Creativity and Decision Making Within a Firm

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Creativity and rational decision making are what drive firms and companies into greater pastures. According to the dictionary, creativity is defined as “the use of the imagination or original ideas, especially in the production of an artistic work”. Through the conscious procedure of making choices, while keeping in mind alternatives, firms move toward a desired state of activites. The first step in any decision process for a firm begins with a rational choice: which is defined as, “effective decision makers who identify, select, and apply the best possible alternative (Mcshane 2018).

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Ultimately, the ability to make rational choices for firms is what makes them successful and allows them to survive in the long run.

One successful tactic that firms have began to adopt for promoting creativity is “design thinking”. There are no concrete definitions of “design thinking”. For some, it is defined as “an industry parlance that refers to the practice of solving traditional tech problems using newer, different and innovative methods (Anirban 2016).

This process is a creative way to solving complex problems that encourages exploration and experiment to instill customer-centricity and empathy (Kupers 2014). In the text, Mcshane says it is a human centered, solution-focused process that relies on creative thinking, logical analysis, empathy, and intuition (Mcshane 2018).

Also “Design Thinking” must follow four strict rules in order to be successfully implemented. They are the human rule, which means to involve others, ambiguity rule which is avoiding problem identification too soon, redesign rule which reviews past solutions, and the tangible rule which builds prototypes and embraces learning orientation amongst the firm (Mcshane 2018).

A company that has adopted this process recently is Infoysys, the second largest software exporter in the $160 billion Indian IT industry. The CEO, Vishal Sikka ensures all of his employees routinely go through training sessions to help them keep pace with the dynamic technology landscape. Specifically, Sikka has sought help from external mentors such as Alan Kay, a computer science pioneer, who regularly has held sessions with company executives and employees. These sessions last on average 3.5 hours, and are offered throughout the business year. According to Infosys chairman R Seshanyee design thinking has been a successful investment in their company.

'The adoption of Design Thinking at Infosys has been very encouraging, and we can see the enthusiasm and energy with which employees are adopting this philosophy. The Infosys board was keen to embrace this approach that is getting deeply ingrained into the company's DNA. We introduced the entire board to these concepts during the year and I have found the application of its principles in our course of business very refreshing and impactful” (Anirban 2016).

Through implementing design thinking, employees are able to generate the needed empathy required by delivering new innovative tactics for the firms to make rational choices.

According to the text, Mcshane outlines the “Rational Choice Decision Making Process” into six concrete steps: identify the problem or opportunity, choose the best decision process, discover or develop possible choices, select the choice with the highest value, implement the selected choice, and evaluate the selected choice (Mcshane 2018). The first encounter that firms must tackle are the challenges associated with problem identification. These include: solution-focused problems, decisive leadership, stakeholder framing, perceptual defense, and mental models (Mcshane 2018). Firms have a hard time realizing that these problems are not given to us, but arise from ambiguous information (Mcshane 2018). For example, before Ron Johnson became the CEO of JCPenny’s in 2011, he was the senior vice president of retail operations for Apple Inc. Johnson thought the simple solution for reviving JCPenny’s was to make it more like Apple. Unfortunately, Ron’s solution focused problem analysis led to numerous decision making errors, and sales plummeted by one-third over the next 18 months. Inevitably, Ron Johnson was relieved of his duties from JCPenny’s in April of 2013.

In our textbook, Mcshane offers a four step process for identifying problems effectively. The first, be aware of problem identification bias, resist temptation to look decisive, develop a norm of “divine discontent” (aversion to complacency), and to discuss the situation with colleagues (Mcshane 2018). Following the problem identification process, firms then follow a “rational choice paradigm assumption” that clearly defines the goals of the firm that are agreed upon. The paradigm states that decision-makers can calculate all alternatives and their outcomes, while evaluating alternatives simultaneously, using absolute standards to evaluate alternatives through factual information, and ultimately choosing the alternative with the highest payoff (Mcshane 2018).

In business, those who posses these traits are usually the CEO’s and leaders of the firm. Problem solving requires transparent communication throughout the firm where everyone’s concerns and points of view are freely expressed (Glenn 2013). This allows all employees to have a “voice” in the company and instills a value of self worth. Relevant communication towards problem solving materializes because of a leader’s capability to enable an open dialogue between people they trust and creates a safe work environment (Glenn 2013). Also, this transparent communication eliminates self promotion in the firm and leads to an organization whose culture is focused on the betterment of a healthier whole. When firms are able to abandon people who only think for themselves, they create more open-minded people which serves the organization better in the long-run (Glenn 2018).

