Saturday, June 2, 2012

Innovation using Kahneman's Analysis of Cognitive Biases

1. Background 

1.1 Who is Kahneman ?

Daniel Kahneman (born March 5, 1934) is an Israeli-American Psychologist and Nobel Laureate. He is notable for his work on the psychology of judgment and decision-makingbehavioral economics and hedonic psychology

With Amos Tversky and others, Kahneman established a cognitive basis for common human errors using heuristics and biases(Kahneman & Tversky, 1973; Kahneman, Slovic & Tversky, 1982; Tversky & Kahneman, 1974), and developed prospect theory(Kahneman & Tversky, 1979). He was awarded the 2002 Nobel Memorial Prize in Economics for his work in prospect theory.

1.2 TED talk

Theory of Experiencing Self Vs Remembering Self

Creative summary of the talk - Sketchnote

1.3 How I came to know about him - by reading his recent book

Thinking, Fast and Slow

Book Review (NY Times)

2. What are Cognitive Biases and how to overcome them ?

2.1 Cognitive Biases

cognitive bias is a pattern of deviation in judgment that occurs in particular situations, leading to perceptual distortion, inaccurate judgment, illogical interpretation, or what is broadly called irrationality. Let us look at some of the common biases:

  • Framing by using a too-narrow approach and description of the situation or issue.
  • Hindsight bias, sometimes called the "I-knew-it-all-along" effect, is the inclination to see past events as being predictable.
  • Fundamental attribution error is the tendency for people to over-emphasize personality-based explanations for behaviors observed in others while under-emphasizing the role and power of situational influences on the same behavior.
  • Confirmation bias is the tendency to search for or interpret information in a way that confirms one's preconceptions; this is related to the concept of cognitive dissonance.
  • Self-serving bias is the tendency to claim more responsibility for successes than failures. It may also manifest itself as a tendency for people to evaluate ambiguous information in a way beneficial to their interests.
  • Belief bias is when one's evaluation of the logical strength of an argument is biased by their belief in the truth or falsity of the conclusion.

Exhaustive list of cognitive biases -

2.2 Kahneman's Questions to overcome Cognitive Biases

In a recent HBR article, Kahneman et al poses 12 questions that will help executives vet the quality of decisions and think through not just the content of the proposals they review but the biases that may have distorted the reasoning of the people who created them

  • Is there any reason to suspect the team making the recommendation is motivated by self-interest?
  • Has the team fallen in love with its proposal?
  • Were the dissenting options within the team explored adequately?
  • Are credible alternatives included along with the recommendation?
  • Are the recommenders overly attached to a history of past decisions?
  • Is the recommending team overly cautious?
  • Where did the worst case scenario come from? 
  • How sensitive is the recommendation to our competitors' responses? 
  • What could happen that we have not thought of?

3. How do Cognitive Biases influence our thinking and hinder creativity ?

Creative thinking is strongly influenced by breaking out of the patterns that we inevitably (or unknowingly) fall into. Learning to become aware of these patterns that we may fall into is very important. Our minds are powerful devices that can perform complex tasks with ease, yet they fall prey to these biases very often.

Cognitive biases are errors in judgement that we can fall into given certain situations. Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily or anchor on one trait or one piece of information when making decisions.

3.1 de Bono's six hats thinking for decision making is one way to avoid falling into this trap - here are the decision makers are encouraged to look at the information from six different perspectives - what is good about it (yellow hat), what can go wrong (black hat), what is interesting (green hat), what does data say (white hat), what do i feel intuitively or emotionally about it (red hat, no need to support with data) and finally what do i feel overall about it (blue hat).

3.2 Reversal of Assumptions

Reversal of Assumptions is a powerful technique to overcome fundamental assumptions and biases. Here we begin by listing our basic assumptions. Then systematically reverse each one of those. Brainstorm around the reversed assumptions. Take the ideas back to the original system and see how they can be adapted.

4. Designing Innovation Workout for Growth Ideas

4.1 Team exercise

1. Pick the top 5 cognitive biases  (from the list that you think you may suffer (either individually or as a team) .

2. Pick each one and spend some time discussing with your team what it is about

3. Think about times when you may have been affected by this cognitive bias

4. Now design strategies by which you could avoid this cognitive bias in future.

4.2 Killer Questions to trigger innovative thinking

Phil McKinney has created many killer innovation questions that help us to overcome a variety of biases. I am currently reading his book "Beyond the Obvious".

You could start reading his blog and listening to his podcasts at Killer Innovation (i have been doing it for the last 4 years now).

1. What are the rules and assumptions my industry operates under ? What if the opposite were true ?
2. What will be the buying criteria used by my customers 5 years from now ?
3. What are my unshakable beliefs about what my customers want ?
4. Who uses my product in ways I never anticipated ?
(Source - Beyond the Obvious - Phil McKinney)

5. Key Takeaways

1. Be aware that your thinking and decision making are influenced by certain cognitive biases

2. Figure out what those cognitive biases (both individually and as a team) - refer to the master list of cognitive biases

3. Frame trigger questions to overcome those biases (derive inspiration from Kahneman's questions and Phil McKinney's Killer Innovation questions)

4. Brainstorm using these triggers

5. Quickly evaluate and prioritize your ideas based on three simple criteria - Desirability, Feasability and Viability - will my customers desire it, is it technically feasible, is it economically viable.

No comments:

Post a Comment