Paul J.H. Schoemaker: A second interview by Bob Morris

Paul J.H. Schoemaker is a pioneer in the field of decision sciences, among the first to combine the practical ideas of decision theory, behavioral economics, scenario planning, and risk management into a set of strategic decision-making tools for managers. He is co-author of a landmark book on the subject, Winning Decisions: Getting It Right the First Time. He has written nine books, the latest of which is Brilliant Mistake: Findings Success on the Far Side of Failure (Wharton Digital Press 2012). In addition, he has written over 100 academic and applied papers, which have appeared in such diverse journals as the Harvard Business Review, the Journal of Mathematical Psychology, Brain and Behavioral Sciences, and The Journal of Economic Literature. Given their global applicability, his writings appear in at least 14 languages. His scholarly work ranks in the top one percent in academic citations globally as measured by the International Science Index (www.ISIHighlyCited.com).  He is also an entrepreneur: he is founder and executive chairman of Decision Strategies International, Inc. Finally, Paul is a dedicated educator: he is research director of the Mack Center for Technological Innovation at the Wharton School of the University of Pennsylvania, served for five years as a director of the Decision Education Foundation, conducted hundreds of lectures and executive seminars around the world. A native of the Netherlands, Paul lives on the East Coast with his wife; they have two children.

Here is my interview of Paul. To read the complete interview, please click here.

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Morris: When and why did you decide to Brilliant Mistakes?

Schoemaker: Two issues have always intrigued me.  First, when the founder of Honda claims that success is 99% failure, I wonder why we label the necessary steps toward success in such a negative way?  Failure and its twin sister “mistake” too often get a bad rap.  Second, when executives tell me that they learned the most in their careers from mistakes, I wonder why they don’t make a few more.  In the book, I suggest that we should make more mistakes (given how valuable they often are), but most people deeply reject that seemingly silly notion.  I was also fascinated with Thomas Watson’s counter-intuitive advice, as founder and Chairman of IBM, that if you want to succeed faster, you need to make more mistakes.  Our ambivalence about mistakes in business seemed an underdeveloped topic to me, especially the paradoxical notion that some errors will prove to be brilliant over time.

To learn maximally from mistakes, we need to commit more errors than we deem optimal as judged within the bounds of our limited rationality.  This idea may be hard to swallow.  Yet, it is the quintessential insight of this book. To my way of thinking, mistakes can be brilliant in two ways.  The first is to learn from an unexpected setback so much that it starts to dwarf the cost of the mistake.  The second way, which is more difficult to achieve, is to create strategies, organizations or cultures where people can make the types if mistakes where the learning benefits far exceeds the cost of the mistake.

Morris: Were there any head-snapping revelations while writing it? Please explain.

Schoemaker: Hardly any “head-snapping revelations,” but certainly a few surprises. Successful people tend to have a different view about mistakes than most ordinary people.  Not only are they more tolerant of them (in themselves and others), but they often embrace them.  Notable examples are Steve Jobs who celebrated his mistakes during a commencement speech at Stanford, or C.K. Rowling who argued that she could not have produced the astoundingly successful Harry Potter series (books, movies, accessories) without having hit rock bottom first.

In the arts and humanities, people embrace mistakes more readily than in business, I feel.  As trumpet great Wynton Marsalis put it so well, if you are not making mistakes, you are not playing jazz – you are not trying.  I believe the same applies to life, since that requires a great deal of improvisation as well.  I don’t think that perfectionists, or people who eschew mistakes for other reasons, realize their full potential as human beings, either for themselves or others

A surprising conclusion is that people who are more risk-averse should make more deliberate mistakes, since they can be used as hedges. This was counter-intuitive to me at first.  A strong portfolio case can be made for investing in mistakes.  For a risk-averse decision maker, it may be worth putting some money in a project expected to yield a loss provided this investment offers a sufficient hedge in case other investments sour.  Even though that seemingly inferior project will not raise profit expectations, it can help reduce losses in case bad scenarios happen.  Similarly, a deliberate mistake can be viewed as a hedge against conventional wisdom, one that will have a high payoff when the majority view of the crowd happens to be wrong (but a loss otherwise in all likelihood).

