Testing Assumptions Can Result in Better Decisions

Testing Assumptions Can Result in Better Decisions

by | Oct 13, 2023 | Driving Profit - Main

There is an excellent Jewish expression called “bubbie-meise”, which refers to old wives’ tales. Some examples are: It’s bad luck to open an umbrella in the house! You can’t go swimming for one hour after you’ve eaten or you’ll drown! Eat all your food, there are starving children in Europe!  And my favorite, Chicken soup can cure anything!

One does not have to belong to any religion to believe in such things.  We generally tend to accept assumptions, beliefs, or superstitions as valid. Such anecdotes have been passed down for generations. But in the world of business, clinging to faulty data and being too stubborn to accept change cannot be cured buy a bowl of chicken soup, however tasty it may be.  We need to test assumptions to ensure better decisions.

Perceptions and inherent patterns cause us to rely on invalid assumptions.  People tend to be risk adverse, avoid change, and accept the most comfortable alternatives. However, just as we can develop routines to help us through our day, we can also develop routines to reduce the chance our assumptions are wrong.  Risk can never be fully eliminated, but understanding how it can be reduced can help us immensely.  It’s why we check the weather forecast before going outside or use the crosswalk to cross the street.

Analytics alone cannot resolve a conflict; it needs to be supplemented with passion, effort, commitment, and focus. Analytics can be less reliable when the data is wrong, when relationships are invalid, when sampling is inappropriate, and when risk is not considered. For example, the more creativity and uncertainty involved in any given situation, the more intuition and a little luck will be required.

Many economic proposals ignore that the economy is getting even more diverse. In 2023 nearly all the stock market gains are in seven stocks. The comparable returns of stocks and bonds seem to gyrate every day. Inflation, bank results, foreign activities and other factors seem to affect the economy every day. 

"When I let go of what I am, I become what I might be." - Lao Tzu

Some suggestions to better test assumptions are as follows:

Review and evaluate processes and decisions. For example, it is unreal to me that objective testing regularly outperforms personal evaluations in employees’ personnel decisions. The reason is mostly poor training and bias.

Data needs to constantly updated. The latest census shows some dramatic changes in the makeup of our country, and that diversity needs to be considered when we gather and analyze data. Different regions have significantly varied ethnic as well as economic characteristics. A great amount of data also needs to be adjusted for the impact of the pandemic. For example, comparisons to last year or 2019 can show quite different results because of social changes brought on by the pandemic; there are more stay-at-home workers than ever before.

Facts are frequently more independent that we think. If you flip a coin a certain number of times, the odds will always work their way back to 50-50 regardless of any streak of heads or tails.   Cause and effect are frequently assumed rather than analyzed. Differing and multiple goals (such as short-term and long-term goals) can impact the understanding of cause and effect. Medical symptoms are frequently attributed to certain issues, while other factors may be the real cause.  That’s why it’s important to get a second opinion if something does not sound right to us.

Bias is one of the greatest complications when it comes to accuracy in the analysis of decisions. This includes statistical problems like sampling, measurement, and development of information. I also believe that social bias can be more impactful than statistical bias. This includes our preconceived perceptions and assumptions about factors affecting decisions. Cultural and environmental factors also affect bias. Dress, demographics, weather, location, and culture all affect perceptions in the decision-making process.  It is important to never assume anything based on the past.  I would refer to the Odd Couple episode “My Strife in Court” to illustrate what the word “assume” is made of.

"You know what happens when you assume..."

Risk assumptions and tolerance are critical to effective actions. Predicting results where there are significant and consistent historical data can be fairly simple; however, predicting results for new programs or with little or inconsistent data requires developing educated estimates. Assumptions regarding risk tolerance also need to be considered. For example, you generally need to be more cautious with regards to safety than low investment high reward opportunities like the lottery.  It’s crucial to know where every dollar is going, and where it can reap the greatest benefits.

Have you considered unconscious bias training?

Organizations need to be open to measurement and feedback and understand cultural parameters. Observing, understanding, and sharing financials, operations reports, and sales reports are the first step. A management style such as “walking around” and checking in with employees can be priceless. Balancing short-term and long-term goals, understanding challenges, and tolerance for failure are examples of understanding the cultural environment.

Analytics, tradition and experience are all valuable tools to improve decision making. However, you need to ensure that the assumptions behind those tools are accurate and reliable. In particular, our rapidly changing environment involving issues like Covid requires regular testing and validation. Similarly, creativity and intuition that defy some analyses and are becoming increasingly required. We can help you objectively search alternative causes and solutions. Understanding that there are various solutions to the problems we face out there only helps us improve our business practices.  It does not mean that chicken soup still does not hit the spot.

