act of omission)…and then paying dearly for it is not new. Clayton Christensen's ground-breaking books The Innovator’s Dilemma and The Innovators’ Solution outline the problem, the costs, and ways out of the dilemma in great detail.
The story of the Prime launch caught my attention for two reasons. First, it was a good reminder that the institutional no (and the resulting missed opportunities) 1) absolutely does exist, even at entrepreneurial and fast-growing companies, and 2) needs to be guarded against.
Second, the launch of Prime was juxtaposed against focusing on existing, high-stake, execution priorities. For whatever reason, staying focused seems to be an increasingly popular drumbeat message from leaders these days.
For example, Frank Slootman, the wildly successful ex-CEO of ServiceNow and current CEO of Snowflake makes everyone list “the one thing” they must execute on. Also, a recent podcast by the former CEO of Instacart attributed their turnaround to focus. He went on to opine that a leadership team isn’t focused “until it is actually painful,” meaning it hurts you to know all the things you are not attending to and letting burn.
Obviously there is no way to know a priori whether one should stay focused on the current plan or pursue a promising opportunity, even at the expense of some existing priorities.
What follows are some ways to help you frame the problem and make more aligned choices for you and your team.
Institutions Don’t Say No. Individuals Do.
It may seem obvious, but one key to unlocking this dilemma is to realize that the institutional no doesn’t really exist because institutions don’t decide. Individuals do.
The popular DACI decision making framework says there are multiple roles around all decisions: The D Driver who brings the problem, options, and tradeoffs to the table. The A Approver who actually makes the decision. The C Consulted stakeholders who weigh in on what to do. And the I Informed who have to implement whatever is decided.
The Driver and the Consulted could all be dead set against the decision, but it’s the A who decides, which was basically the case with the Prime launch. Bezos said, “launch it,” and they did, despite all the howling. And with the Amazon leadership value of Disagree and Commit (plus the fact that it was CEO making the call!), they had little choice but to get behind the decision once it was made.
Institutions and the voices of the many may increase the probability that the person responsible for making a decision defaults to staying the course, but a decision maker and her/his advisors can take steps to ensure the promising idea is fairly considered.
To effectively level the playing field, it helps to know how stacked the deck is against change.
Cognitive Tendencies Bias Against the “New”
...promising innovations are facing a kangaroo court of heuristics, biases, and predispositions inside the head of the decision maker...If you want to guard against costly acts of omission, you need to create space for new ideas to be fairly considered.
I have studied the cognitive biases work of Kahneman and Tversky for 40 years and did my own dissertation on the effectiveness of confirmation and disconfirmation strategies in reasoning.
All of us carry a set of cognitive biases and suboptimal decision-making heuristics longer than a football field. Several of the tendencies, in particular, stack the deck against pursuing a new course of action:
The Devil You Know is Better Than The Devil You Don’t Know. This is not just a common expression. No one likes uncertainty and we work assiduously to reduce it or avoid it. The consequences for failing to deliver against existing priorities are likely more known (you likely know what you are trying to achieve, and how to do it, and the effects likely are more immediate). Moreover, the upside associated with new ideas is probably much less clear and it is an unknown problem someone has to figure out how to solve. The avoidance of uncertainty tips the scale towards existing priorities.
Sunk Cost Fallacy. This is a widely known problem we all still fall prey to. We have so much invested in current efforts, we can’t bring ourselves to walk away. This leads us to standing pat even with better options available.
The Urgent Drives Out the Critical. This is another choice all of us fight against every day. Urgent near-term considerations eat the focus that should be being placed on higher leverage, longer-term efforts. Another bias tipping us towards staying the course.
Avoiding Loss is Often Better Than Winning More. Study after study show a tendency towards loss aversion. Loss aversion implies that one who loses$100 will lose more satisfaction than the same person will gain satisfaction from a $100 windfall. Some studies suggest that losses are twice as powerful as gains. Decision makers default to playing it safe.
Mistakes Can Be Career Limiting. Pursuing this new, unfamiliar opportunity means mistakes are more likely. Everything new comes with a learning curve.
