This article is an excerpt from the Shortform book guide to "Playing To Win" by AG Lafley. Shortform has the world's best summaries and analyses of books you should be reading.
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What is the best approach for better team decision-making? Why is the financial plausibility test system flawed?
The best way to approach team decision-making is to ask what needs to be true for the company’s strategy to be successful. This encourages creative ideas and holistic decisions, as opposed to the model-centric systems that discourage out-of-the-box solutions. The financial plausibility test is a flawed model for team decisions because it is expensive, model-centric, and stifles creativity.
Read on to discover the step-by-step guide to better team decision-making.
Team Decision-Making
Even if you go through the steps of the cascade and the flowchart perfectly, success is not guaranteed. What you’re attempting to do is make your odds for success as good as possible.
Most organizations, though, are not good at bettering their odds. At many organizations, a team comes up with one strategy, which they then analyze through a “financial plausibility test.” This test is meant to support the argument that their strategy will work and is cost-effective based on current market trends. There are multiple issues with this model as a team decision-making tool:
- Predictive analysis of this sort is expensive.
- The goal of the analysis is to bolster a certain strategy, and it’s hard to be objective about the results when you want them to support your plan.
- There are often lots of different analyses being run at the same time, which can produce varying and obscure results—for every result supporting one strategy, another result will support another.
- People who are pitching competing strategies become attached to their models and get embittered if their models aren’t chosen.
- In trying to converge on one answer, creative or unique solutions are often pushed to the side.
This type of analysis reflects what’s true at the moment, because you are modeling only the market conditions in the present. This restricts creativity, given that teams only consider one possible situation (the present). A better team decision-making process is to ask what needs to be true for a strategy to be successful. This allows people to think more creatively and work as a team to figure out ways to make what needs to be true a reality. This process has seven steps:
Step 1: Build a frame for a choice:
There are always multiple ways to solve a problem, and team decision-making sessions should come up with at least two different approaches—for example, cutting costs by either firing employees or cutting down on distribution to an expensive place. Then, ask what information is necessary to figure out which solution is best.
Step 2: Imagine potential strategies:
Think about every possible strategy for solving a problem, no matter how off-the-wall. Don’t go through a vetting process, just let solutions fly. Imagine the positive outcomes of each. Commit to being open.
Step 3: Find conditions for success:
After you’ve written down all of your potential solutions, move on to figuring out what market conditions would be necessary for one of these possibilities to succeed. This is a form of reverse engineering, because you’re beginning with the assumption that each potential solution is a good one, and moving back to what conditions would make this so. Don’t ask whether strategies would be successful based on current conditions; ask what conditions each strategy would need for success. The former approach leads to possibly strong strategies being prematurely dismissed, simply because they wouldn’t be successful now. The latter approach acknowledges that even strategies that wouldn’t work now may work in different conditions, thus encouraging people to contemplate the logic of these potentially successful strategies more thoroughly.
Step 4: Find potential barriers:
Now, do the opposite of step three. Figure out every potential problem with each strategy. Encourage the members of the team who are most skeptical about each idea to take the lead on explaining their skepticism. Do this for all of your potential solutions.
Step 5: Create tests:
Now, begin to build tests—approved by the group—that can properly test both the potential success conditions and the potential barriers to each strategy. These can be qualitative (speaking to customers in a focus group) or quantitative (conducting large-scale price-point tests). If your company can’t afford these sorts of tests, then use publicly available data. Again, having a skeptic in the group is useful because they’ll be more suspicious of publicly available data and its applicability to your system. Everyone needs to believe that the test can produce results that make sense and can be applied to your potential solutions.
Step 6: Administer tests:
After you’ve designed your tests, conduct them. At this point, your group should have an inkling of which ideas are more and less likely to be successful. First, test the ideas about which you feel the least confident. If these possibilities fail your more simple tests, you can eliminate them right away and move on to testing ideas that you think have more chance of success. (Typical approaches analyze every potential solution at once, which costs more money and can cause more confusion as tests and strategies overlap. Many companies end up doing a lot of unnecessary analysis.)
Step 7: Make your choice:
The final step in the team decision-making process is to choose a strategy. If you’ve done the first six steps correctly, you should feel confident that the data from your tests are pointing you in the right direction. Whatever potential solution tests best is the one you should choose.
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Here's what you'll find in our full Playing To Win summary :
- Why the cascade strategy will help you become victorious in your chosen field of play
- Why you should make every choice with the purpose of not just competing, but winning
- How to develop a system of decision-making for your company
