The paradox of control
Larger innovation companies in Sweden, such as Volvo or Ericsson, are often characterized by structured processes in order to manage their innovation processes which often involve a huge amount of collaborating people with different expertise. ISO standards for quality management and gated management models are used to ensure an as optimal process as possible. However, companies are still experiencing an overwhelming complexity in managing all dependencies and dynamics of innovation activities within their organizations.
Why? It involves a paradox.
In their search for methods to conquer this complexity the companies turn to increasingly structured processes and methods in hope to be able to structure and control their innovation activities. The logic behind these structured processes and methods are rationality. The more rational a process or method is, the better. But the increasingly structured processes also introduce interdependencies, strong links, between resources and activities which increase the complexity of the organizational system where a deviation can have far reaching consequences and spread rapidly throughout the system. My research findings point to the need of a balance between focus on smart thinking regarding both proactive as well as reactive decision-making behavior in order to succeed.
The limits of human beings
The thought of people as fully rational dominated research until the 1950s. Since then, scholars have published remarkable results showing that people indeed suffer from a large amount of natural barriers to rational choices. The inability of our minds to handle the complexity of important decisions, our bias towards recent information, risk aversion, political factors, and our emotions are some factors that affect and define our decision-making behavior.
During the 1950′s, research on organizational decision behavior was focused on both producing sophisticated mathematical models and on social sciences, which had been an inactive area in decision sciences earlier. Research on managerial decision-making in organizations, which looks into risk and organizational behavior, was established as a response to the rational approaches. Even though results from the research area have been used to improve decision processes for actors in organizations, the aim of the research area is not to obtain results that enable perfect rationalism. Results instead show how we as human beings have limitations regarding contextual and psychological aspects that constrain us from making optimal choices. These circumstances are called bounded rationality.
The human limitations of attention, memory, comprehension, and communication were reviled. Further, time is a limited resource and constitutes a constraint on the search and attention to information related to the identification and retrieval during decision-making. In innovation project organizations, information stored by one stakeholder is often not easily retrieved by another stakeholder, for example. Other researchers argue that with the constraints of limited time and knowledge in decision-making, it is more effective and efficient to use simple heuristics, including tentativeness and delay. What enables high performance in decision-making is still being debated in the scientific communities.
The roles of decisions
Further, research on decision-making in innovation processes often assumes that the purposes of decisions and main results are choices. This is not the case and the general notion of the equivalence between decision and choice is based on a series of false assumptions. The decision maker is assumed to be searching for the best alternative of action, and uncertainty then relates to alternatives.
As described earlier, we as human beings possesses limitations which constrain us from finding the best alternative in practice; what is more, even if normative mathematical models exist for making the best alternative that acknowledges the constraints, they do not always provide support in practice. Decisions may forego the recognition of preferences or consequences when we decide to find out the consequences of an alternative (a trial and error approach).
Further, in order to enable action in organizations with multiple stakeholders involved, it is important to build in the commitment to the decision from involved actors during the process. This influences the resulting design of decision processes. Uncertainty in terms of commitment is treated rather than alternatives. This socially aware and adaptive use of decisions is in nature more complex than rational decision-making process and can seem irrational at times. However these processes enable not only choices but also mobilization, allocation of responsibility, and organizational legitimization which are all important components in achieving innovative, efficient progress in complex innovation projects.
We need to start thinking differently about decision-making
Despite this overwhelming amount of scientific research on decision-making behavior and performance that point to people’s inability to make fully rational choices, rationality is still the most prevailing and idealized point of view in large scale business and innovation companies. In these companies, rational decisions and actions are encouraged by company management and leaders to such an extent that actors within corporate organizational systems need to disguise certain decision-making processes as rational processes in order to gain an acceptance and legitimize explorative trial-and-error reasoning and actions. We need to start thinking about and managing the complexity of decision-making in innovation from new perspectives – socially aware, structured, and explorative – with more nuanced governance theories and methods which enable a structured but more flexible approach to decision-making in innovation processes than used today.
Two questions that can help in thinking about your organization’s view on decision-making are:
- Does your organization only promote rational thinking?
- How does your organization define decision quality?
- Mechanisms of Hope: Maintaining the Dream of The Rational Organization, Nils Brunsson 2006
- Thinking, Fast and Slow, Daniel Kahneman 2011
- The Consequences of Decision-Making, Nils Brunsson 2007
- Coping with decisions on deviations in complex product development projects, Joakim Eriksson 2012 (Dissertation)
/Joachim Cronquist, Partner, co-author: Joakim Eriksson, Department of Product Realization (Mälardalen University)