“The way we see the problem is the problem.” – Stephen Covey
Towards the end of 2016, the top business risk concerns were:
- Brand/image + market environment
- Regulative/legislative changes
- Business interruption
- Human resources
- Lack of innovation
- Increasing competition
- Technology/system failure
- Political risk/uncertainties + natural disasters
- Injury to workers
Interestingly, in light of how businesses operate these days, nine of these ten factors are influenced by external factors to the organisation. In fact I would suggest that executives have control over one issue – injury to workers. The rest are impacted, influenced and shaped predominantly by factors outside the business.
So how does one minimise these business risk concerns?
It is my belief that the first step to minimising risk is to look at how executives make decisions taking into account that despite the wealth of information that is now available, studies are revealing that the quality of decision-making is in fact declining.
Why is this?
I suspect that one of the major reasons for poor quality decisions is the lack of good analysis as an input into the decision-making process. We cannot expect executives to search, read, review, and analyse all the necessary factors to support every decision that needs to be made. Yet today good governance requires this of all senior executives and directors.
So how can we improve analysis efforts to increase the quality of decision-making and in turn minimise the risks identified above?
While much has been written on what constitutes good analysis, little has been written to address the failures of analysis – and this is the angle I want to take. Some of the reasons for failure of analysis have varied from the lack of information to psychological and/or mental biases that impinge on good analysis and thus in turn good decision-making.
In this article I would like to put forward that there are only four levels to generating effective analysis. In turn these four levels can either increase or minimise the risk inherent in a decision.
The four levels are:
- The individual analyst
- The analysis task itself
- The organisational context within which the task is conducted, and
- The external environment in which the business is ensconced.
These four levels, and the primary problems associated with each, are illustrated in the Table below. It should be noted that some of the problem factors identified may be present across the other levels and I have only listed those most frequently observed in each level.
Four-Level Hierarchical Model of Analysis Failures1
- Individual Analyst Level Failures
- Analysis Task Level Failures
- Internal Organisational Level Failures
- External Environment Level Failures
- Different natural analytical abilities
- Naturally limited mental capacities
- Natural motivation
- Cognitive biases and perceptual distortion
- Insufficient understanding and application of analysis tools and techniques
- Part of larger task
- Task discontinuity
- Unsatisfactory data inputs
- Disconnects from decision making
- Imbalance among key task facets
- Some decision makers don’t understand and appreciate analysis
- Clients cannot specify their critical intelligence needs or questions
- Under-resourcing the analysis function
- Lack of analysis-specific IT support
- Lack of thinking time
- Organisational culture and politics
- Time and trust
- Invisibility and mystery
- Misconception that everyone can do analysis
- Growing range of competitive factors
- Complexity and turbulence
- Data overload
- Educational deficiencies
1Fleisher, C.S. and B. Bensoussan (2015). Business and Competitive Analysis: Effective Application of new and classic methods 2nd Edition. Upper Saddle River, NJ: Pearson Education Inc.
Analysis is a critical component in aiding executives in their decision-making and in minimizing the impact of business risk concerns.
Done well, analysis and the insights developed from it, helps the organization to reduce its risk level in dealing with both threats and opportunities that exist outside. The absence of effective analysis will produce little insight to underlying key decisions.
Without a good analysis capability, a business is increasingly vulnerable to attack and will miss profitable opportunities in the dynamic, globalized world economy.
About the Author
Babette Bensoussan is an internationally esteemed leader in the field of Competitive Intelligence (CI) and Strategy. Her credentials are built upon a long-standing series of outstanding achievements, both business and academic. She is Australia’s only awarded CI professional and is one of the most published business authors.
She is a Senior Associate of Validity Group and a Director of The MindShifts Group, an Australian globally networked consultancy specialising in strategic planning, competitive intelligence and strategic marketing in the Australasian region.