I’ve just enjoyed a lovely lunch and an all expenses paid trip down the river at Henley Regatta. The price I paid was minimal. It was Journalists day at Henley, so to build everyone’s appetite faculty were asked to stand up and say something for five minutes before lunch. The general theme was improving, individuals, organisations and society. They asked me to say a bit about how knowledge affects decision- making. I thought I’d share the extended version of what I said here.
So, in Wimbledon fortnight and being a keen tennis player, I decided to tell a tennis ball story.

Last year, they used 54,250 Slazenger balls in Wimbledon fortnight. It was an odd year because of the marathon 11 hour Isner/Mahut match. But that only used 123 balls. Useful information if you’re ordering balls, trivia to a player. They change balls every 9 games, because of wear and tear. Someone must have done the cost, benefit calculation, to reach that conclusion. But, professional players inspect the balls at every serve and reject ones that don’t suit their needs. They know that choice affects their performance. I can’t say it would affect mine! Maybe their fussiness is simple superstition! But when you learn that a BLINDFOLDED professional tennis player can accurately tell whether tournament balls were used on clay, grass or hard surfaces, simply by feeling them, it starts to say something about how knowledge works in decision making.
In decisions about service performance, tennis pros combine knowledge of an opponent’s ability, ball placement, spin, the wear on the ball, how they work on the court surface, their own level of confidence, the score at the time. In a few seconds they make a judgement i.e. a knowledgeable decision.
I heard Dave Snowden at KM UK talk about the 4 E’s of knowledge which made me think how do they affect how anyone uses knowledge in decision making.
Knowledge is Embodied – We imagine decisions are rational. Input facts and evidence, reason through some analytical process and you get sound output. But neuroscience has shown knowledge is a whole body experience. It involves hormones and muscles as well as the brain. Researchers asked young men to walk across a rickety bridge. Afterwards a young woman approached them to ask them to fill out the questionnaire. She gave them her phone number under the pretext of doing more research. 65% of the men phoned her after to ask her for a date. When exactly the same woman approached men sat on a bench with the exactly the same spiel, only 30% of them phoned her later. Why? Because the former were energized by the rickety bridge and attributed their excitement to the woman who met them on the other side! A picture of a smiling woman has more effect than a 5% reduction in interest rates on male loan decisions!
You can’t blame them. All decisions have an emotional and a subconscious element. With damage to the emotional centres of their brain, people can’t make even the most basic decisions. Emotions sensitise us to the consequences in context; the subconscious allows us to read subtle signals to respond to good or bad situations. Without that sensitivity, we don’t recognise opportunities and risks quickly enough.
What does that mean for business decision making? People are profoundly influenced by context, so there are more biases in most individual decisions than we generally imagine.
Initial information biases behaviour. Read words like, Bingo Florida and old, to a group of people and when they leave the room they walk more slowly!
All judgement is relative to something else. Have you noticed web sites generally present products from highest to lowest price? Offer someone the most expensive option and work down to what they want and, on average, they spend more than if you show them the cheapest and work up. This is called anchoring.
How you frame something affects decisions. Patients told a surgical procedure has a 15% failure rate are more likely to decide against it than if they’re told it has is an 85% success rate.
People prefer to maintain the status quo if they can, so inertia affects decision making. People actively look for things that confirm their initial assessment; they avoid loss and won’t admit to being wrong part way through.
Some people have a strong aversion to loss. This can mean they adjust forecasts down to be on the safe side, but it also means that they can prevent radical new innovations progressing if it looks like it will mean they lose existing business. Experts are often overconfident about the accuracy of their predictions and forecasts suggesting outcomes that best fit the data without taking into account real probabilities
Unaware of these biases, decisions makers can fall into serious traps. No wonder Peter Drucker estimated that only a third of business decisions were right: a third were minimally effective and the rest, outright failures. That’s a 67% chance that business decisions won’t deliver. A study on decision making effectiveness found that 40% of decisions are never fully implemented.
Which brings me to the second E.
