It becomes clearer by the day that we are faced with deepening macro- and micro-economic structural issues. As the new reality continues to sink in, it will likely require further fundamental changes to Diversified Industrials’ strategies. Of course, the need to go beyond incrementalism when making strategic decisions is not new, and many industry participants have already taken, or are currently taking, bold measures. Consolidation through M&A has been a rational response to the slow macro environment as it allows to grow whilst cutting capacity. A strategic realignment through large asset portfolio changes has also occurred in many places. The latest trends, associated with increasing shareholders pressure, simply suggest that we are not at the end of the sector’s repositioning process.
In such a context, I took a new look at some of the advice promoted by gurus when confronted with making tough decisions. Based on some research, I came up with the following synthesis:
1. Cut: In “How to make choosing easier”, Sheena Iyengar argues that it all starts by rapidly cutting the number of alternatives under considerations, starting with the overlapping few. Optionality is generally cherished—but it is well known that it can cause paralysis, or even results in a subpar outcome as illustrated in many striking examples in “The paradox of choice” from Barry Schwartz
2. Act: Most recently, in her 2015 book “How to act as a leader”, Herminia Ibarra suggests that, when faced with a new environment, we act first and think later. Her logic, in a nutshell? In an uncertain environment, experimenting is more valuable than thinking. There is thus no point in over-engineering our decision making process. She calls it the “outsight principle”, arguing that “New experiences not only change how [a company] thinks—its perspective on what is important and worth doing—but also changes who [it] becomes”
3. Hug: The advice from Ruth Chang in “How to make hard choices” implies that tough decisions should be embraced as an exceptional opportunity to define oneself (or, for the purpose of this note, a company), instead of shying away from them at the risk of becoming a “drifter”
According to these eminent consultants, most decision makers tend to think too much…
The great actor Philippe Noiret summarized the feeling when playing a spineless cop in the French cult movie, “Coup de Torchon”, where he justifies his inaction with the same story every morning: “Y'know, I couldn't sleep last night. I lay in bed, eyes wide open, tossing and turning 'til I thought I'd go crazy. Then, suddenly, I got fed up and said to myself: "You're going to go bananas." So I thought… and thought... 'til my head ached from thinking so hard...and I came to the conclusion… that I just didn't know what the [hell] to do.”
The solution: Cut, Act and Hug.