Principles of Process: How to Balance Intuition and Logic in Your Business Strategy




  • Principles of Process: How to Balance Intuition and Logic in Your Business Strategy

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    Many entrepreneurs, particularly those in creative industries, often build their careers and businesses on a strong sense of intuition. Intuition, also described as a gut feeling or a sixth sense, is a powerful way that our minds process information and reach conclusions subconsciously without analytical reasoning. It’s this intuition that often leads creative entrepreneurs to their initial success. Whether it’s intuitively knowing that a particular art exhibition will be a surprise success, or that a certain product idea will become a bestseller, creatives tend to be more tapped into their subconscious and are able to use their instincts to propel them forward in their careers.

    When it comes to running a business, however, relying only on intuition can be a creative entrepreneur’s downfall, even when so much advice in the business world tells you to “go with your gut.” The thing is, many creatives are already good at listening to their instincts. Problems arise when those instincts conflict with the data or numbers—when the facts tell you something that you may not want to hear, do you change course, or stick with your gut?

    How intuition works

    The human brain is wired to see patterns in the information our senses take in. Most of this occurs in the subconscious, which forms 95% of our brain activity. When we subconsciously process patterns, our body produces neurochemicals that trigger in both the brain and gut. This is how our intuition is formed and why we get the sensation that something “feels” right or wrong. We make decisions this way much quicker than with rational conscious thought, which is why intuition is often referred to as the “fast thinking” system within our brain. Without this system, we would get overwhelmed by all the choices and actions we have to make on a daily basis, from what we eat for breakfast in the morning to which route we use to get to work.

    Intuition forms from two aspects: our current senses (the information our brain is processing at the time our gut feeling kicks in), as well as the deep well of memories that our brain has collected since our birth. That’s why successful creative entrepreneurs, particularly those that have been in their industries for a long time, are often known to have “great instincts.” They simply have a much deeper well of experience to draw from. According to researchers it takes about 10 years of domain-specific expertise to develop accurate intuitive judgments. However, even years of experience doesn’t prevent instincts from getting it wrong. Intuition often relies on many cognitive biases, such as overconfidence or selective attention, which can prevent us from seeing situations clearly (see “The Invisible Gorilla” experiment).

    In short, it’s easy to name the stories where business leaders have gotten it right (like Steve Jobs and his famous proclamation about the iPad), but we rarely hear the countless stories where they’ve gotten it wrong—such as the time that Motorola CEO Gregory Brown invested in satellite phone tech over mobile phones, costing the company $ 8 billion.

    Using logic to balance out your intuition

    When it comes to business strategy, creative entrepreneurs shouldn’t fall into the trap of over-relying on intuition. It’s important to realize that intuition can be flawed. By first grounding your instincts with data and logic, you can counteract any potential cognitive biases in your decision-making process—this is balancing the “fast thinking” with the “slow thinking” part of your brain.

    The first place to start is with the data. When it comes to reporting KPIs like sales numbers, profit margins, and projections, intuition does not play a role. Just gather the cold hard numbers. Many business leaders who depend too heavily on intuition seek out data that confirms their instincts, or question whether the data is correct because it doesn’t. Don’t fall into that trap—instead, flip the script and use the data to question your assumptions. Say for example that as a maker of designer bags, one of your key product lines is underselling and not meeting projections. Your instinct might be to ramp up the marketing and sell harder because you’re sure this product should be a bestseller. But Is that the right decision?

    This is where your finance team can play an important role in helping to ground your reasoning in logic and data. With a comprehensive view of the numbers and the general company operations, they can ask the right questions and present the facts and data: What was the marketing spend on this product vs. others? Does the marketing ROI indicate that not enough money was spent or that the campaigns were not successful? Are customers buying more of another product over this one? Using data and logic to test whether your instincts are track can help you avoid the pitfalls of following flawed assumptions.

    Strategic planning using both intuition and logic

    We’ve discussed before the importance of making strategic planning a core function of your company, not just as a way of setting goals for the teams, but also as a way to keep your entire organization aligned on the core vision and values. Both intuition and logic play important roles within your strategic planning processes—the key is knowing where to apply them so that you can create an effective plan. Long-term goal setting in your strategic plan is where good instincts are extremely useful: What do we want to achieve in the next few years and what’s the best way to get there? What do we think will happen in the market and how will that affect our business? Your intuition can help you to draft your initial plans and forecasts.

    The next step is actualizing your strategic plan into actionable short-term goals and initiatives. This is where you start applying more logic to your plan to test your initial assumptions: Does the data support my predictions? Can we realistically achieve our goals based on the current numbers we have?

    Once you have your actualized plan, build in monthly or quarterly checkups with your management and finance teams to ensure you’re hitting your defined milestones. During this accountability phase, let the numbers do the talking and leave intuition out of the process: Where do our KPIs stand and how do they track to the goals? If we’re off from our targets, how far off? What occurred that caused us to hit or miss our goals?

    After these checkups, you may find the need to reflect and iterate on your strategic plan if things are not moving as planned. Intuition can be extremely useful when making adjustments and quick decisions and good instincts are necessary to keep the momentum going on your plan. By knowing when to apply intuition and when to apply logic within your business processes, you can bring a well-balanced strategic mindset to your company that helps position everyone for success.

    Originally published here.

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    Author: Jeanne Hardy

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