May 27, 2010

Why don't businesses experiment more

In a very interesting column in the Harvard Business Review, Dan Ariely writes about why organizations are willing to listen to experts and consultants but not do some experiments themselves and find the best answer:
I think this irrational behavior stems from two sources. One is the nature of experiments themselves. As the people at the consumer goods firm pointed out, experiments require short-term losses for long-term gains. Companies (and people) are notoriously bad at making those trade-offs. Second, there’s the false sense of security that heeding experts provides. When we pay consultants, we get an answer from them and not a list of experiments to conduct. We tend to value answers over questions because answers allow us to take action, while questions mean that we need to keep thinking. Never mind that asking good questions and gathering evidence usually guides us to better answers.
This is a very interesting observation.  I have often wondered why people higher such highly paid consultants.  One point that Dan does not make is an ability to CYA - the consequences of failure are much lesser if someone else (an outside expert) made the decision.  I guess people are recognizing this:
Despite the fact that it goes against how business works, experimentation is making headway at some companies. Scott Cook, the founder of Intuit, tells me he’s trying to create a culture of experimentation in which failing is perfectly fine. Whatever happens, he tells his staff, you’re doing right because you’ve created evidence, which is better than anyone’s intuition. He says the organization is buzzing with experiments.

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