Learn to be intuitive

GUEST COLUMN

Never underestimate the importance of instinct.

Knowledge is what you know you know. It can be taught; you can acquire it from external sources. Intuition is what you do not know you know. It cannot be taught; you learn it on your own.

At the core of intuition is a set of understandings that the owner just does not know about. When knowledge is integrated with intuition, it becomes wisdom.

When I became the head of Unilever's newly-formed Arabian company in 1991, a challenge was to enter the Arabian detergent market against a very dominant competitor, P&G Arabia.

At that time, quite unusually, Unilever had a negligible washing detergent business in the Arabian Peninsula, though it had established very successful brands in personal wash, skincare and tea categories.

In the late 1980s, a "revolution" in detergent offerings had occurred in Japan: standard, big-boxed detergents had been replaced substantially by compact detergent packs.

Apart from using less space on the retail shelf, compacts had other advantages: they needed less capital costs for production, less paperboard for packaging, and less warehouse space in the distribution system, and more tonnage could be loaded on transport trucks "" logically, quite an impressive array of benefits.

Such packs had also been introduced in Europe and they seemed to be gaining ground at the expense of standard detergents.

The general case for compacts was quite compelling. Many in Unilever believed that the days for traditional detergents were numbered and that the world would progressively switch to compacts. Compacts were seen as a likely technological disruption in the evolution of the washing detergent industry.

The Unilever entry into Arabia would have to be audacious; for at least three years before my joining the company that would execute the project, the entry had been planned on the basis of launching a compact.

Such a product was believed to provide a point of differentiation with the products already in the market, as well as offering added consumer benefits. Such differentiation was considered essential if any dent had to be made against a powerful and well-entrenched P&G. All very logical.

I was a first-time CEO of a Unilever company, that too in a foreign country. I felt a huge pressure to get the launch right. As I went through the persuasive market research and the sound business case, my instinct began to tell me the opposite of the analysis: that the route was too risky and the chances of being right appeared low.

Why? I observed that Arabia had huge spaces in the shops, on the roads, in the homes, in fact, everywhere "" quite unlike Japan. As I walked around Arabian markets, I felt that consumers liked everything big "" cars, toys, clothing, housing, furniture and so on. The saving in packaging or transportation costs in a detergent seemed irrelevant in a cheap energy economy. Yet, the research was not saying these things clearly.

I was assailed with self-doubt. Was it a case of believing what I wanted to believe? The fact is that we interpret data through the prism of the dominantly prevalent view about how the future will turn out to be.

Until his dying day in 1601, Danish astronomer Tycho Brahe believed that the sun and the stars revolved around the earth. Using Brahe's own data, his German assistant Johannes Kepler proved the opposite. The devil was in Brahe's assumptions on the environment.

There were big risks as well. The company would have to invest in building new production capacity for a compact product; if the product failed, we would have compounded our problem.

On the other hand, there was plenty of capacity around to source the standard detergent a facon, and to launch it into the market.

I shared my intuition with my regional director and the detergents director. They both heard me out carefully. If they accepted what my gut was saying, the painstakingly constructed Unilever plan would have to be set aside and a sort of fresh start made. If they rejected my view outright, they would be ignoring the instinct of the local manager. That did not seem right either.

Finally, the regional director said, "We will go ahead with belt and braces. Let us modify our plan. Let us outsource and launch a standard detergent first (not originally envisaged), and follow it up within 18 months with a compact produced at our own factory (as originally planned)." To me, at that time, it seemed a fair compromise and that is what we did.

The outcome was a paradox. My instinct was proven right, yet my decision was wrong. Right because the standard detergent acquired nearly 15 per cent market share and the compact's market share was negligible.

Wrong because in the meanwhile, we had built a factory for the compact. The outcome of the "fair compromise", which seemed reasonable to me at the time of the decision, was staring at me.

Analysis and intuition
Management academics have written about "evidence-based management". They are critical of managers who rely too much on their intuition; they note that managers can practise their craft more effectively if they "relentlessly seek new knowledge and insight."

Laziness is unpardonable; but surely reliance on one's experience and intuition cannot be a bad thing! A survey of executives shows that almost half of corporate executives use intuition more than formal analysis to run their companies. Leaders who do not develop and use their intuition are bonsai managers.

Operating managers view academic writing with scepticism. They feel that books are not meaningful and merely purvey fads. How do you square up operating managers' views about relying on intuition on the one hand with the call from academics to be more evidence-based?

After four decades as an operating manager, I am an enthusiastic reader of management books and magazines. I have a mental model of their value to the practising manager, that is, reading causes immersion, which can lead to contemplation; contemplation develops managerial intuition. Analysis is not an alternative to intuition; rather, the two work well together. Reading and contemplation together develop the manager's intuition.

The brain stores explicit knowledge, which means facts and the kind of things you are consciously aware of knowing.

But it also stores implicit know-how, which means processes, the kind of things you are not consciously aware of knowing. These manifest themselves as skills and habits.

A story about the Toyota production system illustrates the nature of implicit know-how. When consultants asked Toyota managers to explain their lean manufacturing system, the managers were unable to articulate its principles.

They could talk of the techniques used, but not the rationale behind them. They had lived that way for two generations. And they were surprised that the rest of the world did not work that way! Implicit know-how lies at the core of intuition.

Learning to be intuitive
Intuition can be developed through practice and immersion. Practice is doing the same thing so many times that you no more know that you know. Imagine how Roger Federer swings his tennis racket, without thinking and knowing how exactly he achieves whatever he achieves!

Immersion means such a deep experience that it enters the implicit memory and stays firmly lodged without your being aware it is there. It equates with what sports psychologists call "flow" or being "in the zone."

When complex issues arise, psychologists and academics prescribe analysis; philosophers prescribe immersion and contemplation. As modern psychologists would state it, immersion should lead to contemplation.

Management magazines make a hero out of the quick-thinking, decisive leader. In reality, particularly with complex problems, it helps to slow down deliberately, and to reflect and contemplate.

This helps managers to build more confidence in their intuition and to recall lessons when they have to make decisions without full information.

R Gopalakrishnan is executive director, Tata Sons. This article is based on his forthcoming book The Case of the Bonsai Manager