How CEOs can make mental flexibility a valuable asset
CEOs must make major decisions about the future under conditions of persistent uncertainty. Developing the mental flexibility to adjust previously held beliefs to new goals or circumstances is paramount.
- Article |
- 01 June, 2015
- Persistent macro uncertainty, unpredictable market responses, and the blind spots of decision-makers all combine to weaken the relationship between a strategy and its outcomes.
- Decision making in such a dynamic scenario demands the mental flexibility to adjust previously held beliefs to changing circumstances.
- CEOs can take practical steps to improve their mental flexibility by adopting three proven approaches.
Standing at the helm of their organisation, CEOs make the major decisions to steer the business in the direction of their strategic intent. These strategic decisions are by their nature complex, uncertain and for the long-term, placing great demands on the capacity of the human mind to make judgments about the future. While CEOs can improve their chances of success by avoiding many of the common traps in decision making, the possibility always remains that their intended strategy may not produce the intended results.
The unpredictability of strategy’s outcomes
The linkages between strategy and the actual outcome are weakened by three key factors: persistent macro level uncertainty, the vagaries of the market’s response and the blind spots of the decision maker.
At the macro level, we now live in a VUCA (Volatile, Uncertain, Complex and Ambiguous) world. A term that came into popular use after the 9/11 attacks but one that became more common in the business world after the sub-prime crisis of 2008. As our assumptions about the external environment have become more vulnerable to sudden, massive and unpredictable change, even the best-prepared strategies require fast adaptation to emerging realities.
At the industry-level, decision-makers must also take into account the unpredictable responses of customers and competitors to their strategies. The customer response to a new product or service may often be very different to how a business envisages it at the time of strategy development.
Take for example the Tata Nano car. While the vehicle represented an incredible feat of engineering to be produced at less than $2,000, it failed to connect with its target Indian customers, who found that it's positioning as a ‘cheap car’ fell short of their rising aspirations.
In a similar vein, the response of competitors to a strategic move can be equally unpredictable, sometimes requiring rapid changes in direction by a company in order to retain their edge.
Lastly, as human beings, we develop mental models to make sense of the environment around us. These mental models help us in familiar circumstances by speeding up our response, but they can constrain our thinking when we deal with novel situations.
3 approaches to improved mental flexibility
Mental flexibility refers to the ability to adjust previously held beliefs or thoughts to new goals or changing circumstances. It enables leaders to adapt their strategies to a dynamic macro environment or an unanticipated market response.
In a world where the best-laid plans can come unstuck, mental flexibility becomes a valuable asset. Research has shown that mental flexibility is not simply a naturally endowed gift, it is a skill that can be improved by using a number of tools and techniques. Three of the most effective approaches CEOs can use for improved mental flexibility are outlined here.
1. Learn in a double loop
Harvard Business School Professor - Chris Argyris - first coined the terms single loop and double loop learning. While single loop learning corrects problems at the surface by accepting current assumptions, double loop learning challenges the fundamental mode of thinking by following a process of reflection.
Take the example of a manufacturing company which had hired a new Chief Marketing Officer (CMO). The timing of this coincided with the firm’s annual planning conference in which the incoming CMO was asked to participate to get a flavour of the business and the team. The company conducted the meeting in its usual way, wherein the CEO tore apart each person’s presentation to ‘help them come up with better ideas’.
A week after the conference was concluded, the new CMO tendered his resignation. The company’s response to this event was to decide that new hires shouldn’t participate in these type of meetings to avoid the risk of ‘culture shock’. However, had they applied double-loop learning, they would have instead explored why their style of the meeting had such an impact on newcomers, and whether they needed to change their ways to attract a new type of manager.
2. Play real-time strategy games
Real-time strategy games have been studied for many years for their effect on the brain’s ability to learn new behaviours and form new memories. Various studies show that they create cognitive and perceptual changes in those who transition from non-gamers to gamers.
In a recent study, researchers from University College London and the University of Texas at Austin used the real-time strategy game Starcraft to study its effect on cognitive flexibility. They found that forty hours of training with a game like this - which addresses rapid and simultaneous maintenance, assessment and coordination between multiple information and action sources - was sufficient to bring changes in mental flexibility.
CEOs can also bring improvements in mental flexibility for themselves and their top team by engaging in simulations (wargaming) of the possible outcomes to their major strategic decisions. This encourages decision-makers to consider the responses from competitors, customers and market regulators, as well as revealing new possibilities for action. Through the process, leaders can become mentally prepared for faster and more nimble responses when encountering real-world scenarios.
Recently researchers from the University of British Columbia and the Chemnitz University of Technology reviewed and analysed 123 brain morphology differences from 21 neuroimaging studies examining over 300 meditation practitioners. Their study found that meditation had a consistent effect on all eight brain regions.
Of particular interest to decision makers is the Anterior Cingulate Cortex (ACC), which is located behind the brain’s frontal lobe. The ACC is associated with self and emotional regulation and plays an important part when conditions are uncertain and changing fast. It helps in directing attention, managing knee-jerk reactions and switching strategies flexibly. The study found that meditators showed more activity in the ACC, performing significantly better in tests of mental flexibility.
CEOs can choose from a number of techniques to practice meditation. One such technique is Vipassana - which means to see things as they are. One of the oldest techniques of meditation, it has been practised for 2500 years.
With business outcomes becoming increasingly unpredictable, mental flexibility can become a strategic virtue for CEOs. Furthermore, rather than being a gift, it is actually a skill that can be developed and enhanced through the three practical approaches outlined in this article.