CRITICAL THINKING

by Mike Figliuolo

Critical thinking is the ability to think reflectively and independently in order to make thoughtful decisions. By focusing on root-cause issues critical thinking helps you avoid future problems that can result from your actions. In this course, leadership trainer and expert Mike Figliuolo outlines a series of techniques to help you develop your critical thinking skills. He reveals how to define the problem you're trying to solve and then provides a number of critical thinking tools such as blowing up the business, asking the 5 whys and the 7 so whats, exploring the 80/20 rule, and more. He also provides guidance on how to develop this skill across your whole team.

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Chapter 1

Welcome to Critical Thinking

Have you ever solved one problem only to realize you created a bigger one? Have you ever thought you solved the problem but then discovered you only cured a symptom and didn't fix the root cause? The reason these things happen is because you're not thinking critically. Critical thinking is both a mindset and the application of some real simple tools. I'm Mike Figliuolo and I've been applying and teaching critical thinking methods for years across all different industries and business functions, I've found these critical thinking skills to be invaluable. In this course, I'll share critical thinking techniques like: defining the real problem, the five why's, the seven so what's, blowing up the business, the 80/20 rule, and how to conduct insightful analysis. I'll discuss how you can apply these techniques to your daily work and how you can build a culture of critical thinking within your team.

The Importance of Critical Thinking

Let's look at the importance of critical thinking. So many times when people ask us, "Can you go solve this problem," we rush off and start solving it without stopping to think before we do. We're facing new demands that require extensive amounts of information before we can make a decision. There are multiple departments involved in all of your problem-solving efforts, and each department is contributing its own input. As part as your problem-solving process, there are going to be multiple stakeholders involved. This increases the complexity of trying to get to an answer. When you do ultimately come up with a recommendation, those big decisions will involve numerous trade-offs. Not everyone is going to be happy with what you recommend. There are going to be long lag times in acquiring the required data to make your decision, and when you finally do make the call, there's going to be high scrutiny over whether you were right or wrong. And a bad call can have both business as well as personal and professional implications. Add to this unforeseen bottlenecks in getting the process done of getting to that answer, multiply it by the number of problems you're trying to solve every single day, and then divide by the limited amount of time you have to get to an answer. The importance of stopping and thinking critically before you rush off and undertake all these very comprehensive efforts is very high. That critical thinking process is what's going to differentiate you and the solutions you develop versus rushing off without any thought at all.

Distinguish Causes vs. Consequences

As you begin your critical thinking efforts. I'd like you to think about causes and consequences. One of the biggest challenges we're going to face with any problem solving is that desire to rush off and get to an answer quickly because we feel like we're being responsive to our stakeholders when we do. But think about it. Have you ever solved a symptom only to find out there're other symptons that arise after you solve it? Have you ever put in place a recommendation only to find out you created new problems down the road? When you're going through this critical thinking process, first, consider causes. Look at the symptom that is problematic. Then figure out the real reason it's happening. And come at that possible symptom from multiple perspectives. Once you generate a recommendation, stop and think critically. What new problems can you create, if you implement this recommendation? What are the new symptoms that will be caused? Think that through before you implement your recommendation. Let me offer an example. I know the client situation where the organization was going to roll out a brand-new website that would be facing their customers. The problem was they continued to miss deadlines for rolling the website out and going live. Now let's look at causes and consequences. What was the cause of the website not rolling out? Well, the code wasn't ready. Yeah, but that's a symptom. That's a symptom of a problem. Why wasn't the code ready? Well, the specifications weren't done. Okay. Well, that's also a symptom. Why weren't the specs done? Well, because they didn't agree on the features and functionality of the new website. But let's not stop there. Why was that symptom happening? Well, they weren't given clarity by leadership around one aspect that was a major strategic decision in terms of how they would roll the website out. That was the cause of all these issues and why the rollout wasn't happening. Now let's think through, once that strategic decision is made, what are the consequences of it? So leadership finally decided to make the website a closed network. Therefore, new customers would have to call in to register, instead of registering on a website. But let's look at the consequences of that decision and the new problems that can emerge. New customers are now going to have to call a call center associate. That's then going to flood the call center with incremental calls. The consequence of that is the staff in the call center is going to be overworked. And then the consequence of that is current customers are going to experience service issues. They won't get their calls answered as quickly. And then the consequence of that is we might lose current customers. By stopping and thinking about causes first and then consequences, once you do make a recommendation, you're going to identify the true problem that you need to solve and, hopefully, you'll be able to avoid causing future problems. When you go out to solve a problem, think backwards about the causes, think forward about the consequences. As you go to apply these notions to your critical thinking processes, I'd like you to think about a problem you're working on. Look at the causes. Spend some time thinking about what's really causing this issue. Continue to work backward until it's clear you're solving a problem and not a symptom. Then, once you've generated a recommendation, think through the consequences. What are the new problems that could emerge, if you implement your recommendation? Think about a problem that you made a recommendation on where it didn't go so well. Which of these two did you miss? Did you miss the real root cause? Did you miss possible consequences of your recommendation? By spending this extra time thinking about these aspects and putting in the critical thought, there's a much higher likelihood that whatever recommendation you come up with is going to solve the true problem and you're going to account for some of the possible consequences down the road.