The expression "no one ever got fired for choosing IBM," reflects a law of the corporate jungle: while other solutions might be better for your situation, people are less likely to question a decision to go with a market leading solution if the implementation gets bumpy.
Companies say this is changing however, and they often tout the fact that they “reward failure.”
I sure like the idea of throwing champagne parties for dead-end projects and abject failures, but I confess to being a little dubious that this is the norm. You tell me: is that really happening, consistently, out there on the Serengeti where we all work? Or do you still see plenty of memos about people deciding to "pursue other opportunities?” I’ve got ketchup and am prepared to eat my hat.
For the record, I am not advocating the pursuit of shiny objects. Staying laser-focused has obvious value. But sometimes really promising, game changing opportunities come along. Ask any VC for a list of their biggest mistakes. It’s not the companies they invested in that failed. It’s the deals, and in some cases even the initial meetings, they didn’t do because they wanted to remain focused.
The bottom-line of this section is that promising innovations are facing a kangaroo court of heuristics, biases, and predispositions inside the head of the decision maker that make pursuing those promising innovations much less likely.
If you need innovation or you want to guard against costly acts of omission, you need to create space for new ideas to be fairly considered.
The Monty Hall Problem
The key to the Monty Hall problem is that it is not about the probabilities at the start. It’s a lesson in how probabilities change with new information.
Before we discuss how to level the playing field, I’m going to geek out and look at how the infamously counterintuitive Monty Hall problem might shed light on this dilemma.
The Monty Hall problem is a probability puzzle proposed and solved in 1975, but it became famous in 1990 when Marilyn vos Savant shared the answer in her Ask Marilyn column. Here is the challenge:
Monty Hall is showing you the famous three doors. Behind one is a new car. Behind each of the other two isa goat. You pick a door. Then Mr. Hall opens one of the two remaining doors to reveal a goat and asks you if you would like to switch the door you chose to the other door. Is the best option to stick with your original choice or choose the other door that Mr.Hall didn’t open?
Even though it seems like the likelihood of your original guess being correct is the same as switching to the other door (1/3 chance of each door being correct at the beginning), seeing one of the doors that has a goat behind it has in fact increased your chances of winning the car if you switch to the remaining door.
You might be howling about switching giving you any advantage. Don’t all three doors have a 1/3 probability of having the car behind them?
Think of it this way. At the beginning, there was a 1/3 chance the car was behind the door you chose and a 2/3 chance it was behind one of the other two doors you didn't chose.
If, at the beginning, before anything was revealed, Monty offered you the chance to swap your door for both of the other doors, it would be a no-brainer because you would be trading a 1/3 opportunity for winning the car for a 2/3 opportunity for winning the car.
With the new information and the opportunity to switch, you are now getting that 2/3 probability that the car is behind the door Monty did not show you.
Still doesn’t make sense? Don’t worry, it is not easy to intuit, and many statisticians completely whiffed on this problem. Hundreds of empirical simulations have borne out the correctness of the door switching strategy.
The key to the Monty Hall problem is that it is not about the probabilities at the start. It’s a lesson in how probabilities change with new information. Because of the new information, like a good Bayesian, you have to “update your priors.”
Leveling the Playing Field for the New
OK, back to creating conditions that can overcome the institutional no, which is biased towards staying the course.
Continuously Reflect on Existing Priorities. The world is changing fast, and it is a wash in information. Which makes periodically checking if you and your team need to “update your priors” a good idea. It starts with having a written list of three-to-six-month priorities that you review with your boss, peers, and team on a regular basis.
As an aside, if you don’t have a list of written priorities, there is a good chance you have a bigger problem than remaining focused…because you might not be focused to begin with.
When you review your priorities with key stakeholders, ask these two question: 1) has anything changed in the environment that invalidates or weakens any of the assumptions underlying our priorities, and 2) have we learned anything or have any opportunities presented themselves that suggest resources could be better allocated?
Pre-Parades Before Pre-Mortems. Pre-mortems are everywhere and for good reason. They are a great way to identify the forces that are likely to cause a project to fail and to make plans in advance to avoid.
