Imagine you’re asked if you’d invest in the company whose annual report is below:
If you’d bought its stock four years ago, you’d have quadrupled your money by now. But did you notice what box you were thinking in while reading these figures?
This exercise is from business analyst Mark Chussil’s recent article for the Harvard Business Review. From within the financial-accounting box, the answer seems logical and obvious. However, this isn’t the only box. The problem is that alternative boxes are invisible until you start looking for them.
The figures actually leave a lot out, such as the company’s market position, cost structure and customer preferences. The presence of data isn’t in itself bad, but it can blind you to other data.
The figures come from Enron in 2000 – its last annual report before it went spectacularly bankrupt.
There are things you can do to enter the other perceptual boxes you need in order to make informed and wise decisions. Chussil recommends four:
- Role-play the competition. If you think a planned price cut will work on the assumption that your competitor couldn’t match it, by role-playing that competitor, you may rapidly see that they couldn’t afford not to.
- Rev up SWOT analysis (strengths, weakness, opportunities, threats) by reversing the terms; your thinking gets much more agile when you think of threats as opportunities and weaknesses as strengths.
- Don’t plan for “the” future. There are countless possibilities ahead. Converging on one imaginary future shuts down awareness of them.
- Assume the presence of intelligent life. Decision “X” might have led to an unhappy outcome, but that doesn’t mean its author was stupid. If you want to learn something of value from it, ask: “Why would an intelligent person do that?”
As Chussil puts it: “So, don’t ask how you can think outside the box. Ask how many boxes you can think inside. Then, dive in. The revelations are fine.”