Dr. Bert Shlensky, President of www.startupconnection.net, offers experience, skills, and a team devoted to developing and executing winning strategies.  Our strategy includes clear steps, and over 150 free articles and templates to facilitate your efforts and guide your process. We’re here to help you get on track and stay there as you move forward. You might start with our quick video: https://www.youtube.com/watch?v=dhZ3LvSmZfw

We welcome comments, suggestions, and questions. You can write us at: bshlensky@startupconnection.net or call at 914-632-6977

Make Better Decisions: Incorporate Operations

by | Jun 19, 2019 | Operations

“Who’s in charge here?” A question frequently asked when things go wrong. We want answers when bad decisions lead us to less than ideal outcomes! We demand to know where blame should be placed for any negative situation we find ourselves in! And we tend to assume that all decisions are made at the top level—and, too often, they are. And that’s the problem. Because the best decisions usually include operational features. Learn to make better decisions.

It’s a common misconception that the smartest, most capable members of an organization are at the top, “running the show.” But, that’s naïve thinking because a majority of us have been that employee dealing with an incompetent boss, right? Successful businesses (and governments) have learned that infrastructure, support, and teamwork are integral to effective decision-making. This is why leaders have advisors and the reason many companies utilize think tanks to make better decisions. Sure, there’s often a need for a strong “all-star” to be the face of a business or team, but organizations are finally acknowledging that operations are the glue holding everything together and communication between all levels is imperative.

With that in mind, it’s easy to see why the current trend shows that operations and analytics are critical components of marketing and planning. Additionally, automation, technology, customer needs, and the sharing economy are becoming vital components of the branding and marketing process. Some examples include:  

  • Internet sales. In the beginning, delivery and security were thought to be major obstacles. Today, quality customer service, heightened cybersecurity, and speedy delivery have become virtually standard. Additionally, the elimination of several processing stages (like those used in brick and mortar stores) can dramatically reduce costs and prices.
  • Innovative marketing strategies. Creativity, differentiation, and advertising have always been the focus of traditional marketing and branding approaches. However, factors like value, service, quality, and culture are producing better results. The evidence is clear if you compare how brands in department stores target their customers versus the way Amazon and other leading online stores interact with users.

So how do you utilize operations to make better decisions?

  • “All-inclusive” business structures. Companies are learning to value expertise and experience over the obsolete hierarchy system. Phrases like, “We have always done it this way,” and, “Because I’m the boss,” simply need to be replaced with a commitment to searching alternative options to find the best solutions.
  • Integrate Functions. For example, an organization’s Customer Service department is frequently owned by the contact center (voice, chat, email), while a marketing team manages its social media. There’s a silo that needs to be broken down with this relationship in order to keep everyone on the same page and maintain communication between departments.
  • Critical Analysis. More attention needs to be placed on analytics, review, and alternative approaches. In particular, risk, probability, and goals need to be taken into consideration as a critical part of problem analysis and decision-making. An easy and free analysis tool is the Internet. Simply search Amazon or Google for a better understanding of your competition.  
  • Welcome failure. We view it as a “bad word,” but it’s part of Success. And an important one. Vince Lombardi got it right when he said, “If you aren’t making mistakes you aren’t trying hard enough.” After all, how many times did Thomas Edison fail before he succeeded?
  • Curb exorbitance. We all know the expression, “If at first you don’t succeed, try, try again.” And as the previous bullet point states, failure helps us learn. BUT, I do like to make a note that there it is necessary to maintain a balance between the encouragement of innovation and the critical analysis of what is and is not working. Stupid questions may not exist, but bad ideas do. And you need to have the tools and judgment to recognize when you’ve spent too much time or effort on something that isn’t worthwhile. A good decision can be as simple as: stop making the same bad one. 

While organizations and environments continue to become more complex and change at rapid speeds, it’s important to adjust your business plan to accommodate these transitions accordingly. Focusing more on Operations can improve the way your business functions, and allowing the decision making process to start at an operational level is an integral part of adapting a more efficient strategy. When decisions are inclusive, they’re more informed. And I think we can all agree that the more informed we are, the better equipped we are to make better decisions.

Dr. Bert Shlensky, president of Startup Connection (www.startupconection.net ) is a graduate of Sloan School of Management at M.I.T. He served as the president of WestPoint Pepperell’s apparel fabrics business as well as the President & CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, his focus is on working with select startups and small businesses.

Contact Bert at:
914-632-6977 or  BShlensky@startupconnection.net