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Check, Recheck, and Check Again Your Optimistic Assumptions

Mar 15, 2008
In a genetic engineering company that develops pharmaceutical products, the company's founders and scientists developed disdain for the views and processes of the Federal Government's Food and Drug Administration (FDA). The company knew (correctly) that the regulators at FDA were much less capable and knowledgeable than they should have been in genetic engineering.

Whenever the FDA raised an issue, the company would sneer as it explained to the FDA people that they were wrong. As you can imagine, the FDA examiners were soon concerned that the company was out of control because of the unfriendly attitude. And the FDA was right.

The company had shortchanged some important procedures in its pharmaceutical trials. While the company correctly believed that it knew a lot about genetic engineering, its superior knowledge did not extend into making safe and healthful pharmaceuticals. There, the company was clearly deficient.

When the FDA finally found out, it gave the board a choice: Go out of business or replace all of your senior executives and scientists with people we can work with. Naturally the board complied, but it took the company more than five years to recover from the prior management's refusal to acknowledge that the FDA was one of their company's irresistible forces. That overoptimism about overcoming the FDA's views cost the company hundreds of millions of dollars in lost revenues and profits, and life-saving developments were unnecessarily delayed.

Overoptimism is bred by homogeneous thinking. One way to overcome that one-sighted tendency is to have at least thoughtful person consider what the organization should do if future conditions change, and challenge the prevailing view.

As an example of the problem, one fast-growing health-care company explained that all of its senior executives were focused on getting new customers. When many types of customers became unprofitable due to changing health-care reimbursement practices by governments and employers, the company was slow to shift away from the unprofitable accounts.

Another company in the same industry had many fewer problems because one member of the top team viewed his job as balancing the optimism of his colleagues. So even if this man were not pessimistic about something, he would play the role of devil's advocate for that position to stimulate more balanced thinking.

Early on, the "independent" thinker pushed for not taking on accounts that could become low-margin. s cost containment pressures assaulted the company, it was little affected because it had avoided taking on those profit-threatening customers in the first place. Alfred Sloan often played that same independent thinker role at General Motors during that organization's successful climb over Ford in the first half of the 20th century.

You can obviously improve on this solution by being sure that all of your teams are created with as much experience and psychological diversity as possible. Many organizations encourage teams to undertake simple psychological tests and to share the results with one another on the team, so that each person will be aware of as many of the biases as possible that the others may or do have.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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