A Common Framework for Complex Decision Making
New Orchard’s Business Identity Index
As consultants, we all face a common challenge: new client acquisition and discovery. Each new client represents a unique set of circumstances, challenges, and needs. Unfortunately, our first interaction with our clients is often defined not by the actual problem but how the client thinks about the problem. As a result, navigating perception is as much a part of our jobs as providing strategic guidance.
Perspective and Perception vs Personality
Many of us have used or experienced tools that identify individual personality and behavioral tendencies. What is more difficult to ascertain is how all the various personalities within a business, specifically a leadership team, impact the business itself.
This is the process of institutionalization, or how the mindsets, tendencies and beliefs of individual leaders are absorbed into the decision-making culture of the business itself. We see this when we hear things like “This is how we’ve always done it,” or “I don’t know why we do it this way, we just do.” We also see this when all the facts, resources, and good intentions are steered in a certain direction, but something unspoken and unseen takes the business off course.
Identifying these underlying forces is difficult enough for the business leaders themselves, much less a third-party consultant with limited visibility into both the current state and the history of the business. Predicting how institutionalized behaviors and mindsets will affect strategic initiatives is all the more complex.
As with all complex problems, starting from a simple framework to which every business leader can relate is imperative for furthering discussion towards progress, rather than increased ambiguity. The Exploration vs Optimization spectrum of decision-making heuristics can provide higher levels of clarity for leadership teams to (1) become aware of what unspoken tendencies are driving decisions today; and (2) determine what intentional approaches should drive decision making in the future.
Exploration vs Optimization
Business leaders often want to believe that decision making within their business is a complex web of variables that only they understand fully. As consultants, however, we often see the same stories, scenarios, and outcomes repeatedly. In truth, all business decisions can be distilled down to the allocation of two things: ideas and resources.
No matter what is being decided, the outcome of a decision is defined by the C-Suite’s comfortability and prioritization of Exploration vs. Optimization when it comes to allocating resources (represented on the x axis below) and ideas (represented on the y axis below).
Exploration represents a preference to expand in order to solution, i.e. absorbing new resources and new ideas. Optimization represents a preference to tighten and contract in order to solution, i.e. to make the most of what we have. The application of each approach ultimately creates the core identity of the business itself.
Businesses that employ optimization in both resources and ideas are low risk, low variability. Business that employ exploration in both resources and ideas are high risk, high variability. Identifying where a business falls along this spectrum can significantly impact the nature of your recommendations and guidance and the structure of strategic initiatives.
The problem is, of course, that leadership teams themselves are often unaware of their decision making preferences, making consultants reliant on observations, historic data, and careful lines of questioning to ascertain what approach is being used. Even for the highly intuitive consultant, this can take months or even years of observation, and may only be revealed by unsuccessful outcomes.
This is where the Business Identity Index comes into play as a critical discovery tool for management consultants.
The Business Identity Index
New Orchard’s Business Identity Index measures the balance of optimization versus exploration currently deployed by leaders as they make decisions in four key areas: Strategy, Implementation, Resource Allocation, and People. These ratios are translated into 16 possible business identity types.
The fully optimized business identity is a Traditionalist Business (lower left of the graph below) while the fully exploratory business identity is an Anarchist Business (upper right of the graph below). The remaining 14 types represent every possible combination of exploration and optimization in the four categories mentioned above.
While each member of the leadership team takes the Business Identity Index independently, the BII is not a personality assessment. The Business Type resulting from a respondent’s answers reflects the kind of business this individual believes he or she is working in. In a world where perspective is reality, this perception often drives how kind of business that individual is building. When completed by a team, complicated differences of opinion (often chocked up to personality differences) become clear variances in decision making heuristics that can be discussed with a common language.
In the results below, Grant, the CFO is building a vastly different business than Brad, the CEO, and Emily, the COO. While the three leaders (and likely everyone around them) may have been feeling this tension, now they can see it for themselves.
As a result, leadership teams are forced to collectively and definitively answer 4 core questions:
- Should we optimize or explore in how we allocate resources?
- Should we optimize or explore in how we approach our market
- Should we optimize or explore in how we problem solve
- Should we optimize or explore in how we build our team?
As consultants, you can see how clearly defined answers to these four questions can instantly clarify the resulting tactical decisions, making your engagements easier to navigate towards highly effective guidance and mutual success.
Try the Business Identity Index for Yourself
As members of IMC and fellow consultants, I want you to experience the process. New Orchard is providing one-time access to the Business Identity Index to our members. Simply click on the following link to take the BII and find out how you perceive your firm approaching these critical decisions.
As an added benefit, IMC will be able to gain insight into our membership base – who we are and how we typically make decisions. This will in turn help us to create more fantastic programming that speaks directly to these areas, deepening the quality of your experience as an IMC member.
Take a few minutes and try the BII today.