The goal of decision-making is to arrive at the best solution possible for an issue given the problem, available resources, and time constraints. While there are many ways to make choices, one powerful decision-making tool is lateral thinking. This involves a leap from a familiar decision-making mindset to a significantly different one. This article, part 6 of a series on Making Better Decisions, discusses lateral thinking and how to apply it to decision-making.
The Decision-Making Process and Solution Formulation
As discussed in a previous article, the decision-making process can be divided into three steps:
- analyzing the decision-making context, which involves studying relevant facts and circumstances and framing the matter to be decided.
- selecting a decision to be adopted from different alternatives; and
- implementing the decision.
There are several ways to formulate a decision.
Historical precedent. One common decision-making approach is to apply a decision framework that has been used in the past. If a company has laid people off when revenues fell, it is likely that if revenues decline in the future, it will lay people off again. If a company has historically addressed periods of reduced revenues by trying to convert fixed costs to variable costs to improve its cash flows, it increases the likelihood that it will take this approach in the future.
Several solution formulation approaches are historical precedent, analogy, and thinking of something new.
Analogy. A second decision-making approach is adopting a decision that other individuals or companies have used. For example, if other companies allow employees to work part-time to reduce costs, it increases the likelihood that other firms will adopt a similar approach. Analogical decision-making strategies are used because:
- it is assumed that people who have used an approach have vetted it from legal, economic, and operational perspectives
- the approach has a track record that other companies can evaluate; and
- it can reduce or eliminate the use of individual or corporate resources involved in developing a new decision or solution from scratch.
Maximally Tolerable Pain Point. A third problem-solving method is through seeking what might be called the Maximally Tolerable Pain Point. This is an approach where someone starts with the problem and simply removes parts of the problem until an acceptable condition is reached. An example is putting a piece of cardboard over a broken window rather than fixing it. This is a prevalent approach to solving problems because it typically is significantly less expensive than completely fixing the underlying issue.
Creating Something New. A fourth problem-solving method to come up with a completely new solution. One way to do this is through lateral thinking.
Frame of Reference and Lateral Thinking
Lateral thinking, or what is sometimes called “out of the box” thinking, is a thought approach that represents a significant departure from one’s typical decision-making framework. Rather than making a small addition to or subtraction from an existing solution, lateral thinking involves a jump to a second perspective not closely related to the first one. For example, a logical step to increase revenues at a ski resort would be to increase ticket prices, raise the cost of food at the ski resort, or add ski-related activities, such as snowboarding. A lateral jump to increase revenues could be using the ski resort for hang gliding activities or business conferences.
The first step in understanding lateral thinking is to start with a reference point. This is important because what may represent a radical leap for one person or company may be ordinary for another. Environmentally friendly practices, such as recycling, are rare in some countries but common in others.
Let us call a decision-making frame of reference “thought point zero.” This point can be further broken down into three parts:
- individual thought point zero
- organizational thought point zero; and
- cultural thought point zero.
Individual thought point zero. This is a frame of reference based on one’s experience, circumstances, and mental state. These factors play an essential role in how the world is perceived, what is viewed as possible or impossible, and the values that are assigned to those possibilities. These reference points can become so engrained in one’s way of seeing the world that they are viewed as “the way things are” rather than a choice among many different options, even those that are objectively better.
Individual, organizational, and cultural factors significantly define a decision-making frame of reference.
Organizational thought point zero. Organizational point zero refers to the framework for decision-making and problem-solving that companies use. Factors that define organizational point zero are company:
- structure
- size
- operating dynamics
- rules and regulations
- DNA;
- risk tolerance or aversion
- financial situation;
- corporate history; and
- values.
These parameters impact:
- whether company view situations as opportunities or problems
- decision-making procedures
- decision-making process inclusiveness
- resources that are allocated to decision-making; and
- decision-making timetables.
Cultural point zero. Cultural point zero refers to the cultural norms that apply to what are viewed as problems, how those problems are discussed, and the range of possible solutions applied to those problems. What constitutes a cultural point zero can vary widely from one place to the next, even in the same country.
Types of Lateral Thinking
Once the frame of reference is determined, the next step is to define lateral thinking. There are three critical types of lateral thinking:
- horizontal lateral thinking
- vertical lateral thinking; and
- diagonal lateral thinking.