Morris: Please explain the approach you take in the book to establish a case for making brilliant mistakes.

Schoemaker: In the book, I draw more on behavioral decision theory and its close cousin, behavioral economics, than portfolio theory or options thinking.  Because humans suffer from bounded rationality and furthermore don’t know what they don’t know, the only way to overcome myopic frames, overconfidence, and incremental career progress is to innovate beyond the bounds of our self-limiting world views.  I describe a long list of past business mistakes – as judged by the conventional wisdom at the time – that proved to be brilliant.  These include personal copiers, selling via pet stores, ATM machines, credit cards for students, organic food, fractional jet ownership, and tobacco-free cigarettes.  Just as these ideas were ridiculed at the time, there are many silly ideas floating around today in business that will prove to be brilliant in the future.  The challenge for managers is to recognize them, and this can only happen if leaders create sufficient space for productive mistakes to occur.  In most companies, brilliant mistake may already have been made, but the brilliant part lies dormant because there is little appetite or capacity to mine the mistake.  Since the tuition was paid, why not extract the lesson?

Morris: All of your previous books are research-driven. Is that also true of Brilliant Mistakes?

Schoemaker: I build on the strong foundation of decades of research in behavioral economics and decision psychology.  I offer a practical plan for separating destructive from constructive mistakes, for learning to make more of the brilliant kind.  I encourage leaders to embrace this quality, to milk it for all of its evolutionary and learning potential.   For those rationalists who deem the notion of a Brilliant Mistake to be an oxymoron, I would recommend that they take a portfolio view. A strong case can be made for investing in projects that are expected to yield a negative return. For a risk-averse decision maker, it may be worth putting some money in a project expected to yield a loss provided this investment offers a sufficient hedge in case other investments sour.  Even though that seemingly inferior project will not raise profit expectations, it can help reduce losses in case bad scenarios happen. Similarly, a deliberate mistake can be viewed as a hedge against conventional wisdom, one that will have a high payoff when the majority view of the crowd happens to be wrong (but a loss otherwise in all likelihood).  My book provides the formal argument for those interested.

Morris: Mistakes can either be intentional or unintentional. Please cite a few examples of mistakes (i.e. those that are deliberate and purposeful) can be beneficial.

Schoemaker: Mistakes have been the cause of great discoveries and revolutionary new insights.  It was bad judgment that led the Wright brothers to try to fly: everybody knew at the time that humans couldn’t fly and never would.  In 1895, just eight years before their fragile construct took to the air, Lord Kelvin, the esteemed British mathematician, physicist and president of the British Royal Society, had unambiguously declared that “heavier-than-air flying machines are impossible.”

It was relative ignorance that prompted Albert Einstein, a lowly patent clerk in a Swiss law office, to pose some silly questions about the nature of time, space and energy.  Albert Einstein made at least 23 mistakes in his published (and refereed) scientific publications.  Some of these were necessary to achieve his monumental insights about the deeper forces of nature.

At a more mundane level, I describe a young woman deciding to date any person asking her out and in the end marrying someone she wouldn’t have given a second look.  She was willing to test her preconceived notions about Mr. Right and companies should perhaps do likewise when hiring new talent.  Hiring in your own image is seldom the best approach.

Morris: In the Preface to Brilliant Mistakes, you observe, “For most people, the problem is not that they make too many mistakes but too few.” Are there any examples of that in your own experiences thus far?

Schoemaker: Although there has not been that much brilliance in my own life, there are several personal examples that I would consider “brilliant” mistakes at my own level.  One concerns my decision to take a two-year sabbatical with Royal Dutch/Shell’s planning group in London just after having been promoted to associate professor at the University of Chicago.  Many colleagues deemed this a mistake since my academic career was going well and leaving the world of scholarship might cast doubt on my commitment to research etc.   This risk was indeed real, and my two-year absence from publishing probably did not help my academic career.  But it also opened up new vistas about life beyond academia and led me to found Decision Strategies International, which for 20 years now has served leading companies around the world in the fields of strategy and decision making.