Pre-parades are less well known. A pre-parade gives a group a chance to dream big and consider how good an investment, a project, a new option might be if it went really well.
This is also not easy. Yogi Berra said, “Predictions are hard, especially about the future.” Still, because the upside of a promising new idea can be so compelling, spending time in a preferred future can counteract the devil-you-know and loss aversion tendencies.
Give More Weight to theOption Moving the Harder Metric. Another way to potentially balance the scales before deciding is to give more weight to the initiative moving the harder metric. Technical and quality breakthroughs and revenue growth are often harder nuts to crack than execution variables like cycle time or throughput or cost reduction. An option which is moving a harder variable should be given more weight and more careful consideration.
As an aside, if you don’t have a list of written priorities, there is a good chance you have a bigger problem than remaining focused…because you might not be focused to begin with.
At Some Point Leaders Gotta Lead
Unfortunately, life is not a probability problem with the answer in the back of the book. You have to choose…with uncertainty, consequences, and errors of commission and omission often down both paths.
I don't know what Jeff Bezos was thinking when he gave the order to launch Prime despite the hue and cry of "please don't" voices. Maybe he just saw a way to be a first mover and get a strong competitive position that would payoff handsomely down the road.
But I can't help believing that part of his decision was to live and act consistently with his stated corporate values. Amazon has a value around Customer Obsession and maybe he knew this was right in the long-term for customers, even if it might be painful in the short-term. Another value is around Thinking Big, and this was without question a big swing.
Act in a way that is consistent with who we want to be vs. a lot of short-term pain and potentially embarrassing results? We know he made a choice to change direction, but the point is, he led.
Russ Roberts, with his popular podcast EconTalk, is one of the most recognized names in Economics. He recently wrote a book called Wild Problems: A Guide to the Decisions that Define Us, argues that many of the decisions that we face can’t be solved with lists of pros and cons, probabilities, cost/benefit analyses…all the tools he was trained as an economist to use.
He calls these “Wild Problems”—the big, life-changing decisions we all must make, where there is no single right answer and where outcomes are somewhere between unpredictable and downright awful like Bezos faced. Do you get married? Do you have children? And think about the decisions many Ukrainians and even Russians both had to make…do you leave for another country or do you risk your own death fighting in a war that you might never have chosen?
Russ Roberts argues that some choices are not about achieving the optimal or maximizing gains. Sometimes the decision is about defining who you are or who you want to be. “They create an overarching sense of ourselves that we want to respect. So the self-respect and dignity that comes from making good choices that take you to who you can be, and not just who you are — those are very important. They go way beyond the day-to-day pleasure and pain.”
Act in a way that is consistent with who we want to be vs. a lot of short-term pain and potentially embarrassing results? We know he made a choice to change direction, but the point is, he led.
Faced with a Wild Problem, corporate decision makers might need to look beyond their spreadsheets and the utilitarian effects on the corporate dashboards, and ask themselves who they want to be as a leadership team and a company.
When Volodymyr Zelenskyy, President of Ukraine, was told the window was closing on his chance to escape the country, he could have chosen "the known" and low-risk path to safety. Instead he chose who he wanted to be as a leader and what he wanted Ukraine to be and famously quipped, “I don’t need a ride. I need more ammunition.”
It is the leader’s job to point to preferred future, create the best conditions possible to get there, tolerate mistakes and failures, realize it may take longer than they had hoped, and lead the team to what was envisioned.
Of course, once an objective is finalized...whether it is to stay the course on existing priorities or risk current efforts to pursue something promising...the leadership challenge changes from setting the strategy to one of execution and effective change management.
“Amateurs talk strategy. Professionals talk logistics,” a quote sometimes attributed to General Omar Bradley, captures this notion that the decision we've been focused on here isn’t enough. It is ultimately about the execution of whatever you decide.
Effective change management, including winning hearts and minds and building the “come hell or high water” attitude in your leadership team and throughout the organization, is the topic for another article, but just to show you one version of what it looks like:
Whether you decide to remain focused on existing priorities or change course, that’s the kind of conviction throughout the organization you are going to need to get there.