Business

Monday March 3, 2008

Overlooking the obvious

Managing Mindset
By MORTEN LUNDAL



DiGi.Com Bhd CEO says incredible mistakes are made by the most senior people and the largest organisations.

IT'S incredible how wrong we humans can be sometimes. We make big and small mistakes - errors of judgment that are so obvious when we look back days or years later. Some are of the kind: “Well, I did not know better and this was the best I could do.” Some are more ... : “I just can’t believe I did that or thought so!”

In the business world, we often see unfathomable decisions being made. Well, at least unfathomable in retrospect but still?

I can take an example from my own industry - the mobile operators. Let’s say you are in year 1999, 2001 or 2003, even 2005. You are a big mobile boss and you say to yourself: “Hmmm, now I’m going to lie back on the office sofa and think about some big trends.”

Thought 1: Mobile phones seem to be a really good thing. It’s incredible how people from all social levels view this wireless device as an absolute integral part of their daily lives.

Thought 2: Asia is emerging. It is economically developing in all ways and it’s likely that most Asians will also want to use the phone. Then you lie even further back on your sofa and easily reach your conclusion - to invest in mobile operators in so-called emerging markets might not be such a dumb idea.

Do you think most European/American operators did just that, in lieu of the 100% likelihood that their own markets would be fully mature soon? No, nearly no one did so. Some did try but left soon afterwards.

They all fully focused on their home markets and then they all got the same idea of crowding in to compete in Germany or something.

Incredible value was obviously created in mobile operations in emerging markets. And we had to wait until very recently to read about western companies wanting to invest in emerging markets, now that the door is all but closed for any of them.

Oh, there are so many of these gigantic mistakes. I must use 120 words of my allotted 900 in this column on the incredible hype and fall of the value of so-called 3G mobile spectrum. The payment from mobile operators to governments for the right to use airwaves is called the biggest transfer ever of resources from private to public wealth. What was the killer application? Video-telephony.

Big corporate CEOs in very dark suits were explaining how this would change the entire world. Think about it. If you hold your phone to your ear, you cannot see the person on the screen (though the other person might get a good look at your ear). And if you are holding your hand out to look at the screen, it will be very difficult for any of you to hear each other. The hopelessness seems obvious now but this little belief and hype drove a whole industry in Europe to massive debt and the brink of self-destruction.

There are so many causes for management blindness. I just want to mention five that came to me as I was writing the introduction that you just read in this column.

  • Pressure for short-term performance. Think the CEO is almighty? Think again. Think about the pressure from the shareholders, the board, the media commentators, the peer group and the key employees. They all want growth, profit and bonuses and they want them now. What room do you think you would have that creates for longer-term ambitions?

  • Lack of diversity in management team. There is a clear and understandable tendency to hire people who mirror yourself, people with whom you share the outlook of the world. “Great minds think alike” is a slogan from a luxury clothes brand. For me, it’s rather a recipe for uninventive thinking and predictable action.

  • Overestimation of change ability. It’s actually very, very hard to make a lot of people change their behaviour. To change how people interact, buy and pay and so on is an extraordinary effort. Face it, as an example, after countless efforts, endless hype and a decade of years, an overwhelming part of the three billion mobile users is still using only voice and SMS. It’s hard (though possible) to change a mass market’s established routines.

  • Too bound by mission. Companies have their strategy and they stick to it in good and bad times as if this is their given place in life. In many cases, this probably makes sense but just think about all the opportunities lost in the self-enforced belief in sticking to your core. What would Nokia (and Finland) be if they stayed on their previous core of focusing on paper, cables and rubber?

  • Following mainstream. It’s so alluring to follow mainstream thinking because nobody will be fired for doing what everybody is doing. But I believe a company needs to be cautious when everybody is going in one direction because it might be hard to create value by doing the same as everyone else.

    So, incredible mistakes are made by the most senior people and the largest organisations. Psychological traps await all of us. How do we avoid them? I have no idea. There is no such thing as one recipe (if I had one, I would publish a colourful airport book entitled 'Five Great Ways to Avoid Unfathomable Mistakes'). But I can suggest some values that might reduce the likelihood of stooping into blind alleys:

  • The importance of diversity. We should not just have management teams that are composed in a diverse way. We also need the decision-makers to stimulate an environment that is really open-minded for energetic proposals and equally energetic opposing viewpoints.

  • Embracing opportunities. Sticking to the core business and focusing on committing no mistakes is probably alright as a survival strategy but an open-minded culture will run away with the big-ticket rewards.

  • Pragmatism and agility. Strategies are good for a company’s focus in the long-term but when dramatic changes happen, a pragmatic attitude will help the company to grab opportunities and turn fast when needed.

    So in the end, it’s all about mindset. Every day, companies are seizing big opportunities (or not) and making big regrettable decisions, all driven by the management’s mindset. With all the possible psychological traps lurking, it’s imperative to heighten the awareness of your organisation’s corporate mindset because that is what sets you up to win or lose out.

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