“Experience is something you get... just after you need it”

Many would agree with the sentiments of the quote above. Executives and decision makers the world over are often called on to make decisions with incomplete information. What’s even more frightening is that they may not be aware of blind spots, missing information that could have a material impact on the final decision.

Humans have an amazing ability to scan vast amounts of data and then draw inferences or conclusions on the basis of the information in front of them. Our “Mental models” – predispositions shaped by our briefs, emotions, networks and previous experience etc – enable us to quickly reach conclusions that we sincerely believe to be right, even if they are fundamentally wrong.

The well-known Kanizsa triangle, however, illustrates the danger. What do see in the illustration? Most people see a white triangle on top of a black one. Truth is, there is no white triangle! This well demonstrates that reliance on our first impressions can lead to wrong conclusions.

Imperfect Information in a Complex World

An even more difficult challenge than our potentially flawed cognitive maps is the dizzying complexity of the twenty-first century business environment. When assessing problems, our natural tendency is to look at a situation in terms of cause and effect’ relationships. “That’s the problem. If I do this it will fix it!” If only it were that simple… The answer to a problem is rarely as simple as we may initially perceive. Biologist Lewis Thomas aptly wrote in his essay "On Meddling" (1974):

"When you are confronted by any complex social system....the things about which you are dis-satisfied and anxious to fix, you cannot just step in and set about fixing it with much hope of helping. You cannot meddle with one part of a complex system from the outside without the almost certain risk of setting off disastrous events that you hadn't counted on in other remote parts. If you want to fix something you are first obligated to understand the whole system"

So, what’s needed is complete information! But is that realistic? Today’s business environment is bewilderingly complex, interconnected, with myriad moving parts. Is it even possible to have full information of the ‘whole system’ before making a decision? Not likely. And if a company stipulated that they must have a full ‘understanding of the whole system’, how would they achieve that? How long would that take? The likelihood is that the opportunity giving rise to the decision will have a passed before a decision could be reached.

‘My Kingdom for a Man (or Woman) With Experience’

So what’s needed is experience – someone who’s been there done that! Ahh – but the problem is that many of the complex issues that confront executives today are unique to our time. Few, if any have experience in dealing with a paradigm shift such as we are now witnessing. How many of today’s executives for instance, have steered businesses through a global pandemic along with its economic, social, and geopolitical implications? How many have directed corporations through a global climate crisis or the rise of China as a new economic super-power willing to flex its muscle using trade a strategic weapon? Maybe some may have. But is such experience typically available to most corporations? Not likely.

John Sterman – author of the book Business Dynamics. Systems Thinking and Modeling for a Complex World – well described the situation when he wrote: “We are all passengers on an aircraft we must not only fly, but redesign in flight”.

So – our brief exposé into the decision paradigm of a typical executive has revealed some scary facts.

Decision makers: -

• are influenced by mental models that may be predisposed to draw incorrect conclusions,

• often do not have all the information needed to make a truly informed decision,

• are called on to make decisions in situations that are inevitably more complex than we can perceive,

• may have little or no experience in the subject requiring them to make the final decision,

• need to make a decision cognizant of the reality that there may well be unintended or unanticipated reactions in other parts of the ecosystem,

and of course – time is of the essence!

Sounds like fun! Surely there's a better way?

Make better decisions –with Dynamic Modelling.

Airline pilots train extensively on flight simulators – systems designed to help them hone their skills, and gain experience and knowledge in a virtual environment. These systems are designed to equip them to deal with emergencies and unexpected situations they could encounter in the real world.

Like flight simulators computer systems using modern software tools enable companies to gain insight and experience into complex, dynamic systems that are difficult to fully understand with traditional methods. Simulation modelling enables companies, to ‘test drive’ possible options and observe the system’s responses in a risk-free environment. Modelling can vastly improve the quality and quantity of information available to executives enabling them to make better – more informed decisions.

Simulation Models can even be designed to leverage the power of Artificial Intelligence (AI) using Reinforcement Learning (RL) to enable companies to make truly optimal decisions.

Adaptint are experienced simulation modelling consultants. We'd be happy to help you to see how the power of dynamic simulation modelling can assist you to make the best decisions for your organisation.