Break Big Problems into Small Ones

One of the first steps in any good critical thinking process is taking a very big problem and breaking it down into smaller ones that you can actually solve. The time you invest thinking through what the components of the problem are is going to pay dividends on the backend when you look at the possible solutions, because you'll have a better sense for what recommendations and solutions to pursue, and how those solutions help you solve the bigger problem. Let me illustrate. Let's imagine we have a problem where our profits are down. That's a huge issue to solve. We can't solve that in and of itself. We have to look at smaller components of it, so if we have a profit problem, we have two components. Either our revenues are down, or our costs are up, or some combination of the two. But those are still very big problems to try to solve, so let's break down revenues, and what could be causing our revenue shortfall. Well, that's either volumes are down, or prices are down. On volumes, that's still a big issue. We may have a smaller issue of current customers are buying less, or we're selling less to prospective customers. Now on the cost side, the reason that costs could be up are either prices are up, or we're buying more stuff. If prices are up in terms of the stuff we're buying, well that could be a function of base prices are up, or we're getting less of a discount. When I take these big problems and I spend the time to think about breaking them into smaller and smaller ones, those smaller problems are much easier to solve. There's this whole notion of, the path of a thousand miles begins with one step. This applies to your problem solving as well. Having that bias to action. Spending the critical thinking time breaking the big problem down into smaller and smaller ones is going to enable you to take those first smaller steps at solving the big problem. What I'd encourage you to do is take a big problem you're currently facing. Go find a whiteboard somewhere, and ask yourself, what's that big problem composed of? What are the smaller issues that are driving the big problem? Once you have those smaller issues, break them down again, and continue breaking those big problems down into smaller and smaller ones until you say, "Oh, I know how I might solve that component of it." When you can start seeing the solutions emerge, you're moving from that problem identification stage to a problem solving stage, and the time you invest in dimensionalizing this problem solving space is going to help you solve problems more quickly and more effectively.

Chapter 2

Define the Problem Statement

Define the problem statement from Critical Thinking by Mike Figliuolo

One of my favorite critical thinking and problem solving tools is a good problem statement. You should never just take a problem and rush off in a general direction, thinking you're going to come up with a solution that will satisfy the needs of your requester. If you don't know the destination, you're going to get lost. It'll take you a long time to get there. The corollary here is with your problem solving and critical thinking. You need to know what that destination is. What is success for your problem solving? Your problem statement defines that endpoint. Without a problem statement, you're going to spend a lot of wasted hours, wasted work, and have excessive revisions, because your recommendation won't make sense, because nobody knows what you're trying to solve for. When you put together a good problem statement, it becomes your charter for your critical thinking efforts. It's going to spell out your goals. It will lay out boundaries on the problem solving space. It will define success criteria. Your problem statement should spell out the constraints you're going to face. It should articulate your assumptions, who the stakeholders are, and any timelines that you're going to face. I have one client organization where they didn't spend the time laying out the problem statement. They ended up with major issues for their charter for a huge technology project. Because the team was trying to solve all different problems, they didn't have clarity on what the ultimate goal was, what the metrics were, who the stakeholders needed to be, and what ultimately the boundaries were for the space they were trying to solve in. This led the team to write a lot of code, have multiple revisions, multiple attempted roll-outs. They couldn't solve the problem because they hadn't defined what the problem was in the first place. Take a look at a problem you're trying to solve. Is it clear what the problem statement is? Do you know what the goals are, what the boundaries, constraints, and assumptions are? Do you know who the stakeholders are? The time you spend with this type of critical thought is going to help you be more effective in solving the problems that you face.

"Take a look at a problem you're trying to solve. Is it clear what the problem statement is? Do you know what the goals are? What the boundaries, constraints, and assumptions are? Do you know who the stakeholders are?"