The second mistake concerned our family’s move from Chicago to Philadelphia without there being any single compelling reason to do so.  We were quite happy in Chicago but I left nonetheless to be closer to family, friends and colleagues I had worked with in academia and business.  It turned out to be a great move, without regrets and many new experiences that Chicago would probably not have offered.

In the book I describe a third example, where our company decided – against its better judgment – to respond to Requests for Proposals (RFPs) that came in over the transom.  We had good reasons to believe it would be a waste of time to pursue such RFPs, but then decided to challenge this key assumption.  It turned out that we were wrong; some of these random RFPs proved quite valuable to us in terms of new clients and growth.

Morris: Which factors have the greatest impact on a decision’s outcome? Which of them seems to have the greatest impact? Why?

Schoemaker: Companies that want to compete on innovation are well-advised to become more error-tolerant in practice and develop better methods for capturing the lessons from mistakes.   Such companies should also emphasize that managers (especially younger ones) who are involved in project failures, are to be viewed as being on a fast learning track, rather than an exit track.  Given the significance of failures and mistakes that have led to success, there is potential value from the lessons learned if they are documented, captured and shared. Career development benefits should follow for those involved in the right kinds of failure, assuming they learn and apply the lessons to avoid mistakes in the future.  This can be tested via performance reviews as well as actual on-the-job behavior.

The deeper challenge in all this is that leaders must learn how to celebrate the egg that people invariably have on their face, award.  This president of an Ann Arbor business decided to institute a Golden Egg to make sure his organization would extract as much learning as possible from past failures.  This story is detailed in the book.  His viewpoint was that mistakes are valuable assets that belong to the organization.  To hide them and not share the lessons would amount to destroying shareholder wealth.  At first, few managers wanted to receive the Golden Egg award, but after a while it became much sought after.  Winners would proudly regale visitors in their office with the tale of their failed venture and proudly share its lessons.   The president created a true learning culture.

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To read the complete interview, please click here.

Paul cordially invites you to check out the resources at these websites:

Home Page: please click here.

Wharton’s Mack Center: please click here.

His Amazon page: please click here.

His Wikipedia page: please click here.

A video: please click here.

4 Secrets of Great Critical Thinkers

Here is an excerpt from an excellent article written by Paul J. H. Schoemaker and featured online at the Inc. magazine website. To read the complete article, check out other resources, and obtain deep-discount subscription information, please click here.

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The best problem solvers see a complex problem through multiple lenses.

Here’s how to become a better strategic thinker and leader yourself.

In 2009, J D Wetherspoon, a chain of more than 800 pubs in the UK, was facing declining sales. Demand for beer had been down for five years. In addition, pricing pressure from super market chains was intense, and higher alcohol taxes further squeezed its already tight margins.

Most people see it as a sales problem and recommend better marketing and promotion. But this reflex may be wrong. In Wetherspoon’s case, the company examined the problem more deeply, looked at data, and framed the situation from multiple angles. In the end, they found the real problem: A subtle but profound shift in consumer preferences.  As a result, the chain responded with much bolder actions, transforming all its pubs into family friendly cafes during day hours.

The strategy worked. Wetherspoon saw its earnings per share jump by 7.1 percent in the first year. Two years after this frame shift (2011), it has maintained its earnings per share and, with the investment in this new strategy, its free cash flow is up 12.9 percent. Exploring multiple problem framings, by zooming out rather than in, gets you to the root of issues and more creative solutions.

If you fail to do this, you risk solving the wrong problem.

Ironically, the more experience you have, the harder it will to break from conventional mindsets. Leading companies often get stuck in old business models. Kodak engineers developed an early version of the digital camera, while the rest of the company remained focused on chemical film processing. Microsoft executives doubted the value of online search as a revenue model. Barnes and Noble seemed convinced that people would always want a physical book in their hand.

