Power of Observation: What Purchasers Can Learn From

Darwin

Track 2-Strategic Cost Analysis and Management

The 63rd Annual Southwest

Purchasing ConferenceBy

Thomas L. Tanel, C.P.M., CTL, CCA, CISCM ,

CATTAN Services Group, Inc.College Station, TXcattan@cattan.com

Created by CATTAN Services Group, Inc. © 2009

The Power of A Theory and Darwin’s Observations

Power of a theory

=

That which it explains  

 That which it needs to

assume in order to do the explaining 

Darwin and the Power of Observation Here was a man who applied his powers of

observation and rigorous testing to everything he looked at in great detail, from the movements in plants and barnacles, to how pigeons navigate, to the importance of earthworms in soil health and ecology.

The essence of Darwinism is nothing more than, that simple-minded observation, as near as we can tell.

Darwin and the Power of Observation What Darwin did

for most of his career was observe.

Only later on did he come up with a theory to explain his observations.

Darwin and Survival of the Fittest It is so simple that in the guise of “survival of

the fittest” (the renaming that Darwin adopted from Herbert Spencer): the fittest are defined as those that survive, so the catchphrase amounts to “those that survive, survive.”

But Darwin didn’t define the fittest as those that survive. His “fittest” were those endowed with the best equipment to survive, and that makes all the difference.

As Darwin observed (and he himself was at pains to point out), natural selection is all about differential survival within species, not between them.

The Power of Observation Charles Kettering, the famous inventor, once said: “A

problem well stated is a problem half solved.” This implies that a good portion of problem solving

should be devoted to a thorough understanding of what’s going on [observation] before any corrective action steps are taken.

In many cases, too much time is spent on proposing various solutions before the problem has been correctly defined.

Observation is a powerful technique that can be used to help understand problems. Often, clues about how to solve a problem can come from simply observing the process .

Tips for Making Observations Use all of your senses (sight, hearing,

touch, and smell) to make qualitative observations.

Review your observations to be sure they are accurate and objective.

Whenever possible, count or use measurement devices to make quantitative observations. Be sure to include units of measure with them.

Check your observations to be sure that they are statements about information gained through your senses, not explanations of what you observed.

What Do You Observe?

A Woman

at a Vanity or a

Skull?

Observation and “Thin-Slicing”

Activate your powers of observation.

Writer Malcolm Gladwell refers to this process in his book Blink as "thin-slicing."

Thin-slicing calls upon the use of limited information to come to conclusions.

Colin Powell on the Use of Limited Information to Come to Conclusions

“When I am faced with a decision…I dredge up every scrap of knowledge I can…I use my intellect to inform my instinct. I then use my instinct to test all this data. Hey, instinct, does this sound right? Does it smell right, feel right, fit right?

We do not have the luxury of collecting information indefinitely. At some point, before we can have every possible fact in hand, we have to decide.”

Powell on P40 to 70: Thin-Slicing“I have a timing formula, P-40 to 70, in which P

stands for probability of success and the numbers indicate the percentage of information acquired.

I don’t act if I have only enough information to give me less than a 40% chance of being right.

And I don’t wait until I have enough facts to be 100% sure of being right, because by then it is almost always too late. I go with my gut feeling when I have acquired information somewhere in the range of 40-70 percent.”

“Thin-Slicing” and the Power of Observation

Both "thin-slicing" and using the power of observation, are concerned with the challenge of identifying and focusing on only the most significant information.

Marcus Aurelius on Observation

“Observe constantly that all things take place by change, and accustom thyself to consider that the nature of the Universe loves nothing so much as to change the things which are, and to make new things like them. “

Observation in the Land of the Blind “In the land of the blind

the one eyed man is king.”

The thing is, the saying isn't about how many eyes you've got, or how good they are, it's about how well you use them.

Observation in the Land of the Blind:Wake Up and Take Notice So the ability to be blind to

most of what we see and deaf to most of what we hear is quite useful. It helps us get by in life.

Whatever our role we tend to be so busy just getting along that we rarely make the time to sit up and really take notice.

We are in the habit of not looking, of not hearing, and of not noticing.

Practice Observation In the Land of the Blind

Pierre Wack, the influential scenario planner used to refer to himself a “the eyes of the wolf at the front of the pack” at Royal/Dutch Shell.

His view was that: "Scenarios help us to understand today better by imagining tomorrow, increasing the breadth of vision and enabling us to spot change earlier… Effective future thinking brings a reduction in the level of crisis management and improves management capability, particularly change management."

Observation is probably the most succinct description there is of the practice of scenario planning.