Knowledge is Enacted. Intelligence comes from acting in the physical world. Doing things changes the way the brain works. Experience is both the source of learning and the basis for expertise, but only if you reflect on its implications. If you keep repeating the same activity without examining how well it is working, you embed errors. Practice makes permanent as my old tennis coach used to say. Research suggests that in any field, top performers devote five times longer to becoming great, than average performers devote to becoming competent. Coaching helps them examine precisely what they are doing. Do we devote that sort of time to developing expert business decision makers?
Third E coming up. Knowledge is Embedded – We are the only species that can change our environment. We create ways to store knowledge and capability. Models and principles are mental scaffolding to support better judgements. Physical artefacts augment capability to manipulate our environment – the iPhone for example. Organisations are artefacts, knowledge stores with a unique identity that will exist long after we retire. They all shape possible decisions.
The last E is perhaps the most important. Knowledge is Extended. It brings results through collectives. We are social animals. For most of our genetic history we’ve lived in tribes. So the structure of our brain evolved to thrive in communities. Communities are sources of meaning. Knowledge per se is neutral; it can be used to the benefit or detriment of society. Meaning and value are the consequences of how it is used. In principle, organisations are economic tribes who integrate knowledge into something worthwhile for society – products, services, new inventions that we value in monetary terms to facilitate exchange. Organisations should be better at turning knowledge into value because the community context guides decisions towards something meaningful for those who belong. In a shared context, transactions costs are lower; Individuals can specialise. Specialisation delivers more bang for the buck in knowledge terms than being a jack of all trades. Collectively we should make less mistakes, so be more efficient. We can learn more so we can be more innovative. We can do more to combine expertise by creating the conditions for co-operating with other experts. More people are sensing changes in the outside world, which the collective needs to adapt to, making the community more responsive to change, more competitively distinctive and better able to contribute more value to help society grow and advance. Of course, collectives are prone to groupthink. Present satisfaction can obscure future prosperity. And over the past two years we’ve seen many examples of how major shifts in collective confidence, trust , fear and greed produce bubbles, crashes and global crises in the Middle east, Iraq, and across the financial world.
Decisions are part of organisational life. Knowledge should prevent the consequences of ill- informed decisions. Sound decision-making affects the value business contributes to society, so it has to become a core strategic capability. Organisations can give people responsibility and authority, assuming they can make sensible decisions simply because they have done so in the past, but in our volatile connected world, past experience is also becoming less of a predictor of future success. Key decisions are becoming more complex (they have to take into account more variables, are surrounded by uncertainty and much of the available information is highly ambiguous ). The dilemmas involved in competing through knowledge are hard to resolve because people take opposing positions in the decision making process. So what can we do about it.
So what can we make it happen?
It’s 11 years since I began exploring how knowledge affects organisational performance. Much of what we research in the Henley KM Forum is about strategy, innovation and change. How leadership creates the conditions for performance. How mobilising knowledge can improve efficiency, reduce waste, increase innovation. All involve decisions. Our research, much of which has been assembled in our book Knowledge Works, suggests that knowledge managers have a key role to play in supporting and improving organisational decision quality. Key aspects of their role which came out in the research we did on knowledge enabled decision making include
• Identifying valuable knowledge,
• Developing and retaining expertise, and bringing the diversity of thatr know-how to bear in significant decisions.
• Introducing technology to give easier access to expertise and extend the reach of expert knowledge.
• Developing the relationship capital of the organisation by introducing ways for people to collaborate more effectively internally AND externally with customers, suppliers, competitors and other stakeholders. Then the organisation has the intelligence that it needs to respond to change.
But most importantly knowledge managers have a key role to play in developing organisational capacity to learn how to make better decision. This requires two things: Institutionalising processes like coaching and mentoring that encourage mangers and leaders to reflect honestly and carefully on their approach to decision making and its successes and failures. And helping everyone collectively to review and learn from different types of decisions, to build an appropriate repertoire of responses to the various contexts.
Perhaps it’s overpaying the tennis metaphor, but I’ll leave you with a question. Why the deuce should we be satisfied with amateurs batting decisions back and forth? Shouldn’t we make a ‘racquet’ about developing expert leaders and managers who ace the decision making process so that organisations produce more value for society?