Ask the Question Behind the Question

So many times when we're asked to look into an issue, we just rush off and start solving it without really thinking through what's causing the person to ask me this question in the first place. Probe to understand why you're being asked to look at something. Once you have a good understanding of why, you're more toward a cause, but don't stop there. Once you have that understanding, ask why again. Really get that deep understanding of what's causing concern on your stakeholder's part. By understanding the real question they have, you can avoid solving symptoms and instead, come up with a recommendation that is going to resonate for them and be something that they're excited about. The real question opens up new answers, new ideas, and new opportunities. Let me offer an example. An executive that I worked with, named Sue, was asked by her senior stakeholder, Kim, to look at employee turnover data. Now Sue knew this data inside and out. It was very easy for her to go into the information, pull out the data, and generate a report about turnover. And she could have done that, but she didn't. She stopped and asked Kim why she wanted to understand this issue, and it was really an issue of evaluating unit performance. Well, once Sue understood this, other metrics made more sense than just the base turnover data. She stopped though and asked Kim again why was she looking at unit performance, in particular. Turns out what Kim really wanted to understand was did they have issues with leadership or with processes that were causing a lot of churn and turnover of their associates? It was now clear to Sue that she had to look at metrics and processes. By doing so, she was able to generate ideas on how to fix some of the issues with leadership, as well as some of the processes that should change. She generated a better solution. What I'd encourage you to do is take a look at a problem you've been asked to solve. Go back to that stakeholder and understand what's really driving that request. Why do they care about this? When you get a better understanding of that, you'll find the solutions you come up with are going to be bigger, better, and more exciting.

"So many times when we're asked to look into an issue, we just rush off and start solving it without really thinking through what's causing the person to ask me this question in the first place."
"Why do they care about this?"

Ask Focusing Questions

As you define your problem, you should ask and answer some focusing questions to help you bound the solution space. You should ask things like, what's the real question? Specify the objectives and timing that that stakeholder has asked of you. Ask, who are the stakeholders or influencers who are involved in the decision? Who can support it and who can derail it? You should articulate how you're going to measure success. Lay out what the quantitative and qualitative measures are going to be. So you know on the backend if you've really solved the problem. Ask the specific scope, what is or is not included in the space you're looking at? And lastly, understand the constraints that you face. By answering all of these questions and spending this time in critical thought, you're going to have a much more clearly bounded problem space. Let me offer an example of how I use these focusing questions to help bound a problem space. In my past, I worked for a credit card company and I was responsible for some of our collections. The way we collected our money back from consumers who owed us was we outsourced these activities to external agencies. The problem we were asked to solve was to improve the performance of those agencies. So first, we looked at the objectives. We wanted to reduce costs, increase our collections, and make those changes by the end of the year. So we bounded the space in terms of what success looked like. We then had to think through the influencers and stakeholders. We looked at IT and finance because anything we did was going to require technology changes and any changes in the commissions that we paid was going to impact finance. We then looked at the cost per dollar collected, the commission rate, and we also looked at some qualitative metrics of success. In terms of bounding the solution space, we looked at specific lines of business. We had 10 business units. For this initial solution, we were going to only focus on two of them. And we had to understand the constraints to that space. There were legal and regulatory issues that we had to consider. We had time constraints, remember, end of year, and we also had some budget constraints. We would only be able to spend this much money on IT and this much on commissions. By asking and answering these focusing questions, we had a better sense of what that box around our problem looked like. So when we found a solution, there was a higher likelihood that we would solve within that box which would then meet our stakeholders' needs. Take a look a problem you're trying to solve. Ask and answer these focusing questions. The time you spend in the critical thinking required to come up with these answers will help ensure that the solution you come up with is going to meet your stakeholders' needs.

"Specify the objectives and timing that, that stakeholder has asked of you."
"Ask who are the stakeholders or influencers who are involved in the decision."
"Who can support it and who can derail it?"
"You should articulate how you're going to measure success."

Examine Past Efforts

Another element of the critical thinking that goes into defining your problem is considering past efforts. We shouldn't reinvent the wheel. Ask yourself, has this problem been considered in the past? What did we learn? What's different now versus the last time we looked at it? Were there challenges or issues last time this was addressed that we need to think about as we try to solve it this time around? What are the ingoing assumptions that are limiting our thinking? Who was involved in the problem solving last time? By learning from experience, it's going to prevent you from wasted effort. You can identify and avoid prior pitfalls and you can also involve some of the veterans to help push your thinking. Let me show you how this showed up in a problem that I was solving. When we were trying to solve that collections issue and improve our agency performance, we had looked at commissions before. What's different this time around was we didn't have the measurement data the last time, and last time we were working with a different set of agencies on a very different technology platform. This time around new agencies, new data, new platform. Some of the assumptions we had were that we couldn't measure everything we wanted. In terms of who was involved last time, well, it was the Recoveries team from the last time, and the people who were involved in that effort, most of them were still around, and could help us think through the problem this time. By looking at prior efforts, we were able to understand what our limitations were the last time and it helped us gain institutional knowledge that we could apply this time around. As you're going through your critical thinking efforts to define your problem, ask these questions about the past efforts and see how they can inform your problem solving this time around.

