Better, Faster and
Cost-effective Decision-making in Times of Crisis
By Greg Silverman, July 13, 2020
Humans are creatures of habit. Waking up, brushing your teeth, heading to work, and winding down at the end of the day — the body craves a routine that influences what we do on a daily basis.
In many instances, having a routine is a positive. Northwestern Medicine explained that having a daily schedule promotes wellness by reducing stress and promoting healthier eating and sleeping habits. However, there are instances when these habitual behaviors become so deeply rooted in a routine that they defy logic.
Consider behaviors such as smoking or speeding; people understand the dangerous consequences of these actions, but they have become ingrained in a routine, and it's difficult to break the cycle. According to sociologist Morris Massey, only a significant emotional event (SEE) (in other words, an experience that is "mentally arresting") is the catalyst for people to change their habits.
Businesses operate with a similar level of routine, and when a SEE occurs, it rocks their normal processes. Of course, organizations don't always have the resources or time to hit rock bottom before changing their ways, so it's important to always be prepared to make smart decisions in times of crisis. Let's explore how businesses respond to significant emotional events and ways to adapt their decision-making process during uncertain times.
Do businesses SEE it coming?
Individuals experience SEEs at any given time or place — sometimes, these emotional experiences are played out publicly. Still, more often than not, they take place privately as people grapple with changing their routine. Businesses, on the other hand, rarely experience such earth-shattering events.
This is not to say there aren't instances of SEEs in the business world; there are times when product launches go awry or critical funding falls through, leading to bankruptcy. But in the grand scheme of things, these events are few and far between. Of course, now we are experiencing an anomaly — the entire world is experiencing the same SEE that is quickly changing consumer spending, business operations, and market volatility.
Business owners are now asking themselves if this event will shift the behavior of their organization. In other words, will the exogenous shock in the marketplace create an endogenous shock that necessitates changing their routine and decision-making process?
In the past, SEEs such as marketing and commissions scandals were unveiled publicly and even prompted legislation. One would assume these events would change business operations; however, very little transformation occurred internally. This is again chalked up to the habitual nature of humans. It's easier to stick to the status quo rather than change behaviors, and when consumers don't react in the market, there is no shock to the internal operations of an organization.
With this single global SEE, there's no ignoring its impact on consumers. Gallup recently reported that 51% of adults in the U.S. are consciously spending less money in light of this shared experience. Considering consumer spending accounts for over 60% of GDP, there's no denying the effect this decrease in spending has on economic growth.
So, the question remains, how should businesses respond to this SEE that is poised to shock their internal systems?
Making decisions in the moment — even during uncertain times
The fact of the matter is that businesses need to make better, faster, and more cost-effective decisions to respond to the changing global situation. It's easy for people and organizations to fall into two camps when it comes to how they choose their actions during uncertain times.
Many dwell on the past, musing about when things will return to normal and basing their decisions on previous patterns and routines. On the other hand, some institutions are already looking toward the future and trying to predict and plan for how they will operate months or years from now when things settle. Stuck in either of these mindsets, businesses fail to make better decisions to respond to the circumstances at hand.
Instead of dwelling on the past or looking toward the future, businesses need to determine how to respond to the immediate event disrupting their system. The reality is that businesses are currently facing the "new normal" and must adapt to having a smaller market size and need to acquire new customers without having costs go up.
Once businesses acknowledge that their current routine does not work in response to a SEE, they are able to make strategic changes to absorb the shock rather than be dismantled by it.
Reevaluating the decision-making process
The rate at which a customer can change their decision to purchase an organization's product or service determines a business' market tempo. With consumer goods, there are milliseconds between when a consumer decides to purchase one product over an alternative. Acknowledging the consumer activity is the first step in determining how a business is affected by a SEE.
For instance, with what we're experiencing today — a SEE resulting in less consumer spending — it's important for businesses to produce better and faster answers to their complex questions to achieve broader market coverage. To maximize the efficiency and effectiveness of their response efforts, businesses must redesign the decision-making process with their market tempo in mind.
To achieve better, faster, and cost-effective decision-making, ask your organization:
1. How are decisions made? Is your business utilizing self-service analytics tools to make decisions internally, or is it outsourcing these operations? Using in-house tools is a cost-effective way to streamline decision making and promote collaboration between teams.
2. Why are decisions being made? There are typically two distinct goals in mind when making a decision: To win shares or generate demand. When a SEE occurs, demand is no longer a given, so teams need to be more strategic about why they are making decisions in times of uncertainty.
3. How are you investing? Once the model is in place, what does your organization do with those decisions? Insight from analytics is only beneficial if it's able to be carried out.
With these three questions in mind, businesses are able to change their decision-making model to adapt to changing circumstances and improve their goals in the moment — not in the past or future. Concentric offers the what-if software to manage uncertainty, and make informed decisions in times of uncertainty, learn more about our platform today.