Musings on Entrepreneurship and Innovation
Saturday, June 02, 2007Group Decisions are Predictably Ambiguous
The other day, my EIP partners and I had a beer with an experienced member of the corporate development group of a consumer products company. With typical candor, this person noted:
Show me any idea, and I'll show you at least one fairly senior person in our company who is interested. It's pretty easy to get someone here interested; it's a lot harder to convert interest into action.
I'm sure many of you who are inventors can relate. Getting stuck in the "we're interested but not willing to commit right now" do-loop is akin to inventor purgatory. Consequently, I can imagine many an inventor nodding their heads in agreement at the following line from Men in Black:
A person is smart. People are dumb, panicky, dangerous animals, and you know it.
How is it that an organization full of smart people (i.e. people who are interested in our great ideas) can be so dumb (i.e. fail to commit to act upon those same ideas)?
Sociologists such as Duncan Watts might say that I'm asking the wrong question, because the question is based upon the fallacy of composition (the whole behaves like the part) or division (the part behaves like the whole). Specifically, my question assumes a representative agent. Think about how many times you use phrases like "the market believes" or "the customer thinks" or "the company decided" as if you were talking about an individual. How many times have you assumed that if you can persuade individuals, in isolation, you can persuade the group? The assumption that the collection can be described in terms of a representative agent holds up if individuals' behaviors are independent of one another. However, in business, that's rarely the case.
Consider the following from Robert Cialdini's book, Influence: The Psychology of Persuasion:
In general, when we are unsure of ourselves, when the situation is unclear or ambiguous, when uncertainty reigns, we are most likely to look to and accept the actions of others as correct.
In other words, when we are uncertain either because we don't have access to sufficient information or we don't have the individual capacity to understand all of the information that is available, we'll turn to our colleagues for guidance. It should come as no surprise, then, that when faced with the uncertainties inevitably surrounding the decision whether or not to commit substantial resources to a prospective innovation, the beliefs of individuals within the organization would be highly interdependent.
As Watts notes in a recent essay titled "The Collective Dynamics of Belief,"
Under fairly broad conditions...it is possible to show that when individuals make decisions in response to the decisions of other people, the relationship between individual preferences and collective decision breaks down.
and
When individual beliefs are formed interdependently, the collective outcome is fundamentally ambiguous, in the sense that it is not determined in any obvious way by the characteristics of the individuals, considered in isolation of each other.
We experienced this truth quite recently. The individual members of the management team of a prospective licensee of one of our products seemed quite positively inclined to move forward toward an agreement. However, in the span of just a week, their collective decision was to pass. Why the apparent reversal? I'm not sure that we'll ever know for sure, notwithstanding our respective ability to construct plausible explanations.
So, on the one hand, it is important for inventors to understand that group decisions are fundamentally unpredictable in the strict "if X, then Y" case of linear causality. A great product concept pitched well to a group of rational decision-makers can fail simply due to the complex dynamics of collective decision-making. On the other hand, that's not the same thing as saying that anything is possible - weak concepts pitched poorly aren't going to win the approval of a licensee.
As I think about the varied challenges of influencing the probability of adoption, I'll share my thoughts in subsequent posts. Even if we can't predict the future, we can influence the probability distribution of possible futures.
