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How much should you rely on intuition in business?

What's the best way for CEOs to formulate strategy?


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In an article from “Knowledge@Wharton”, a piece of research is cited from Daniel Kahneman—noted behavioral economist and author of Thinking Slow and Thinking Fast— where he articulates the challenge of “intuition” with a number of examples of how it fails us, from medical diagnosis, to ratings of performance in work settings. He points out that the antidote to flawed intuition (mine is very good, of course) is algorithms, or good process.

As Kahneman says in reference to rating performance, “Global rating is very good—and intuition is very good—provided that you have first gone through the exercise of systematically and independently evaluating the constituents of the problem.” (Italics are mine.) In other words, think systematically, then use your intuition!

Nowhere is this more appropriate than in thinking through strategy for your business—identifying what markets you’ll play in and how you will win.

It is natural for action-oriented CEOs to want to move from ideas to action quickly. I appreciated this. Ready, fire, aim is preferable to ready, aim, aim, aim. It is sometimes necessary, however, to slow the game down and think hard before you take action.

Strategy should dictate how you address your chosen market. It should identify where you play and how you win but it must be future focused. That means that you need to identify what you believe the future looks like before you can actually craft a strategy.

Putting smart executives in a room and asking them, “What direction should we take the business?” seems like a logical thing to do, but it is ineffective. You must first ask them to think (in a systematic way) about what future they are going to address. If you were to ask 7 talented chefs to add an ingredient to a pot without an idea of what the end result was supposed to be it would be inedible.

Addressing a shared vision of the future reduces the challenge of everyone thinking from only his or her perspective. Slowing the game down to have evidence-based conversations before you decide which actions to take allows you to more fully engage the minds of your top executives.

Or you could just use your intuition. I’m sure that yours is better than everyone else’s.

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Todd Ordal

Todd Ordal is president of Applied Strategy®. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He is a former CEO and has led teams as large as 7,000. Todd is the author of Never Kick a Cow Chip On A Hot Day: Real Lessons for Real CEOs and Those Who Want To Be (Morgan James Publishing, 2016). Connect with Todd on LinkedIn, Twitter, call 303-527-0417 or email todd@toddordal.com.

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