houston voices

Houston expert: Know when to trust your intuition — and when to think outside the box

Why relying on intuition can backfire when it comes to crafting a successful business strategy. Photo via Getty Images

When a fast-casual restaurant chain started to see stagnating sales, the company’s CEO came up with a solution: adding new, higher-quality menu items.

To validate his thinking, he informally interviewed a few dozen diners at different locations, asking them how they would feel about more and higher-quality menu items. After getting enthusiastic responses from several customers, he went ahead with his plan. Sales fell further.

So what went wrong? Systematic surveys showed that what created the most value for customers was a fast dining experience with a short wait time, a simple menu with a few items, ample parking and a bill under $12 per meal. Higher quality and an expanded menu did not correlate at all with customer value. Where the company’s CEO went wrong was by relying on salience instead of importance.

Salience refers to factors that are top-of-mind and easy to recall, which become prominent and are then incorrectly prioritized. A classic example is a 1979 study that surveyed people about their perceived risk of dying from causes like drowning, murder or cancer. The study’s authors found that people thought they were more likely to die from causes that were mentioned more often in their local news, such as murder, when in fact they were at much greater risk of dying from common but less prominent causes such as cancer.

The CEO made food quality and expanded offerings salient to himself by talking about them to a small group of customers. It was an easy way for him to feel good about his efforts. But, like many executives, he relied on salience.

Salience is easy and convenient, but it’s also the curse of decision-making. It simply reinforces executives’ prior beliefs rather than diagnosing the true cause-and-effect relationship. Imagine if a doctor saw a patient with stomach pain and recommended an appendectomy because a patient she’d seen the day before needed one. Or if the doctor asked the patient to recommend the treatment himself. Patient outcomes would likely falter and the doctor would go out of business (and perhaps lose her medical license).

Thankfully, doctors don’t operate this way. They rely on the statistically measurable relationship between critical inputs and outputs for decision-making. So should senior executives and CEOs.

Informal customer conversations draw primarily on gut feelings, hunches and top-of-mind ideas, and as such, aren’t reliable indicators of true customer value. Like all of us, customers often tailor their responses to the audience they’re addressing. So a company’s vice president of service might speak with a customer who says they love the service, while the same customer might tell an HR executive they love the employees and then go on to tell the VP of sales that they would like lower prices. These on-the-spot responses typically have no significant impact on or statistical correlation with customer value, which ultimately drives sales and profits.

To craft a successful strategy, executives need to use a systematic, statistical process that starts with choosing a clear outcome or output, such as customer value or employee retention. The next step is to measure inputs that drive that output, and then quantitatively correlate each input to the output. Only those inputs that drive the desired output should be included in the company’s strategy.

Take, for example, a nursing home that attempted to craft a strategy for decreasing employee turnover. Relying on casual conversations with a few dozen employees, executives assumed higher pay would increase retention. They were wrong.

When they statistically correlated multiple inputs — higher pay, health benefits, supervisor respect, promotion opportunities and paid vacation — with retention, they realized their intuitive leaps had been incorrect. Only health insurance and promotions were correlated with increased employee retention. Higher pay had no effect.

Committing to this type of systematic review to drive strategy requires humility on the part of senior executives. The nursing home executives were able to look past their own assumptions and learn from this type of statistical analysis, recognizing the limits of salience-driven thinking and deferring to algorithms that could better predict the inputs of turnover than they could.

Doctors understand this as well. To treat their patients, they rely on data from groups like the Food and Drug Administration or the National Institutes of Health, which run clinical trials and rely on data, statistics and an infrastructure of knowledge.

Unfortunately, many senior executives lack humility when it comes to strategic planning. They equate decades of salience-laden thinking with a deep understanding of correlations between inputs and strategic outputs. They might think, “I’ve been in this industry long enough to know what works,” or “Since this worked then, it will work now as well.” But more often than not, relying on salience-laden intuition alone will not achieve the desired outcome.

“Focus: How to Plan Strategy and Improve Execution to Achieve Growth” lays out specific steps for senior and mid-level executives who want to follow systematic, statistical processes to drive their company’s strategy.

------

This article originally ran on Rice Business Wisdom and is based on research from Vikas Mittal, J. Hugh Liedtke Professor of Marketing at the Jones Graduate School of Business and author of “Focus: How to Plan Strategy and Improve Execution to Achieve Growth.”

Trending News

Building Houston

 
 

The Texas Medical Center Innovation Factory has named the 16 companies making up the inaugural cohort in the Innovate UK Global Incubator Programme. Photo via tmc.edu

Sixteen digital health and medical device startups founded in the United Kingdom have been selected for a customized accelerator at the Texas Medical Center's Innovation Factory.

In partnership with Innovate UK, TMCi created the Innovate UK Global Incubator Programme, a new accelerator that supports UK businesses as they build their United States go-to-market plan. The program builds the BioBridge relationship between TMC and the UK that was originally established five years ago.

“The TMC UK BioBridge program was launched with the UK Department for Business and Trade in 2018 to serve as a gateway for advancing life sciences and foster innovation and research between our two countries," says Ashley McPhail, chief external affairs and administration officer for TMC, in a news release. "We saw an opportunity to work with Innovate UK to develop a larger program with the UK after the success of the 11 companies that previously participated in our health tech accelerator."