Horizontal lateral thinking. Horizontal vertical thinking is what most people think of when they hear the concept of lateral thinking. This is a jump from point A to a seemingly unrelated point B. An example of horizontal lateral thinking is deciding to use a portion of farmland for a renewal energy project in addition to farming activities.
Vertical lateral thinking. Vertical lateral thinking refers to thinking about an issue from a different level of granularity. For example, assume that a firm has challenge running productive meetings. A high-level vertical lateral thinking approach could be to completely change the meeting format or eliminate meetings altogether. A low-level vertical lateral thinking approach could be to focus on materials that are used at the meetings. Every issue can be broken down into high-level and low-level components.
Diagonal lateral thinking. Diagonal lateral thinking refers to thinking of solutions not only in terms of what is possible but working backward from the intended results. It is another way of asking “What needs to happen for x result to occur?” For example, if we ask the question “Can an elephant get on a bus?” the answer will likely be “no.” But if we ask, “What needs to happen to get an elephant on the bus?” we will get a completely different answer.
Applying Lateral Thinking to Decision-Making
There are several steps to applying lateral thinking in practice.
Define the issue to be decided. The first issue is to define the issue to be decided clearly. This step is more complicated than it sounds. Suppose there is an issue with an employee’s work performance. Is the issue the employee’s competence? How the employee is being managed? How the firm is being run? Focusing on different issues will lead to different decisions.
Break down and reshape issues. The next step in lateral thinking is issue decomposition and extension. Issue decomposition refers to looking at an issue in terms of its parts. For example, assume we have a pizzeria that is not performing well financially. The parts of a pizzeria for lateral thinking purposes are:
- revenue drivers (revenue model, products produced, price, marketing)
- cost drivers (cost of materials, cost of staff, taxes); and
- other factors (such as work dynamics).
Breaking down the problem in this way creates a much broader range of opportunities to apply lateral thinking.
Another way to apply lateral thinking is through issue extension. This means looking at the problem not as an isolated issue but as part of a larger set of conditions and circumstances. For example, this could mean considering where the pizzeria is located or examining larger micro or macroeconomic factors.
Broaden decision-making perspectives and options. Once an issue has been broken down into areas where lateral thinking can be applied, the next step to develop new ideas. There are several ways that this can be done:
- actively seeking exposure to different perspectives
- building teams with people who have different organizational and life backgrounds and outlooks; and
- creating environments where lateral thinking and novel solutions are encouraged.
Experiment with different decision-making procedures. Many companies apply funnel-shaped decision-making procedures that make similar outcomes likely. To avoid this, companies should be willing to experiment with different decision-making approaches. This could involve:
- experimenting with centralized or decentralized decision-making
- trying different decision-making timeframes
- for firms that tie decision-making to extensive research, encouraging free thinking sessions. For firms that often create ad-hoc decisions, this means trying to carry out more research before making decisions.
- experiment with decision-making sessions that are collaborative and sessions where people can think independently; and
- experiment with new decision-making venues.
Another element that can be incorporated into lateral thinking is to break the link between solutions and resources as a way to generate ideas. While resources are important considerations in terms of what types of solutions can be implemented, as a first step it is beneficial to consider what solutions would solve the problem independent of resources. If these resources are not at hand, there may be ways to get them.
Introduce randomness. A very powerful way to encourage lateral thinking is to use random references and work backward. For example, imagine that you are planning your vacation. You likely would either go to places you have been before and like, places that people you know have been or other places that you have heard about.
A lateral thinking approach to vacation planning would be to place random place names in a hat and pick one out. While, for different reasons, you may decide not to go the place selected, the mere fact of picking it out would likely generate thoughts about what might be good about the place you selected and what might be bad. This could set in motion a train of thinking that could lead to a significantly better vacation experience, wherever it may be.
Conclusion
This article discussed the concept of lateral thinking. Starting with an overview of decision formulation, it discussed the importance of frames of reference, set forth types of lateral thinking, and offered suggestions for applying lateral thinking in practice. The next article will take us to Japan, where will we discuss the concept of shu-ha-ri..
The photo for this article was created by Sammie Chaffin and is available on Unsplash.