"Ask yourself, has this problem been considered in the past?"
"What's different now versus the last time we looked at it?"
"By learning from experience it's going to prevent you from wasted effort."

Use New Lenses to Think Critically

Another set of critical thinking tools for defining your problem is looking at the problem through new lenses. Can you change the point of view? Can you change context? And can you change reality? Let's look at what those mean. Changing point of view. How is the problem defined from the perspective of the CEO, of the frontline staff, of customers, of adjacent groups? They're all going to look at the problem in different ways, and they'll define it differently depending upon their point of view. The problem will look very different from 10,000 feet versus 50 feet. In terms of changing context, can you reimagine the problem in new ways? We tend to come at the problem from our own functional perspective. If I work in finance, well, it's going to be a finance problem. If somebody works in IT, they'll look at the same thing and say, "No, it's an IT problem." So, can you change the context in terms of how you're defining the problem? And can you change reality? Ask yourself, "What if? What if I removed some of these constraints? What if I had some of these resources? What if I was able to do this instead of that?" By changing reality, you may find a different way to define the problem that enables you to pursue different opportunities. By looking at the problem in new ways, you're going to get a clear sense of direction around what the real issue is, such that you can generate some innovative and insightful solutions. Let me tie back to a collections example, where we were solving the problem and we saw it as an agency management issue. It was about relationship management with our collections agencies, and that's how we were going to improve their performance. Other people saw it as a strategy problem. Should we be outsourcing or insourcing those activities? Other people saw the performance issue as a commission or pricing problem. Were the commissions and incentives we were giving these agencies correct? Or should we change them to improve performance? Other people saw it as a training issue in terms of the frontline staff. Were we giving them the tools and techniques and training that was required for them to perform effectively? So, looking at the problem from very different points of view led us to other possible solutions. So, I want you to take a problem you're looking at and ask, "Can I change my point of view?" And if you struggle with this, if you're so tied into your functional area, go find somebody from another group. Explain the problem to them, ask them how they would define the problem. Use their perspective to generate that different point of view. Spending this critical thought around looking at the problem from different angles and understanding what aspects of it can change may help you uncover that one really big solution that you never would have seen with your very limited scope. So, spend the time in this critical thought, stepping back from the problem, and really asking, "Is there a different way to define it?"

"Can you change the point of view? Can you change context? Can you change reality?"
"How is the problem defined from the perspective of the CEO? Of the frontline staff? Of customers, of adjacent groups?"
"I want you to take a problem you're looking at, and ask, "Can I change my point of view?"
"Can you change reality? Ask yourself, what if?"

How to Find Root Causes

The final thing you should think about as you're trying to define your problem is causality. I've mentioned thinking about causes and consequences, that applies to thinking through how you're going to define the problem in the first place. You should understand, are some elements of the problem you're trying to solve derived from other problems or other related elements? How does this problem tie to other issues in your organization? What's the real root cause of the problem? Remember, we don't want to solve symptoms, this is about solving the right problem the first time around. Does solving this really means solving that much deeper or proceeding problem? The more you can get to the root, the more effective you're going to be in preventing future problems in the organization. Once you've solved it and you come up with that recommendation, think forward about these consequences. Are there organizational, customer, competitor repercussions to anticipate? If you make this change, how will everybody else behave? Are you really clear about chronology and what causes what causes what? Laying out that path that says, if I do this, then this might happen, then this might happen is going to help you predict some of the outcomes that you could face. And if those might be bad outcomes, it can impact the type of recommendation you make in the first place to be able to avoid those issues down the road. Understanding those causes, and then the effects of your recommendation is going to help you solve the real problem and avoid unintended consequences. Tying to my example when we were changing agency commissions as a collections organization, we understood that the real issue was incentives weren't aligned. We had two teams working on this issue. One team was my team and we were trying to drive overall collections performance. The other team that was involved was the agency management team. What that team was trying to drive was a very different set of metrics in terms of reducing the amount of money that we were spending with those particular agencies. Those goals were in conflict. So a way that we got past that was we created one single team with one clear objective that would help both of our organizations succeed. Now, our recommendation was to change the commissions, we were going to pay these agencies. By paying them more money, we were going to get them to focus more on our work versus our competitor's work that they were also being outsourced. Now, this would be great in the short term. Those agencies would change their performance, dedicate more of their efforts to our work, and a side benefit was they would ignore our competitor's. But let's think about the repercussions. And we said, if we make that change, well, I'm pretty sure our competitors are going to make similar changes as soon as they find out what we've done. And then it really became a race to the bottom on pricing. So if we raise the commissions, our competitors would raise the commissions, and we'd have to raise them and they'd raise them. So we needed to make sure whatever solution we came up with we'd be able to avoid those types of consequences. This critical thinking time helped us come up with a better recommendation that met the needs of all the stakeholders involved and helped us avoid some downstream negative consequences. For a problem you're solving, spend that time thinking about causality. What's the real cause of the issue? What are the consequences you might face? And then document those thoughts in your problem statement so you keep them top of mind as you're coming up with your recommendations.

