Intuition in Strategic Decision Making: Friend or Foe in the Fast-Paced 21st Century?

Topics: Decision making, Strategic management, Risk Pages: 9 (2125 words) Published: April 5, 2011
In the minds of many, this well-known tale of
Honda’s entry into the U.S. motorcycle market illustrates
intuition’s power in strategic decision making.
Honda’s scouts saw a discouraging picture but
felt they and their firm could be successful in spite
of the odds. The discouraging analyses from government
officials didn’t sway them from feeling
they had the resolve and capabilities required to
achieve competitive success. They felt that risking
some of Honda’s precious resources to pursue “success
against all odds” made sense. In hindsight,
with knowledge of the story’s resolution, it’s easy
to construct rational arguments for why Honda
should have moved forward. At the time, however,
the course of action the firm should have followed
wasn’t as clear.
Additional examples of intuition in strategic decision
making are all around us. Ignoring recommendations
from advisors, Ray Kroc purchased the
McDonalds brand from the McDonald brothers:
“I’m not a gambler and I didn’t have that kind of
money, but my funny bone instinct kept urging me
on.” Ignoring numerous naysayers and a lack of
supporting market research, Bob Lutz, former president
of Chrysler, made the Dodge Viper a reality:
“It was this subconscious, visceral feeling. And it
just felt right.” Ignoring the fact that 24 publishing
houses had rejected the book and her own publishing
house was opposed, Eleanor Friede gambled
on a “little nothing book,” called Jonathan Livingston
Seagull: “I felt there were truths in this simple
story that would make it an international classic.”3
Consistent with these stories, many academic
researchers, business writers, executives, and
managers champion intuition as a key part of strategic
decision-making effectiveness. One noted intuition
researcher,4 for example, assembled an edited
volume filled with testimonials supporting
intuition. A set of business authors5 highlighted
the faith that Herb Kelleher, the legendary founder
and former CEO of Southwest Airlines, placed on
intuition, originality, and creativity. Kathleen
Eisenhardt,6 a well-known strategy researcher, argued
that collective intuition among members of a
management team contributes to the group’s ability
to quickly recognize strategic issues such as
evolving environmental opportunities and threats.
Leonard and Sensiper,7 also well-known strategy
researchers, suggested that intuition plays a role
in a firm’s efforts to innovate. This is significant, in
that innovation is a potential source of an important
competitive advantage for companies across
industries as they compete in the increasingly
complex global economy. Finally, a chronologist of
what some perceive to be history’s greatest management
decisions argued that intuition played a
key role in each instance (e.g., Akito Morita’s decision
to develop the Sony Walkman in spite of internal
opposition, Johnson & Johnson’s rapid decision
to pull Tylenol from store shelves at a cost of
$100 million).8
With success stories readily available, and with
common sense suggesting intuition’s necessity in
times of change, intuitively dominated decisions
are likely to increase in the fast-paced 21st century.
Indeed, recent commentaries in the business press
and in the applied academic literature support this
assertion, as do many surveys of executives and
managers.9 In a recent survey of executives,
search-firm Christian and Timbers found that almost
half of corporate executives use intuition
more than formal analysis to run their companies.10
On the face of it, greater reliance on intuitively
dominated decisions would seem to be a good
thing. But is it? Are the popular stories of intuition
representative of all or even the majority of such
stories? Are the common-sense arguments and the
limited systematic empirical data supporting intuition’s
use in the face of change as sound as they
seem? Importantly, intuitive decision makers cannot
explain why they feel...
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