In his book Thinking, Fast and Slow, Nobel laureate Daniel Kahneman attributes shallow framing to people substituting easy questions for hard ones. We often miss the crux of the issue by drawing imaginary connections between what we see and what we expect to see. As our own book Winning Decisions explains, the essence of critical thinking is to slow down this process, learn how to reframe problems, see beyond the familiar and focus on what is unique in any important decision situation. Here are [two of] four ways to hone these critical thinking skills:

1. Slow down.  Insist on multiple problem definitions before moving towards a choice. This doesn’t need to be a time consuming process – just ask yourself or the group, “How else might we define this problem – what’s the core issue here?” This should become a standard part of every project scoping conversation you have, especially when the issue is new or complex

2. Break from the pack. Actively work to buck conventional wisdom when facing new challenges or slowly deteriorating situations. Don’t settle for incremental thinking. Design ways to test deep held assumptions about your market. Of course, different is not always better so seek to understand the wisdom inherent in conventional wisdom as well as its blind spots.

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This article was co-authored with John Austin and is second of in a series examining the key components of strategic aptitude: anticipating, thinking critically, interpreting, deciding, aligning, learning. For an overview of all six skills see 6 Habits of Strategic Thinkers.

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To read the complete article, please click here.

Paul J. H. Schoemaker just published Brilliant Mistakes: Finding Success at the Far Side of Failure (Wharton Digital Press). He serves as Research Director of Mack Center for Technological Innovation at the Wharton School of the University of Pennsylvania, where he teaches strategy and decision making. He was previously at the Univ. of Chicago, from where he spent an extended sabbatical with the scenario planning group of Royal/Dutch Shell in London. Paul is also the founder and chairman of Decision Strategies International, Inc, a consulting and training firm specializing in strategic planning, executive development and technology solutions. He has written more than 100 academic and applied papers, and is the (co)-author of several earlier business books including Decision Traps, Decision Sciences, Wharton On Managing Emerging Technologies, Winning Decisions, Profiting from Uncertainty, and Peripheral Vision.

6 Habits of True Strategic Thinkers

shutterstock images

Here is an excerpt from an outstanding article written by Paul J. H. Schoemaker and featured online by Inc. magazine. To read the complete article, check out other resources, sign up for free email alerts, and obtain subscription, please click here.

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In the beginning, there was just you and your partners. You did every job. You coded, you met with investors, you emptied the trash and phoned in the midnight pizza.

Now you have others to do all that and it’s time for you to “be strategic.”

Whatever that means.

If you find yourself resisting “being strategic,” because it sounds like a fast track to irrelevance, or vaguely like an excuse to slack off, you’re not alone. Every leader’s temptation is to deal with what’s directly in front, because it always seems more urgent and concrete. Unfortunately, if you do that, you put your company at risk. While you concentrate on steering around potholes, you’ll miss windfall opportunities, not to mention any signals that the road you’re on is leading off a cliff.

This is a tough job, make no mistake. “We need strategic leaders!” is a pretty constant refrain at every company, large and small. One reason the job is so tough: no one really understands what it entails. It’s hard to be a strategic leader if you don’t know what strategic leaders are supposed to do.

After two decades of advising organizations large and small, my colleagues and I have formed a clear idea of what’s required of you in this role. Adaptive strategic leaders — the kind who thrive in today’s uncertain environment – do six things well. [Here are the first two.]

1. Anticipate: Most of the focus at most companies is on what’s directly ahead. The leaders lack “peripheral vision.” This can leave your company vulnerable to rivals who detect and act on ambiguous signals. To anticipate well, you must:

o  Look for game-changing information at the periphery of your industry: Search beyond the current boundaries of your business
o  Search beyond the current boundaries of your business
o  Build wide external networks to help you scan the horizon better

2. Think Critically: “Conventional wisdom” opens you to fewer raised eyebrows and second guessing. But if you swallow every management fad, herdlike belief, and safe opinion at face value, your company loses all competitive advantage. Critical thinkers question everything. To master this skill you must force yourself to:

o  Reframe problems to get to the bottom of things, in terms of root causes
o  Challenge current beliefs and mindsets, including your own
o  Uncover hypocrisy, manipulation, and bias in organizational decisions

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Do you have what it takes?

Obviously, this is a daunting list of tasks, and frankly, no one is born a black belt in all these different skills. But they can be taught and whatever gaps exist in your skill set can be filled in. I’ll cover each of the aspects of strategic leadership in more detail in future columns. But for now, test your own strategic aptitude (or your company’s) with the survey at http://www.decisionstrat.com. In the comments below, let me know what you learned from it.