Chapter 3

Challenge How the Business Operates

Challenge how the business operates

When you go to generate new ideas to run things better you need to think critically about the way your business runs. I like to look at three things, a business model blow-up, a revenue blow-up, and a cost blow-up. On the business model blow-up, fundamentally rethink about how you go to market. Even rethink what your market actually is. You're going to challenge the entire business model for the way you deliver products and services. On the revenue blow-up side, how do you dramatically expand the products, your pricing, the geography, the reach of your business? And on the cost blow-up, how do you challenge the business model and what you're spending money on? How do you fundamentally eliminate drag from the business to become much more efficient? One company I hold up as an example of one that fundamentally blew up the business, blew up the cost, blew up the revenues, is Skybus Airlines. If you think back several years ago, the way the airline industry functioned, everybody was the same. Tickets were all bundled, they had a similar operational model, and prices were pretty predictable. Along came Skybus and they said, "We're gonna blow-up the way all of this works." They posted some things on their website that were very provocative in terms of how they were going to do business differently. Things on their site included hungry, thirsty, bring cash. From now on, all meals were going to be paid for individually, and people were going to stop subsidizing the meals of other passengers by paying for a bundled ticket. They said, "Don't call us. "We're not gonna have a call center." Call centers are very expensive to run. Skybus said, "We're going to do everything online." It's a different customer service model. They said, "Don't expect an army of gate agents." People in the airport cost a lot of money. They were going to change their staffing model in terms of how they would get passengers onto the plane. They said, "Tickets aren't refundable." It costs a lot of money to rebook passengers. They said, "Once you buy it, it's done." They also said, "Bigger isn't better." They were not going to fly to the major airports. They would fly to secondary cities and then you could drive the rest of the way because the large airports cost a lot more money for them to operate at. The impact of all these changes Skybus made, because they thought critically about the business model, was pretty tremendous. They were able to sell tickets for $10 or $20 each way. Sure, some of the tickets on the plane cost $200 as you got closer to the flight time, but their pricing model by unbundling everything and by reducing their overall cost structure, allowed them to compete differently. I personally benefited. I took my entire family to California from Ohio for $200 total each way. In the past, those tickets would have cost me thousands. Now these changes that Skybus made were very radical and they were risky, and these risks won't always play out well for you. One day I was teaching a class on how innovative Skybus was and I was talking about how great their business model was. When I got home that night and I went to book some new tickets on Skybus, I was greeted by a splash screen that said they were out of business. They took some major risks. They fundamentally altered the way that they went to market and it caused their competitors to change too. Now even though Skybus wasn't successful in the long term, their critical thinking and looking at the business differently, altered the landscape. I'm sure if you fly today, you've noticed that pricing is unbundled. You'll pay $25 or $50 for an extra bag. It'll cost you $75 to $200 to change a ticket. A meal on the flight will cost you $9. If you get preferred seating, it's gonna cost you $12 or $25. By Skybus looking at the industry differently, they forced all their competitors to do the same thing. In order to compete with Skybus, they had to unbundle pricing. So that critical thinking led to massive changes in a huge industry. As you think about applying some of these critical thinking tools, let me offer you some questions you can ask. On the business model blow-up, ask yourself if we had to do over, what would we do differently? If we were staring this business again today, what would we change? If we move this business to India or China, both the operations as well as your customers, how would you restructure it to compete more effectively in an environment with different economics and different regulatory challenges? How would you double the size of whatever metric you care the most about is in two years? That's a huge goal, doubling something, but it's going to challenge you to look at your business differently. On the revenue blow-up side, ask who could create more value with our customers than we can? Who does it better? That will get you to look outside of your own walls at different ways of doing things. How would you triple your revenues or your profits within five years? Again, that big provocative number to get you to remove some of the constraints that you currently face. On the revenue side, ask what are the 10 products we're not offering that we should be? What are the things that our customers want that we simply can't provide? For the cost blow-up, how would you run this business with 2/3 fewer people? Wow, new processes, new technologies, new ways of doing things. By making a massive cut, it's goings to force you to look at your business differently. I love this one question. How would you eliminate your job? Think about all the work that you do. That's pretty unnerving to say, "I want to put myself out of a role." But by asking that question, it forces you to think critically about the work that you do. What work should you stop doing? What work should you delegate to other members of your team? What work can you automate? Again that question is very provocative but it forces that critical thinking about your role. And my last favorite question is what's the most wasteful thing we do as an organization and what's stopping us from stopping that? Look at your business. We all know where some of the waste is. Understanding what the waste is and what the barriers are to eliminating it can create new solutions for making your business more efficient and more effective. So as you look at your organization, ask yourself how can you blow-up the business model, how can you blow-up the revenue side, how can you blow-up the cost side? And those answers to those critical questions will help you identify new opportunities that can make your business much more competitive and much more effective.

