Too Much Focus On Analytical Approach

Too much focus on analytical approaches as defined by

"...the excessive use of data, statistical and quantitative analysis, explanatory and predictive models and fact-based management to drive decisions..."

Thomas H Davenport et al, 2007

Most business strategies are based on models that assume rational economic behaviour. This is a false assumption. The impact of the unconscious on behaviour, thoughts and outcomes is not recognised as important. This is often referred to as the "inner theatre" - the programming we bring with us from our genetic inheritance and early childhood experience. This inner theatre acts as a standard by which we see reality and governs our behaviour and thoughts.

(source: Karl Sigmund, 2002)

. People are more than Homo economicus (a rational individual relentlessly bent on maximising purely selfish rewards). People are a hybridof H. economicus and H. emoticus - a complicated hybrid species that can be ruled as much by emotion as by cold logic and selfishness. Sometimes the emotional area is referred to as

"...emotional economy and economies of soul..."

Leon Gettler, 2001

This unrecognised irrationality is linked with the human inclination to make irrational decisions based on issues like loss aversion, status quo bias, hyperbolic discounting, etc. This can contravene traditional economic principles, as money doesn't buy happiness and people are often concerned about the welfare of others. They don't always act purely as rational, selfish people.

Furthermore,

"... people are mainly greedy but live within a social norm where this is considered undesirable and hence they pretend to be something they are not. This insight is incredibly powerful for understanding everyday life..."

Paul Frijters as quoted by Deirdre Macken, 2010b

Many decisions can be triggered by emotions first and rationalised later. Yet most economic models assume that all humans are rational and always try to maximise gains from actions.

A good way to explain this is to compare the different economic approaches, ie traditional/classical vs. behaviourial (Deirdre Macken, 2010b). For example, in buying Christmas gifts, the classical approach sees buying gifts as inefficient owing to the time it would take and your incomplete knowledge of what the persons want. Hence you might buy something that is not wanted. Thus the traditional approach would be to give money for Christmas and let the receivers buy their own gifts. On the other hand, the behaviourist would see the actual gift is that of time; with the gifts merely signifying the time you have spent thinking about your friends and buying something for them.

. Furthermore,

"...analysis alone is not sufficient for solving many problems in a fast-changing environment, as the rational mind is not sophisticated enough to deal with complexity under pressure. Instead.....we should be practising techniques that allow us to tap into our subconscious, ingenuity in mind - a far richer resource that could hold the key to more effective decision-making..."

James Hall, 2004c

"...the more you learn about how to do things the way other people know how to do them, the more you limit yourself to thinking about things the way other people have always thought about that..."

Ian Hickie as quoted by James Hall, 2004

Recent research suggests that rational thought occurs in a shallow outer cortex of the brain while creativity, memory, innovation and intuition reside in a deeper part of the brain's structure which is more active during subconscious thought. It is claimed that the subconscious, ingenuous mind contains the "data-mining capacity of several supercomputers". Furthermore,

"...it is too complex to be engaged by rational thought. When we do engage it, it tends to be accidental and often when we are in a state of relaxation. That's why "eureka moments"so often occur when we least expect them, such as when we're in a shower..."

James Hall, 2004c

In senior management positions the traditional, rational analysis needs to be supplemented with intuition, judgment, creativity, innovation and experience so that the right decision is made in unfamiliar situations. Furthermore, the pace of change is so fast, that analysis of obsolete data is not suitable, ie executives have

"...no choice but to build their intuition up rather than study statistical data that is irrelevant by the time the analysis is completed..."

Gary Klein as quoted by James Hall, 2004c

An example of this is market research which involves understanding the intuitive and often irrational decisions made by consumers

On the other hand, there are claims that the science behind intuition is inexact as it supports information that supports assumptions, dismisses information contrary to beliefs and sees patterns where there are none.

Furthermore,

"...A quarter of a century ago, most psychologists believed that human behaviour was primarily guided by conscious thought and feelings. Nowadays the majority will readily agree that much of human judgement and behaviour is produced with little conscious thought..."

Mahzarin Banaji et al, 2013

 

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