When it comes to analysing the reasons why a particular business or entrepreneur has succeeded or failed, hindsight is a wonderful thing. It leads us to ignore the role of luck, put talent on a pedestal, and treat every event in the story as one in a causal chain which led inevitably to a particular conclusion.
In Black Box Thinking, former table tennis champion Matthew Syed warns against “the narrative fallacy”, which leads us to diagnose the causes of our mistakes in retrospect – from the top-down and not the bottom-up. “We are going to trust our hunches, our existing knowledge and the stories we tell ourselves about the problems we face, rather than testing our assumptions and seeing their flaws and learning,” says Syed. He tells City A.M. how business should learn from their mistakes.
Embrace your ignorance
“We find out what we don’t know by accepting that we don’t have a good handle on things,” says Syed. “For centuries, scientists thought they had all the right answers. The Earth revolved around the sun, and if anyone challenged that assumption, they were killed. It was only when the scientific community accepted that it could improve that it started conducting experiments.”
In business, as in sport, there is rarely a silver bullet. Success is achievable only through identifying areas which can be improved, and ensuring that they are.
“In Formula One, Mercedes’s pit-stop team can change a car tyre in 1.6 seconds, and believe that they can improve that time still further. It is constantly probing. But, if you look at many local authorities, they’re just interested in defending the status quo. Think of the thousands of marginal gains which could be exploited in healthcare – better diagnostic training, changes to surgical procedures and patients’ drug regimes. There needs to be the curiosity to say: ‘We’re not perfect. We can get better, so what can we do?’.”
Incentives and egos
Certain industries have structures which encourage the interrogation of errors. “The airline industry finds out where its weaknesses are through near-miss events, which are then statistically analysed,” says Syed. There is a framework in place to encourage pilots to report their mistakes, he explains. Each aeroplane has two black boxes which record pilots’ conversations and the commands they send to the on-board computers. Those recordings cannot be used to prosecute them if something goes wrong, encouraging transparency.
In healthcare, however, the attitude towards failure is entirely different, and not because doctors may be threatened with career-damaging lawsuits. “In healthcare, competence is often equated with perfection. Making mistakes is seen to demonstrate ineptness. The very idea of failing is threatening.”
Creating a culture where failure is not maligned or ridiculed is, he thinks, crucial to a firm’s success. “Jeff Bezos’s recent letter to Amazon shareholders explained that the company is an incubator of experimentation. Dyson produced 600 prototypes in the development of its most recent invention – the hairdryer.”
It's not all about talent
Hiring for talent alone may be a recipe for failure. Syed says that around 25 per cent of FTSE companies have a growth mindset culture, because they recognise that an employee’s ability to adapt is vital.
This isn’t simply because new hires who embrace the need to improve will be more likely to interrogate a business’s shortcomings. But because if a company thinks that its employees are perfect, it will use this certainty to justify mistakes. “That’s when you get cover-ups, like the Enron scandal,” he says. “Cover-ups are particular to high-talent companies. They don’t want to admit that anything is less than perfect.”
Black box thinking: Marginal gains and the secrets of high performance by Matthew Syed is available now (John Murray, £9.99).