Use the 5 Whys of Critical Thinking

Use the 5 whys of critical thinking

One of the most effective critical thinking tools I've ever come across is the five why's. When I was a young analyst as a consultant, I was at a client engagement and I was responsible for doing a lot of analysis. One morning, I did a bunch of analysis around some things that my client was purchasing. When I went to lunch with my project manager, he said "what have you been doing today?" I said, "well, I was doing the analysis "on this one category of spend." He said "Okay, what'd you learn?" I said "well, I think this is happening." He said "Okay, well, why?" "What do you mean why?" "Well, why is that happening? "Why do you think that's happening?" I said "I don't know, maybe it's this." He said "Okay, well, why?" "What do you mean why?" "Well, why would that be happening?" I stopped and I thought and I said "well it might be this." He said "well, why?" I said "Oh my gosh, what's with the why's?" He said "Mike, our job is to come to insights "for our client. "we can't be satisfied with that first answer. "we need to ask why and really understand cause." "By the time you ask the fourth or the fifth why, "that's where the real insight is. "That's why it's the five why's." I took that away from that day and anytime I was working on analysis, from that point forward, I would ask why. Why am I seeing the numbers do this and why is that happening and why is that happening? Asking those five why's will lead you to insight. Let me offer an example. Let's say you're working with a senior executive and that senior executive says "hey, our stock price just plummeted." Okay, well why? Why did that happen? "Well, we missed our earnings." Okay, well, why did that happen? "Well, because we were discounting our prices too much." Okay, well, why were we doing that? "Well, because we wanted to retain our customers, "so we were offering bigger discounts." Okay, well, why are we trying to retain customers with discounts? "Well, because we want to grow market share." Okay, well, why do we want to grow market share? "Well, because that's what the incentive plan is tied to "for all our managers and business unit presidents. "The bigger the share, the bigger the bonus they get." Well, what happens if we change the incentive plan? If we had just stopped at "hey, the stock price fell, "and it's because we missed earnings "because we were discounting", there's no real insight there. When we keep asking why and peeling it back, we can identify what that true root cause is. Then we can solve it. Then we can have an impact on the organization. The fifth why is where that real insight resides. As you look at a problem you're dealing with, when you see that issue, ask yourself why it's happening, and ask why again and again and again. By the time you get to that fourth or fifth why, hopefully a new insight will pop out and you'll be able to start solving the real problem that will have a true impact on the organization.

Answer the 7 "so whats?"

Answer the 7 "so whats?"