Observation and Seeing What’s Invisible As Jonathan Swift said: vision is

the art of seeing things invisible to others.

And why does so much of what's in front of us seem invisible?

Well, perhaps because people only see what they are prepared to see (Ralph Waldo Emerson), and because what we see depends mainly on what we look for (John Lubbock).

Techniques to Become Truly Observant Become hyper-observant of the more discreet

elements of your everyday environment Look for patterns amidst your everyday routines Regard anything out of ordinary patterns as

possibly a risk or intentional distraction Focus on incongruent people, equipment,

processes, methods, material flow, etc. Look beyond what you are shown or told, and Do not tune out familiar surroundings---look

deeper for things that you may have missed

Have You Become Truly Observant?: How Many Human Faces Do You See?

Creativity and Innovation In any organization today, sooner or later the

words "innovation" and "creativity" will come up. Few leaders truly know how to foster creativity

and innovation in their workplace. And even fewer actually do it!!! "The way forward is paradoxically not to look

ahead, but to look around [observation]," explains John Sealy Brown, the director of the Palo Alto Research Center (PARC) for Xerox.

The Practice of Innovation

In most companies today, the “practice” of

innovation can be likened to

the mating of pandas: infrequent, clumsy and

often ineffective.

In most companies today, the “practice” of

innovation can be likened to

the mating of pandas: infrequent, clumsy and

often ineffective.

Sawyer’s “Group Genius” The heart of this book Group

Genius is Sawyer’s proposal that “collaboration is the secret to breakthrough creativity”

He has found that true creativity and innovation only comes through the open sharing of information between groups of individuals.

Sawyer’s “Group Genius” Sawyer discovered that innovation truly emerged

from “small sparks gathering together over time, multiple dead ends, and the reinterpretation of previous ideas”.

True organizational collaboration means letting go of preconceived notions for how to attain success.

When true sharing of ideas is fostered, then real

innovation can occur.

Sawyer’s “Aha” Moment The idea of small sparks, which are small

moments of creativity that, when added together, provide the larger picture for the “Aha” moment.

This “collaboration over time” suggests that great inventions emerge from a long sequence of small sparks.

Collaboration brings small sparks together to generate breakthrough innovation.

Four Step Creative Process1. Preparation: To train

your mind.2. Incubation: To set

back from the problem.

3. Illumination: The idea arises in the mind like a sudden flash.

4. Validation: You have to check the validity of the idea.

Four Step Creative Process—Step 1

Preparation: To train your mind. Concentration and attention play a great role in

preparation Read everything and as much as you can Meet people Keep a log Choose a motivating environment Increase your intellectual capacity

Four Step Creative Process—Step 2

Incubation: To set back from the problem.

Incubation is a contingency phase It means that you have not solved your

problem during the creative session Very often the solution you were looking for

is easily found after a good sleep.

Four Step Creative Process—Step 3

Illumination: The idea arises in the mind like a sudden flash.

Brainstorming Mind Mapping Mind Revolution

Four Step Creative Process—Step 4

Validation: You have to check the validity of the idea.

All of the previous steps aim to produce new ideas. It does not mean that these ideas are worthy or useful. Organize a validation session and discuss with friends,

colleagues, associates, etc. If you get interest and support, it means that your idea is

innovative and that you can start the process of studying the project.

Definition of Critical Thinking

A process by which we use our knowledge and intelligence to effectively arrive at the most reasonable and justifiable positions on issues, and which endeavors to identify and overcome the numerous hindrances to rational thinking.

Critical Thinking Critical thinking is more than

thinking logically or analytically; it also means thinking rationally or objectively.

Logic and analysis are essentially philosophical and mathematical concepts.

Whereas thinking rationally and objectively are broader concepts that also embody the fields of psychology and sociology.

Critical Thinking: Five Step Process Step 1: Adopt the Attitude of a Critical

Thinker Step 2: Recognize and Avoid Critical

Thinking Hindrances Step 3: Identify and Characterize Arguments Step 4: Evaluate Information Sources Step 5: Evaluate Arguments

Adopt the Attitude of a Critical Thinker: Step 1 The first step to becoming a proficient critical

thinker is developing the proper attitude.

Such an attitude embodies the following characteristics:

Open-mindedness

Healthy skepticism

Intellectual humility

Free thinking

High motivation

Recognize and Avoid Critical Thinking Hindrances: Step 2 Each day of our lives we become exposed

to things that hinder our ability to think clearly, accurately, and fairly.

