How the Wise Decide by Bryn Zeckhauser, Aaron Sandoski

• Table of Contents
• Read an Excerpt

Table of Contents

Read an Excerpt

Chapter 1

Go to the Source

Remember the game you played in kindergarten in which the class, one by one, passed on a whispered statement? When the last child told out loud what she had heard, it was nothing like what the first kid had whispered.

If you’re like most people, you’re playing a variation of that game every day at the office. Sure, you get authoritative-looking reports to read and you sit through detailed PowerPoint presentations. But you’re still getting the same kind of distorted and incomplete information that you got from your classmates in the kindergarten game. That doesn’t mean the information you get in the office isn’t useful. But you’re not going to the source to get firsthand information, far and away the best kind of information. You may argue that you get out of the office occasionally to meet with customers or suppliers to learn what they’re thinking, but that isn’t what we mean by going to the source. Going to the source is the relentless pursuit of information from the field. It is hard work, and it takes a lot of time, effort, and imagination.

Do you devote two-thirds of your work time to going to the source? As CEO of Medtronic, Bill George did. That’s how he got a bloody catheter thrown at him in an operating room and solved a serious problem confronting his company.

Do you make more than four hundred customer visits each year? That’s how Mike Ruettgers discovered deep in the bowels of a customer’s data processing center the need for a new product that revolutionized EMC’s fortunes.

Do you travel the world studying how your business thrives inradically different environments? Orin Smith found the solution to expanding Starbucks into untapped markets tucked away in small towns in New Zealand.

All three of these successful former CEOs share a passion for developing primary sources of information. It is one of the characteristics that defined their success. They went places other CEOs didn’t and heard things others couldn’t. They asked a lot of questions and listened carefully to the answers. They not only got the best information, they also got it faster than anyone else. They were able to use that information to make important decisions about how to beat competitors to market with new products, how to solve critical problems, and what sweeping organizational changes to make for profitable growth. For them, going to the source became a powerful competitive advantage.

But how can Mike Ruettgers make four hundred customer calls in a year? How can Bill George spend two-thirds of his time observing complex surgery in an operating theater or talking to Medtronic employees about developing new products or solving problems? The answer is that they value primary sources of information enough that they make going to them both a priority and a routine. Among all the things a CEO can be doing, they have decided that the largest portion of their time is best spent gathering unfiltered, unbiased information. Other tasks can be delegated, but firsthand observation and conversation require you to be where the action is, whether it’s an operating room or your own factory floor.

Making important decisions can be stressful. Information may be skimpy, confusing, or contradictory, especially if it comes to us filtered and diluted through the mind-sets of people who think differently than we do. Wise leaders know that they can never have all the information they want. That’s why it is critical to have the right information. They know that primary information gives them three major advantages over other kinds of data in reaching a decision.

First, information at the source is unfiltered by others. Organizations invariably edit and distill information as it moves from level to level and from one department to another. The result is a presentation or a report that purports to capture the essence of a problem, but that may miss or misinterpret some crucial piece of information. Decision makers need to supplement this diet with unfiltered data, information straight from the source that hasn’t been manipulated or interpreted.

Second, information at the source provides subtle details and nuances that get lost in second- or thirdhand accounts. Reports and canned presentations lack emotional content, but the fact is that emotions play a large role in business. Without emotion, we can’t appreciate the passion of a high-potential customer or the frustration of an underfunded product development team. It’s the decision maker’s job to understand what emotions are at play and to use that understanding to make the best possible decision. Without face-to-face encounters with the people driving the future of your business, you will miss out on the power of emotional input.

Finally, information from the source is critical because it shows us reality. Too often, secondhand information distorts reality enough to give us a false sense of confidence. Only when we see things firsthand—how our product performs, what motivates our employees, what a customer really needs to do his job—do we have the breadth and depth of information to make the right decision. Comparing what we have personally seen and heard at the source to all that other information also allows us to put the secondary information in its proper context. The result is better decisions.