The 16 companies will participate in the program from June to November. The cohort is expected to arrive in Houston on June 5 and have access to TMCi's facilities, network of mentors and potential clients, funding, potential customers, and curated programing — all while being a unique entry point into the US. The new offering joins three other globally recognized curriculums: Biodesign, Accelerator for Cancer Therapeutics, and Health Tech.

“TMCi nurtures long-term growth, development, and competitiveness to increase startups chances of success and global expansion," says Emily Reiser, associate director of TMC Innovation. "By bringing their novel technologies and exposing them to a curated selection of TMC’s expert network, startups receive support and evaluation to build, scale, and expand in the US market."

Two of the cohort's specialties include cardiovascular and oncology — two of TMC's strongest areas of expertise — with solutions ranging from surgical devices to AI-enabled risk stratification and hospital efficiency.

Innovate UK is the country's national innovation agency dedicated to supporting business-led innovation in all sectors.

“The United Kingdom is fully committed to improving global healthcare through scientific collaboration," says His Majesty’s Consul General in Texas Richard Hyde in the release. "Through the expansion of the TMC UK BioBridge and in partnership with Innovate UK, this programme will help to expose the brightest and best British companies to the world’s largest medical city. Our companies will collaborate and grow as they work to develop cutting edge technology. The partnership between the UK Government and TMC demonstrates that international collaboration can drive both economic growth and improvement to quality of life.”

The 16 companies making up the inaugural cohort are as follows, according to TMC.

  • AINOSTICS aims to revolutionize the treatment and prevention of neurological conditions, such as dementia, by developing innovative AI-enabled solutions that draw novel insights from routinely acquired non-invasive medical scans to deliver accurate diagnosis and outcome prediction, and in turn facilitate personalized care and timely access to disease-modifying treatments for patients.
  • Alvie is a blended human plus AI-enabled digital solution providing personalised pre and rehabilitation coaching and supportive care for cancer and surgery. Alvie's technology combines data profiling, risk-stratification and tailored prescriptions of health and well-being with curated educational content, targeted behaviour change coaching and expert support through chat messaging and virtual consultations.
  • C the Signs™ is a validated AI cancer prediction platform, which can identify patients at risk of cancer at the earliest and most curable stage of the disease. Used by healthcare professionals, C the Signs can identify which tumor type a patient is at risk of and recommend the most appropriate next step in less than 30 seconds. The platform has detected over 10,000 patients with cancer, with over 50 different types of cancer diagnosed, and with a sensitivity of >98% for cancer.
  • At PEP Health, We believe all patients deserve the best care possible. Our cutting-edge machine-learning technology enables healthcare organisations, regulators, and insurers the real-time, actionable insights they need to have a direct and dramatic impact on patient experiences.
  • PreciousMD improves the lives of lung-cancer and other lung-related illnesses patients worldwide by enabling imaging-based diagnostics needed for personalized treatment pathways.
  • Ufonia is an autonomous telemedicine company, we use large language models and voice AI to increase the capacity of clinical professionals.
  • My mhealth offers digital therapeutics for a range of long-term conditions- COPD, Asthma, Diabetes and Heart Disease. Our product has been successfully deployed in the UK and India, with >100,000 users registered to date. Our solutions empower patients to self-manage their conditions, resulting in dramatic improvements in outcomes, as evidenced through multiple clinical trials and real-world evaluations.
  • At Surgery Hero, we offer a clinically backed solution that ensures whole-human support before and after surgery. We help health systems, employers and health plans cut costs without sacrificing quality of care.
  • Panakeia's software platform enables extremely rapid multi-omics profiling in minutes directly from routinely used tissue images without needing wet lab assays.
  • QV Bioelectronics are striving to deliver longer, better quality lives for brain tumour patients. Using their first-of-its-kind implantable electric field therapy device, GRACE, QV will provide effective, focal & continuous treatment without impacting patient quality of life.
  • 52 North is a med-tech company focused on improving health outcomes and health equity by reinventing care pathways. The NeutroCheck® solution is a finger-prick blood test and digital platform built to significantly improve safety and quality of life for cancer patients, by helping to identify at-home those patients who are at risk of the most fatal side-effect of chemotherapy: neutropenic sepsis.
  • Somnus is fulfilling an unmet need in global healthcare by developing real-time, point of care blood propofol monitoring. Its products will improve the care of sedated and anaesthetised patients, save money for hospitals, and facilitate a major reduction in greenhouse gas emissions.
  • ScubaTx is a breakthrough organ transplant preservation company established to solve the global unmet need for cost-efficient and longer-duration organ preservation technology. ScubaTx has developed a simple, small and affordable device which uses Persufflation to extend the preservation of organs.
  • IBEX is on a mission to help people live active, healthy and productive lives by increasing their access to early diagnosis of osteoporosis. The IBEX BH software as medical device delvers routine, automated assessment of fracture risk from routine radiology for earlier detection and more equitable treatment of osteoporosis.
  • NuVision produces products derived from donated human amniotic membrane that are used in ophthalmology to help patients with chronic, traumatic and post-surgical wounds of the eye to be treated earlier and recover more fully and more quickly. The company’s products are also used in the management of dry eye disease, a debilitating conditions that affects around 17m people in the USA.
  • Calon Cardio-Technology is on a mission to improve quality of life for patients with Left Ventricular Assist devices (LVAD) and reduce the common post operative complications associated with these implantable heart pumps. We plan to do this by introducing a completely wireless heart pump system and augment patient follow-up with built-in remote monitoring capabilities.

Trending News