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To read the complete article, please click here.

Paul J. H. Schoemaker: Founder and Chairman, Decision Strategies International. Speaker, professor, and entrepreneur. Research Director, Mack Center for Technological Innovation at Wharton, where he teaches strategic decision-making. Latest book: Brilliant Mistakes: Finding Success on the Far Side of Failure.

 

Paul J.H. Schoemaker: An interview by Bob Morris

Paul Schoemaker is the founder and chairman of Decision Strategies International, Inc., a consulting and training company specializing in strategic planning and executive development. He is also a co-founder and chairman of Strategic Radar Inc. and serves as Research Director of the Mack Center for Technological Innovation at the Wharton School. He specializes in decision making and strategic thinking, working with companies worldwide. His books include Decision Traps with J. Edward Russo, Wharton On Managing Emerging Technologies that he co-edited with George S. Day, Winning Decisions (with Russo), Profiting from Uncertainty, and more recently, Peripheral Vision co-authored with Day.

Here is an excerpt from an interview I conducted a few years ago. Since then, Paul has published Brilliant Mistakes: Finding Success on the Far Side of Failure (Wharton Digital Press, November 8, 2011). To read the complete interview, please click here.

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Morris: Before we get into a discussion of some of your specific books, Paul, please explain what the Mack Center for Technological Innovation is and does.

Schoemaker: As we explain at our Web site (http://emertech.wharton.upenn.edu/), in May 1995, the Wharton School established the Emerging Technologies Management Research Program to address the need for new best practices, strategies and competencies in the field of emerging technologies…under the supervision of a Core Team of senior Wharton faculty and staff representing management, marketing and strategic planning.  In 2001, the program was brought under the newly created the Mack Center for Technological Innovation, with a broad mandate to continue and expand our research and to communicate our insights to firms around the world, and to help prepare tomorrow’s future business and technology leaders being educated at Wharton.

The goals of the ET Program are to:

• Provide research-based insight and guidance to firms competing in emerging technologies

• Identify (and where necessary, develop) new best practices and competitive strategies, to replace traditional practices that no longer apply to emerging technology-based industries

• Offer the Wharton School as a respected neutral venue for open discussion of critical issues and problems in emerging technologies

•  Report the results to corporate and academic communities

• Include the results in classroom curricula, to be shared with faculty and students in undergraduate, graduate and executive management education.

We believe that emerging technologies represent a “different game” that doesn’t fit the culture and business approaches of most established firms. Many traditional management principles and methods do not address the high risks and uncertainties that characterize emerging technologies. Better practices and strategies are needed. General and specific insights come from studying patterns of success and failure across a wide variety of emerging technology-based industries. The best performing companies are those that are willing to abandon old technologies and embrace new ones. Early stage success does not assure eventual success in development and commercialization of emerging technologies.

Morris: You co-authored a book about “decision traps” with Jay Russo. What exactly are these “traps”?

Schoemaker: Typically, people fall victim to solving the wrong problem, being overconfident, shooting from the hip, repeating the same mistake (i.e. not learning), assuming that groups or team necessarily make better decisions, etc. Dividing the decision-making process into discrete stages can provide that map to avoid these landmines. These four stages provide the backbone of any decision process, and consciously or not, every decision-maker goes through them. Here they are:

1. Framing. Framing determines the viewpoint from which decision-makers look at the issue and sets parameters for which aspects of the situation they consider important. It determines in a preliminary way the criteria that would cause them to prefer one option to another.

2. Gathering intelligence. Intelligence gatherers must seek the knowable facts and options and produce reasonable evaluations of “unknowables” to enable decision-making in the face of uncertainty. They should avoid such pitfalls as overconfidence in their current beliefs and the tendency to seek information that confirms their biases.

3. Coming to conclusions. Sound framing and good intelligence don’t guarantee a wise decision. People cannot consistently make good decisions using seat-of-the-pants judgment alone, even with excellent data in front of them. A systematic approach—particularly in group settings—leads to more accurate choices, and it usually does so far more efficiently than hours spent in unorganized thinking.