These hindrances can be divided into four categories: Basic Human Limitations Use of Language Faulty Logic or Perception Psychological and Sociological Pitfalls

Identify and Characterize Arguments: Step 3

At the heart of critical thinking is the ability to recognize, construct, and evaluate arguments.

In the context of critical thinking, an argument means the presentation of a reason(s) to support a conclusion(s), or:

Argument = Reason + Conclusion

Evaluate Information Sources: Step 4 Most arguments reference facts to support

conclusions. A critical thinker must have a sound approach for

evaluating the validity of facts. Facts are usually acquired from information

sources such as eyewitness testimony or people claiming to be experts.

These sources are typically cited in the media or published in reference books.

Evaluate Information Sources : Step 4

In order to assess credibility, truth, and exactness, the critical thinker must seek answers to the following types of questions:

1. Does the information source have the necessary qualifications or level of understanding to make the claim (conclusion)?

2. Does the source have a reputation for accuracy?3. Does the source have a motive for being inaccurate or

overly biased?4. Are there any reasons for questioning the honesty or

integrity of the source?

Evaluate Arguments : Step 5 The last step to critical thinking, evaluating

arguments, is itself a three-step process to assess whether: Assumptions are warranted; Reasoning is relevant and sufficient, and Relevant information has been omitted.

The first step to evaluating arguments is the use of assumptions or inferences which are essentially reasons implied in an argument that are taken for granted to be true.

Evaluate Arguments: Einstein on Knowledge and Experience

Albert Einstein once said, “The only source of knowledge is experience.”

Experience allows us to use both our education and our observations to gain a greater understanding and become a more valuable resource for others.

Evaluate Arguments : Step 5 The second step to evaluating arguments is to

assess the relevance and sufficiency of the reasoning (or evidence) in support of the argument’s conclusion.

A convincing argument is one that is complete, in that it presents all relevant reasoning (evidence), not just evidence that supports the argument.

Thus, the final key to evaluating arguments is attempting to determine if important evidence has been omitted or suppressed.

H.G. Wells on Inductive Thinking: Seeing Things Before They Happen

H.G. Wells argues that inductive thinking allows one to build up an understanding of the broad outlines of future history by “the comparison and criticism of suggestive facts”.

Wells suggests using existing or researched information to infer a future state of affairs.

He proposes that such inferences can be reasonably accurate.

Peter L. Bernstein on Risk: Seeing Things Before They Happen The objective is not to control things you

can’t control but to enable you to be relatively better at delivering results and performance over time, no matter what the “weather” is.

The ability to do that means we have to manage our companies and our divisions by understanding what they’re actually doing, not just by looking at their results.

Peter L. Bernstein on Risk: Seeing Things Before They Happen In his book Against the Gods

he states, "The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome and the linkage between effect and cause is hidden from us."

As Henry Mintzberg Explains It: Seeing Things Before They HappenWhy? Because good planning requires a view of the future, and since forecasts based on current trends or

estimates of growth based on history will be dangerous to organizations if their environment is

changing fast. And as we know, everything is changing fast. A major source of change in the world today is the adoption of information technology. The changes visible in the last few years, as the financial

services industry reinvents itself, are expected to change the way we work, play, shop, are governed,

bank, and the communities we belong to. In this environment, scenario planning is a must...

Mintzberg on Extracting the Significance from the Noise

Always keep in mind that the successful organizations are those which have

found ways of looking for early

warning signs---the significant through

the noise.“There is no phenomena unless it is an observed phenomena.”John Wheeler

(There Is No Alternative) Shell Scenario Planning: Seeing Things Before They Happen

The present may be murky; the future may be up for grabs.

But strategy that separates what's inevitable from what's unknowable is the essence of the game.

There Is No Alternative (TINA)T: Tackle it yourself.

I: Isolate certainties.

N: Name it.

A: Act on it.

Go to The Source for Better Decisions:Seeing Things Before They Happen

Make it routine to go to many individuals directly influenced by the issue so you can see firsthand and fully understand the subtle details, realties of a situation and their “histories of the future”.

Keep informed about the future and new trends.

Get out and visit your supply chain both internally and externally---observe.

Observation and the Periphery: Seeing Things Before They Happen Valuing the periphery requires a seismic shift in organizational

thinking.

Instead of considering any deviation from standard operating procedure to be irrelevant, excessive or unnecessarily expensive, organizations must begin to view such variances as portals to the future.

With wide eyes and an open mind, they must actively and systematically extend the range of observation outward, beyond the comfort of the known.

Those who do not pay attention to the periphery are soon overcome by the waves of change.

Being Fit to Ride the Waves of Change: Seeing Things Before They Happen

Thank You !Thank You !