Our world is obsessed with data and efficiency. We justify what we are doing ‘because it is rational’; logic tells us it ‘should work’ and it’s, therefore, less risky.
In most businesses, this means that rational ideas are the only ideas that see the light of day.
A rational idea is justified by basic cost-benefit analysis. It ‘makes sense’ to senior leaders. It ticks the boxes of the risk analysis in the business case. But is it the best idea?
Full disclosure here, I studied Chemical Engineering at university. I have worked as a Process Safety Engineer, a Risk Consultant and a Data Analyst. I understand the value of rationality and logic, and I get a kick out of things that can be explained in spreadsheets.
But in terms of innovation or creativity, the rationale is often flawed because it needs hard and fast rules to work. It’s fine if you’re building a bridge because the laws of physics are constant (at least on Earth). But if you start relying on humans instead of building materials, that’s where rationale fails. We mere mortals don’t follow hard and fast rules. We are irrational whether we like it or not.
Let’s use an example. Economic theory tells me that if I am getting a certain number of sales per month, then discounting the item by 20% will increase that number of sales. If the item was a $3 bottle of milk at the supermarket, it’s safe to assume there would be no problems with this. People will compare your milk at $2.40 with other brands beside it that are $3 and choose yours. But what if there are no simple comparisons?
Charlie Munger, the vice-chairman of Berkshire Hathaway, tells the following story about his friend in a speech in 2003:
“When he was head of Beckman Instruments it produced some complicated product where if it failed it caused enormous damage to the purchaser. It wasn’t a pump at the bottom of an oil well, but that’s a good mental example. And he realized that the reason this thing was selling so poorly, even though it was better than anybody else’s product, was because it was priced lower. It made people think it was a low-quality gizmo. So he raised the price by 20% or so and the volume went way up.”
This is completely comprehensible in hindsight, but I’ll bet that very few senior leaders, even fewer business cases and no cost-benefit analysis would support the idea of increasing the price of products to drive an increase in sales. Even though there are examples showing it works!
Seemingly irrational ideas aren’t bad ideas. The American physicist Richard Feynman put it nicely when he said “It doesn’t make any difference how beautiful your guess is, it doesn’t matter how smart you are, who made the guess or what his name is… If it disagrees with the experiment, it’s wrong. That’s all there is to it.”
The only way to know if an idea will work or not, is to test it. So, the next time you are considering a rational idea (like let’s outsource our call centre to save money) consider also testing an equally irrational idea (like Zappos, who spent more money on their call centre). And if you can’t think of any irrational ideas, email me at nickj@inventium.com.au and I promise to overwhelm you with absurdity.
Nick is the Head of Growth at Inventium with his focus set on experimenting with our products to super-charge growth. He has a passion for testing new ideas, improving existing ideas and sharing the lessons learned along the way.