2
JULY 2015 By Osmo Salonen, Systems Thinking Europe Oy (STE) [email protected] Business beliefs - Unknown Knowns There are known knowns. There are known unknowns. But there are also unknown unknowns” stated Donald Rumsfeld famously. One category is missing in this list: there are unknown “knowns” that are not true. We call them beliefs. Companies don’t go down for what they don’t know, companies go down for what they know that isn’t so. And we have a strong evidence that this is the category of knowledge that is often more important than either of the unknowns. There are a lot of commodity product companies who “know” that by lowering the product price the sales will increase despite the abundant evidence that lower price means almost inevitably lower sales. The European Union experts knew for sure that by promoting solar and wind energy there will be less CO2 emissions. But the use of coal has increased dramatically. The once global leader of mobile phone business, Nokia corporation, “knew” that by hiring thousands of scientist for the problem area (software) the company will be a leader again. Nokia had hired earlier electronics and signal processing scientists and was lured to believe that they had had a positive impact on the company’s success. (For further details see the former CEO Jorma Ollila’s book Mahdoton menestys. Kasvun paikkana Nokia. (2013)) Nokia mobile phones does not exist any more.

Business beliefs - Unkown Knowns

Embed Size (px)

Citation preview

Page 1: Business beliefs - Unkown Knowns

JULY 2015

By Osmo Salonen, Systems Thinking Europe Oy (STE)[email protected]

Business beliefs - Unknown Knowns

“There are known knowns. There are known unknowns. But there are

also unknown unknowns” stated Donald Rumsfeld famously. One

category is missing in this list: there are unknown “knowns” that are

not true. We call them beliefs. Companies don’t go down for what they

don’t know, companies go down for what they know that isn’t so.

And we have a strong evidence that this is the category of knowledge

that is often more important than either of the unknowns.

There are a lot of commodity product companies who “know” that by

lowering the product price the sales will increase despite the abundant

evidence that lower price means almost inevitably lower sales.

The European Union experts knew for sure that by promoting solar and

wind energy there will be less CO2 emissions. But the use of coal has

increased dramatically.

The once global leader of mobile phone business, Nokia corporation,

“knew” that by hiring thousands of scientist for the problem area

(software) the company will be a leader again. Nokia had hired earlier

electronics and signal processing scientists and was lured to believe

that they had had a positive impact on the company’s success. (For

further details see the former CEO Jorma Ollila’s book Mahdoton

menestys. Kasvun paikkana Nokia. (2013)) Nokia mobile phones does

not exist any more.

Page 2: Business beliefs - Unkown Knowns

Systems Thinking Europe OyTietäjäntie 1302130 EspooFinland+358 9 4124 1121

The belief that has caused the largest damage must be the expected

utility theory, foundation block in classical economic theory. It took

200 years to see that the theory was just a belief. Prospect theory was

developed emphasizing that choices and decisions are about change

not absolute values.

Why do these beliefs exists and prevail for long times, the utility theory

more than 200 years?

The reasons for these beliefs can be categories into four classes: Our

education, characteristics of systems we are in, how human mind

works and our human, selfish nature:

We try to analyze and force the world around us into linear, continuous

and complete mental models. Our brains do not comprehend systemic

features like accumulation, delayed impacts, worse before better or

trigger levels etc. To understand counter intuitive systems it takes a lot

of time, tools and expertize to figure them out.

This is the first post in a series that approaches the challenge of

business beliefs and ways to identify them.