Primary sources are all around you, but you have to think differently about who they are. Going to see your customer is a vital part of learning how your product or service is used and how it can be improved. But most customer calls involve peer-to-peer contact. CEOs visit CEOs and salespeople visit purchasing agents. That’s the wrong mix. To get the most useful primary information, you have to penetrate much more deeply into your customers’ organizations to discover the nitty-gritty details about what people on the firing line want from a supplier. The vice president of purchasing for a big hospital has never used a medical device in surgery, but surgeons have—and they have strong opinions. Similarly, a chief information officer isn’t likely to have the same perspective on technology needs as the harried manager of one of the company’s data processing centers.

Start looking for primary sources where it’s easiest to find them—in your own company. If you’re in sales, for example, when was the last time you visited the credit department to check up on your customers’ credit ratings and how they’ve changed over time? Is product development working on something that might benefit from some input from your customers?

Outside your company, there is a vast array of potential sources of firsthand information beyond your customers. Think about potential new customers. And what about your customer’s customers? Suppliers and competitors can be good sources of primary information, as are government regulators, investors, news reporters who cover your industry, and academics who study it.

Making it a routine part of your job to go to the source will require a new mind-set, a realignment of your priorities and the tenacity to pursue firsthand information wherever it may take you. But if you become as skilled at using this powerful tool as the three leaders you’re about to meet you can beat competitors, find new markets, and generate terrific new product ideas.

The Bloody Catheter

It was turning into a long, frustrating day for Bill George as he cooled his heels in the corridors of New York City’s massive Lenox Hill Hospital. George, recently appointed the president and chief operating officer of Medtronic, Inc., a Minneapolis medical equipment manufacturer, was spending his first ninety days on the job learning about his company’s products firsthand in the operating room. But today’s procedure, an angioplasty using one of Medtronic’s balloon catheters, had been delayed for hours while technicians scrambled to repair the fluoroscope that would show the doctor the route to guide the small balloon into the patient’s clogged arteries. The gruff German-American cardiologist that George would observe was furious that his busy schedule was being disrupted.

Finally, the fluoroscope was fixed and the operation could begin. George, gowned and gloved, stood a few steps back from the operating table where the patient lay swathed in sterile sheeting. But soon after the doctor inserted the balloon catheter into the patient’s femoral artery, the device fell apart in his hands. Ever so carefully, the surgeon withdrew the catheter from the patient. Then, with ill-concealed rage, he hurled the bloody device at George, who ducked just in time to avoid being smacked in the face. The operation resumed, this time with a competitor’s catheter.

George had been aware that Medtronic’s catheter sales weren’t what they should have been. The company was losing market share and the sales force had been complaining about product quality. But the engineers had said the product was fine and getting better. Maybe the sales force was just looking for an excuse for not doing a good job, he had thought. Now, shaken by what he had just seen, George sat down with the Medtronic sales rep who had been with him in the operating room. The rep told him that the problem he had just witnessed wasn’t an isolated incident. The catheters had been failing with disturbing frequency. All the sales reps knew that, he said, and they had all filed the required company reports.

But George hadn’t known it, and he wanted to know why he hadn’t known it. When he returned to his office in Minneapolis, he began investigating how information about the catheters got reported to headquarters. What he found was a tortuous path that routed the sales reps’ reports about failing catheters through seven layers of bureaucracy before they reached the people who designed the products. When George questioned the engineers about the reports, they denied that any design flaws existed and blamed the surgeons for misusing the equipment.

His investigation of the catheter failure led George to two conclusions. First, there clearly was a problem with the quality of the catheters. He had seen the problem with his own eyes, had been shocked by the incident, and had even brought the ruined device back to headquarters in his baggage.

“It’s an overstatement, but field reports are a dime a dozen,” George says. “There’s no emotional association with them. But when you’re in a medical environment like an operating room, all your senses—sight, sound, smell, taste—are working. It’s a totally different experience than reading a field report.”

Second, and more important, there was something dangerously wrong with Medtronic’s ability to handle critical information. “It was a systemic problem,” he explains. “What was wrong was that the system wasn’t getting quality information from the operating room to engineering, quality control, and manufacturing, the people who could fix the problems. People don’t want to pass on bad news, and engineers can be in denial about a problem.”