Intuition in Strategy Development: Two can be as bad as one? Maybe not.

Reading the McKinsey article “The four global forces breaking all the trends” gives food for thought to mull over how intuition gets in the way of developing strategies. While the article focusses only on how relying on intuition can affect business strategies, I would like to turn our attention to an idea that is slightly less headstrong. “Saigon, 1965” is an episode from the podcast “Revisionist History” by Malcolm Gladwell that shows how intuition affects strategies in either direction. The episode focusses on how one of the most ambitious studies on enemy combatants led by the RAND Corporation for the Pentagon became a classic example of Intelligence Failure. The study revolves around the Vietnam War and was majorly made up of interviewing captured North Vietnamese soldiers in order to measure their morale and determine whether America’s strategy of relentless bombing will make them give up? The story shows how a young Vietnamese woman, a refugee from Nazi Germany, and a brilliant Russian émigré each interpreted the enemy information differently, all because their thought process was shaped by their upbringing. It took a long time for RAND Corporation to correct the initial military intelligence formed that the North Vietnamese will crumble, all these conflicting interpretations based on the same 62000 pages of transcript collected from interviewing soldiers, one of the most detailed portraits of an enemy ever created. My takeaway from this podcast is that one man’s intuition was right and another’s was not.

Moving on to a Harvard Business Study of why Kodak failed when the camera industry faced digitization. Kodak was the first to invent the digital camera, however, they were myopic and wanted to protect their film photography business. As a result, they did not market it until it was too late when Sony and Canon had already captured a large market. The way I see it, it was their core values and intuition that led them to fail on the marketing front. However, don’t those same values also contribute to why they pioneered the digital camera to start with.

From the above examples, I am reminded of a time when I had to make an analogous decision. Fresh out of college on my first job, I was faced with the not-so-common situation for someone my age to have enough savings to invest and the choices of how to do so. One choice was to go with my father’s advice who sides with the more safe options such as fixed deposits with retail banks. Another choice was my brother’s suggestion to look at newer options such as mutual funds. The safer choice locks your money for a longer duration and does not have a return that matches the projected inflation. This, however, is tried and tested for decades. The mutual funds, on the other hand, are susceptible to risk with a shorter lock-in period but proven to have cases of at least 5x more return. What I ended up doing was ignore neither the old strategy of investing nor the new. I invested in a combination, leaning more towards the riskier option because I felt it is okay to do so at a younger age with relatively lesser responsibilities. 3 years later, I feel the decision was good because it lets me sleep in peace knowing part of my hard earned money is safe and that the other part of it is growing at a good enough pace.

Therefore, there seems to be reason to believe that we may benefit from a combination of holding on to intuition as well as resetting it rather than following just either approach rigidly to inform strategies. Diversification brings to light the value of each perception.

References:
Anthony, S. (2017, April 24). Kodak's Downfall Wasn't About Technology. Retrieved from https://hbr.org/2016/07/kodaks-downfall-wasnt-about-technology

Gladwell, M. (n.d.). Revisionist History Episode 02. Retrieved from http://revisionisthistory.com/episodes/02-saigon-1965