Good critical thinking processes don't just look at causes, they look at consequences as well. A great tool for thinking through the consequences of an action is the 7 So What's. The 7 So What's force you to go from an early answer to think through all the possible implications and future consequences of your action. Let me offer an example. Let's say we have a situation where we're going to change our incentive and bonus plan. We say that's the recommendation. Okay, so what? If we change that, what happens? So what? Well, if we need to change it, we don't know how. If we knew how, we would have already changed it. Okay, so what? If we don't know how, what's the implication of that? Well, we need to find someone who does know how to do it. Okay, so what? What are the implications of that? Well, that means I need to start a search for a vice president of compensation. Okay, so if we start that search, so what? What's the implication of that? Well, I need to de-prioritize other searches for other roles so that I can focus on getting this person in. Okay, well, so what? What happens if we de-prioritize those other recruiting efforts? Well, that means I'm going to have to reduce my search for somebody in supply chain and focus on this VP of compensation. Okay, well, so what? Well, that means I probably need to change my supply chain goals for the year. This all started with our business plan is broken or our incentive model is broken, and now we're looking at goals for supply chain. If we didn't think this through, we may have caused huge problems for the organization, by making that one change to the incentive plan, without thinking through the consequences. When you're looking at making a recommendation, ask yourself so what, and ask seven times. The lens you should have on that is what is the consequence of this action? What's going to happen to our business? What will happen in the marketplace? What will happen with our associates? What are the reactions we're going to see? If that reaction happens, so what, what happens next? By thinking forward, by thinking about consequences, what you're going to do is be able to see new opportunities, as well as avoid problems you might unknowingly cause. Take a look at a recommendation you're working on right now. Do you know the consequences? Do you know the real downstream impacts of the change that you're proposing? Have you stopped and thought critically about the implications of your recommendation? Invest that time because it's going to help you avoid future problems that were caused by the recommendation you made.

Use the 80/20 Rule to Think Critically

Use the 80/20 rule to think critically

Critical thinking doesn't only apply to coming up with recommendations. You need to think critically about the way you're going to spend your time and energy. Those things are limited. You have too many problems to solve, and not enough time. I encourage people to follow the 80/20 rule, also known as the Pareto Principle. The Pareto Principle was coined by Vilfredo Pareto, and he noticed in Italy, 80% of the land was owned by 20% of the population. He was also a gardener, and he noticed 80% of the peas coming out of his garden came from 20% of the pods. He said, that's interesting, two totally different realms demonstrating the same principle. 20% led to 80% of the impact, and that's the 80/20 rule. 20% of the drivers will drive 80% of the results. You need to think about your work the same way. You can't focus on that 80% that only drives 20% of the results. Focus your efforts on the meaningful. Let me offer an example. I have a client that creates capital equipment, they're a manufacturer. They were having a whole bunch of service issues in the field. Customers were calling up with a variety of complaints, and at first this client was going out and trying to solve every single issue out there, but then they said, "Wait, maybe there are certain issues "that are causing more of our problems than others. "We only have limited resources that we can spend "going out and fixing these issues, "so let's do an analysis," and when they conducted that analysis, they found out that of all the service issues they had had reported, two issues were driving 80% of the complaints. One was about their software crashing, and one was about the motors breaking down. What this client was then able to do was take all of their resources, focus them on these two issues, and solving those two issues would solve upwards of 80% of the complaints from their customers. That's not to say the other complaints weren't as important, but in terms of focusing their resources, they thought critically about what the problem is and where they were going to spend their time. This has implications for you. When you think about a problem that you're trying to solve, think through, what are the major drivers of impact? If you're running a business unit at a high level, and you're trying to grow your profits, you can either look at revenues or costs. In revenues, you can look at volume or price. In volume, you can look at current customers and prospective customers, and within those, you can look at geographic regions. Let's say we said, hey this is gonna be a revenue issue. You can't look at the entire country. What you're probably going to want to do is focus on those couple of geographic regions that can drive the most impact for the metric you're trying to increase. Look at whatever problem you're trying to solve, understand what the drivers are, and understand how much each driver contributes to the overall impact you're trying to have. Spend your time solving for those issues. The ones that have a disproportionate impact on the metric you're trying to move. It'll be a much more efficient use of your time, and you're going to solve the biggest problems your organization faces, first.