4. Learning from experience. Only by systematically learning from the results of past decisions can decision-makers continually improve their skills. Further, if learning begins when a decision is first implemented, early refinements to the decision or implementation plan can be made that could mean the difference between success and failure.

In real life, of course, the process is not as linear—or as distinct—as our four stages suggest. Indeed, information discovered in the intelligence-gathering stage may inspire you to go back and reframe your issue. Moreover, a complex problem (the relocation of your business, for instance) may entail a series of smaller decisions, each of which may involve several framing decisions, several intelligence-gathering efforts, and several coming-to-conclusions steps.

Morris: Now please shift your attention to Peripheral Vision that you co-authored with George Day. Important business books are often written in response to a compelling question. For example, Jim Collins and his research associates set out to learn how a good or even mediocre company could become great. Was there such a question that you and Day attempted to answer in Peripheral Vision?

Schoemaker: Yes. We need to ask: “Why do so many organizations get blindsided – in terms of threats as well as opportunities – and how can they avoid this?”

Too often we overlook events unfolding at the far edges of our business because signals from the periphery are usually weak and ambiguous at first.  Sometimes, however, these early signals foreshadow major problems––like new competitors or products that threaten the company––or they could present significant opportunities. Managers and their organizations build a superior capacity to recognize and act on these signals before it is too late.

Morris: What is a “vigilance gap”? How can it be avoided or at least diminished?

Schoemaker: In a survey of senior executives, we found that less than 20 percent of firms possess sufficient peripheral vision to stay ahead of rivals and potential threats in the future. The following five steps can improving your peripheral vision:  (1) Setting the scope right, (2) Using multiple methods to scan, (3) Avoiding common traps to interpret peripheral signals, (4) Knowing when and how to probe further, (5) Understanding how to act judiciously to stake out options early.  In addition, leaders can (6) enhance their organization’s capacity for peripheral vision and (7) become more vigilant themselves.

Cases we describe in our book include Anheuser-Busch’s anticipation of low-carb beers, the impact of Bratz dolls on Mattel’s Barbie dynasty, the BBC’s response to the digital revolution in communications, and strategies of Philips in addressing the emergence of LED technology in lighting.

Morris: For those who have not as yet read your brilliant book, please explain what the “Strategic Eye Exam” is and why you and George Day recommend that it be taken.

Schoemaker: While peripheral vision is more important than ever, there are strong indications that many organizations are not up to the task. A survey of 140 corporate strategists found that fully two-thirds admitted that their organizations had been surprised by as many as three high-impact competitive events in the past five years. Moreover, 97 percent of the respondents said their companies lacked any early warning system to prevent such future surprises.[i]  A survey we conducted with more than 100 global senior managers found that the growing need for peripheral vision continues to outstrip the capabilities of organizations, resulting in a “vigilance gap” as shown in Figure 1.[ii]  Over 81% of the respondents perceived their future need for peripheral vision to be greater than their current capacity.

Whether or not your organization’s peripheral vision needs change depends upon your current capability as well as the need for peripheral scanning in terms of your strategy, the nature of your business, and your industry environment. The “strategic eye test” helps an organization assess its future need in peripheral vision relative to its current capability.

Morris: Looking ahead is always perilous but if we do so with peripheral vision, we can at least recognize “weak signals” which are especially significant. In your opinion, where are we most likely to find them?

Schoemaker: At the edges of your business; look at five key domains, namely social, technological, economic, environmental or political.

Morris: Given your response to the previous question, here’s a question you are probably asked all the time. How can peripheral vision help us to recognize those “weak signals”?

Schoemaker: Develop good external information networks, create a prepared mind, and insist on multiple interpretations for weak signals.

Notes

[1] Leonard Fuld, “Be Prepared,” Harvard Business Review,  November 2003, pp. 1-2.

[1] A self-assessment on a scale of 1-7, based on responses from participants in senior management programs at Wharton and INSEAD. Details of this diagnostic “Strategic Eye Exam” used to estimate these results may be found in Appendix A of our Peripheral Vision book.  Readers can take the eye test themselves at www.thinkdsi.com.

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To read the complete interview, please click here.

Interview: Paul J.H. Schoemaker

Paul J.H. Schoemaker

Schoemaker is the founder and chairman of Decision Strategies International, Inc., a consulting and training company specializing in strategic planning and executive development. He is also a co-founder and chairman of Strategic Radar Inc. and serves as Research Director of the Mack Center for Technological Innovation at the Wharton School. He specializes in decision making and strategic thinking, working with companies worldwide. His books include Decision Traps with J. Edward Russo, Wharton On Managing Emerging Technologies that he co-edited with George S. Day, Winning Decisions (with Russo), Profiting from Uncertainty, and most recently, Peripheral Vision co-authored with Day.

Morris: Before we get into a discussion of some of your specific books, Paul, please explain what the Mack Center for Technological Innovation is and does.

Schoemaker: As we explain at our Web site (http://emertech.wharton.upenn.edu/), in May 1995, the Wharton School established the Emerging Technologies Management Research Program to address the need for new best practices, strategies and competencies in the field of emerging technologies…under the supervision of a Core Team of senior Wharton faculty and staff representing management, marketing and strategic planning.  In 2001, the program was brought under the newly created the Mack Center for Technological Innovation, with a broad mandate to continue and expand our research and to communicate our insights to firms around the world, and to help prepare tomorrow’s future business and technology leaders being educated at Wharton.

The goals of the ET Program are to:

• Provide research-based insight and guidance to firms competing in emerging technologies

• Identify (and where necessary, develop) new best practices and competitive strategies, to replace traditional practices that no longer apply to emerging technology-based industries

• Offer the Wharton School as a respected neutral venue for open discussion of critical issues and problems in emerging technologies

•  Report the results to corporate and academic communities

• Include the results in classroom curricula, to be shared with faculty and students in undergraduate, graduate and executive management education.

We believe that emerging technologies represent a “different game” that doesn’t fit the culture and business approaches of most established firms. Many traditional management principles and methods do not address the high risks and uncertainties that characterize emerging technologies. Better practices and strategies are needed. General and specific insights come from studying patterns of success and failure across a wide variety of emerging technology-based industries. The best performing companies are those that are willing to abandon old technologies and embrace new ones.     Early stage success does not assure eventual success in development and commercialization of emerging technologies.

Morris: You co-authored a book about “decision traps” with Jay Russo. What exactly are these “traps”?

Schoemaker: Typically, people fall victim to solving the wrong problem, being overconfident, shooting from the hip, repeating the same mistake (i.e. not learning), assuming that groups or team necessarily make better decisions, etc. Dividing the decision-making process into discrete stages can provide that map to avoid these landmines. These four stages provide the backbone of any decision process, and consciously or not, every decision-maker goes through them. Here they are:

1. Framing. Framing determines the viewpoint from which decision-makers look at the issue and sets parameters for which aspects of the situation they consider important. It determines in a preliminary way the criteria that would cause them to prefer one option to another.

2. Gathering intelligence. Intelligence gatherers must seek the knowable facts and options and produce reasonable evaluations of “unknowables” to enable decision-making in the face of uncertainty. They should avoid such pitfalls as overconfidence in their current beliefs and the tendency to seek information that confirms their biases.

3. Coming to conclusions. Sound framing and good intelligence don’t guarantee a wise decision. People cannot consistently make good decisions using seat-of-the-pants judgment alone, even with excellent data in front of them. A systematic approach—particularly in group settings—leads to more accurate choices, and it usually does so far more efficiently than hours spent in unorganized thinking.

4. Learning from experience. Only by systematically learning from the results of past decisions can decision-makers continually improve their skills. Further, if learning begins when a decision is first implemented, early refinements to the decision or implementation plan can be made that could mean the difference between success and failure.

In real life, of course, the process is not as linear—or as distinct—as our four stages suggest. Indeed, information discovered in the intelligence-gathering stage may inspire you to go back and reframe your issue. Moreover, a complex problem (the relocation of your business, for instance) may entail a series of smaller decisions, each of which may involve several framing decisions, several intelligence-gathering efforts, and several coming-to-conclusions steps.