How to Successfully Conduct Analysis

How to Successfully Conduct Analysis

Critical thinking doesn't just apply to the analysis you do, it applies to the way you do analysis, choosing which analyses to do, and how to handle the results that come out. I encourage people to take the high road, and the low road when they're thinking about analysis. On the high road, always step up to the high level problem that you're trying to solve, and ask how does the analysis I'm doing tie to that problem? What am I proving or disproving with the data that I'm analyzing? Estimate the benefit of even doing the analysis before you start pulling data. Is it going to be beneficial? Will this analysis help me answer the ultimate question that I'm trying to solve? Use the 80/20 principle, and back up the envelope types of calculations to ask, will these numbers have any impact? If they will, continue with the analysis. If they won't, don't do the analysis. You don't have the time. And once you've completed the analysis, stay on that high road. Test your thinking. Ask, does this answer I got from my analysis tie to the recommendation that I'm trying to make? Does it support, or does it refute the recommendation I'm making? When you think about the low road, which is the deep analysis you're going to do, you should still be thoughtful about how you approach it. First, only run the numbers you need to run. If you think about your scoped problem statement, and you're only going to focus on two business units, and that's what you've said is in scope for your solution, you should only be running analyses related to those two business units. If you find yourself pulling data for five or six different business units, you're wasting your time. Focus on the numbers you need to run. Also, don't stay in the data too long. It's very easy to lose an entire day, or an entire week doing analysis. The numbers are clear, we can build graphs, and pivot tables, and charts, and we can build formulas, we can analyze data for extensive amounts of time, and when you do that, you may be wasting effort. Pull back up to the high road occasionally. Once you've finished some analysis, ask yourself, what have I learned from this? How does it apply to the recommendation I'm trying to make? I always tell people when they're doing deep analysis, "Don't polish dirt," and what I mean by that is, when you're in there doing rough analysis, and you're not sure what the answer's ultimately going to be, but you're trying to figure out is it hundreds, thousands, or millions? Once you figure out that it's thousands, you don't need to take it out several decimal points. You know it's 5,000 to 7,000, move on with life. You shouldn't get that refined answer if that refinement isn't going to add value. Focus your attention on the answers that matter. That analytical time is precious. It chews up a lot of your time, and a lot of your team's time, so get back up to that high road regularly, and ask about the implications of your analysis. Critical thought isn't only related to the analysis itself, it's about thinking about the analysis, what analysis should you be doing, and not doing? These critical thought processes should help you question everything you do in terms of solving problems, from defining the problem, to generating recommendations, to doing your analysis, to figuring out if you've actually solved the problem, and if you're more mindful about the way you spend your time when you're doing analysis, you're going to be able to solve more problems more effectively, and more efficiently.

 

Consider the implications of answers

Consider the implications of answers

When you're trying to solve a problem, getting an answer isn't good enough. Think critically about the results of your analyses and what's coming back as far as your recommendations go. You should be looking for similarities or differences between the idea and the analytical answers that come out, and other situations that you've been in. Are there common themes that you're seeing across multiple problems that you're trying to solve? Are some elements similar to other problems you've solved in the past? You should be asking about the relative size of the recommendation. Once you've completed your analysis, does this even matter? If we solve this problem, will it have a big enough impact on the business for us to even care? If not, even though it's a great idea, we should push it off to the side and focus on things that are more meaningful. You should also explore connections to other problems that you've had or other situations you've been in, because that connection between two things that are seemingly unrelated may unlock a tremendous insight and give you an opportunity to take learnings from the past and apply them to a situation that seems very different, but is actually quite similar. Let me offer an example. At one point, I did some corporate strategy work, and we were trying to figure out, where should we take the business for the next 10 years? We were looking at things like, what new products should we launch? What new businesses should we enter? Which new market segments should we pursue? Are there acquisitions we should be going after? What we were able to do through all of that analysis was come up with not just an answer to how we decided to prioritize our efforts, but we also generated a process for thinking about how we were going to prioritize our resources, and how we were going to think about entering markets, launching products, conducting acquisitions. Now several years later, I was working with a technology team, and that technology team had the challenge of a lot of projects that were all really great, but they didn't have the time or the resources to pursue all of them. When we dug into the problem, and we did the analysis, and we found out they had 37 different projects that were rated high, and 54 that were medium, and 200 enhancements that they were supposed to be doing, and when we really understood that the analysis was telling us that we weren't good at prioritizing, a little light bulb went off and said, wait, this is a prioritization problem. That strategy work I did in the past was also about prioritization of scarce resources. Are there things that these problems have in common that I can take from the strategy work and apply to the technology prioritization? What was great was, I was able to just dust off my strategy process, think about how it could apply to the technology portfolio, and then we not only prioritized the portfolio, but we put a new process in place to prioritize future projects. By understanding the linkages between seemingly unrelated problems, we were able to come up with a solution that we were able to apply very quickly based upon those past learnings. When you look at your answers that are coming out of your problem solving processes, think critically about those answers. What connections can you make to other situations? What can you learn from other problems you've solved, and how can you apply those learnings to the problem you're trying to solve now? By thinking critically, you may unlock some great opportunities you never would have considered before. That extra time to go one more step beyond the easy answer the analysis gives you, and ask, what does this mean for the broader problem, may help you create one of the best opportunities out there that you get to very efficiently and very effectively.