Another key aspect that arises from a firm’s decision making process “Intuitive Decision making” and balancing emotions while making decisions. A wise man Albert Einstein once said, “The only real valuable thing is intuition”. Intuitive decision making is the ability to know when a problem or opportunity exists and to select the best course of action without conscious reasoning. In the text Mcshane states that one’s emotions form preferences before conscious evaluation occurs, and these emotions serve as information in decision making (Mcshane 2018). In the business realm, perceptions are an emotional experiences employees experience. However, one must take into account “gut feelings” and how they affect their intuition (Mcshane 2018).

Real-life examples of intuitive decision making are choosing your life partner, selecting the right car to buy, or simply what meal you should eat next. Intuition is not something that people are born with. Rather, intuition is a highly intricate and greatly developed form of reasoning that is based on years of experience (Matzler 2007). For example, studies in psychology have found that one needs at least ten years of domain-specific experience to develop the gut feelings needed to make good instinctive decisions (Matzler 2007). Furthermore, according to psychologist Daniel Goleman, 90 percent of the differences between top-performing and average-performing senior executives can be explained by emotional intelligence (Matzler 2007). An executive with greater emotional intelligence in more self aware and is a catalyst in one’s intuitive decision making process to choosing the best alternatives.

In the text, Mcshane offers a three-step process that firms adopt for choosing the best alternative. The first, systematically evaluate alternatives against relevant factors; don’t be too decisive, second, revisit decisions later when emotions or moods have changed, and lastly to engage in scenario planning (Mcshane 2018). Scenario planning is making assumptions on what the future is going to be and how your business environment will change overtime in light of the future. For example, in 1965 Royal Dutch Shell adopted a service what is called the “Unified Planning Machinery” (UPM). This computer-driven system was meant to bring more discipline to the company’s cash flow planning and created a competitive advantage for Shell (Kupers 2014).

There are two key aspects firms must be aware of during decision alternative evaluation period. The first is conformation bias (post-decisional justification), this happens when individuals within the firm inflate strengths of the selected alternative, and ignore or deflate strengths of the rejected alternative (Mcshane 2018). The second is an escalation of commitment, which comes from repeating or further investing in an apparently bad decision. In the text, Mcshane attributes the causes of escalation to: self justification effect, self-enhancement effect, prospect theory effect, and sunk costs effects (Mcshane 2018). Finally, firms must keep these factors in check if they want to continue producing in the future.

Additionally, as firms attempt to avoid decision evaluation problems, our text offers four key steps as to how firms evaluate decisions better. The process begins by, separating decision choosers from evaluators. This will allow the process to be free of any bias, and will lead the firm to the most rational decision. Secondly, establish a preset level to abandon the project. This will help eliminate any project that is not fully up to standards with the culture of the specific firm. The third step, is finding sources of systematic and clear feedback. Likewise, this helps alleviate any bias that may occur in the decision making process and will lead the firm to the most efficient rational decision. The last step also eliminates any potential bias by involving several people in the evaluation process (Mcshane 2018). In any prosperous company, several individuals are briefed on a situation and collectively think of solutions for the betterment of the whole organization. Moreover, firms have begun to implement a quintessential model called the “Creativity Process Model” to help promote more resourceful decision making.

First, firms must have the proper preparation in the creativity process model. This means that they understand the problem or opportunity, and investigate information that seems relevant to the issue. After the preparation stage, comes the incubation phase which allows for a period of reflective thought. This period can be non-conscious or low-level awareness, not direct attention to the issue and allows for an active divergent thinking process. Next comes the illumination stage, where a sudden awareness of a novel, although vague and incomplete idea entering one’s consciousness that may include an initial period of “fringe awareness”. The last stage of the model is the verification process. This allows for a detailed, logical, and experimental evaluation of the illuminated idea that further promotes creative thinking (Mcshane 2018). To better understand the “creative process model” it important to define what exactly creativity is.

Creativity is not just using one’s imagination, but it can be defined as the generation of a product that is judged to be novel and also to be appropriate, useful, or valuable by a suitably knowledgeable social group (Abrar 2018). When looking at what firms promote innovative creative thinking one must begin with the worlds most valuable brand, Google. One example of how Google has successfully fostered creative thinking into their business was the invention of “Google labs”. This project generates a number of new ideas that are incubated by Google user’s thoughts and new ideas. Based on the comments generated through “Google labs” they can determine whether to develop the ideas further or start new ones. For example, the creation of the popular app “Google Maps” was brought to attention through “Google Labs” and has become a staple of the brand ever since its creation (Arbrar 2018). Recently, a Google associate Henry Chesbrough introduced the concept of “open innovation” which allows ongoing collaboration with people involving contributions from outside the company. Google takes this open innovation tactic from outside firms and continues to use closed innovation (in-house within Google) and has developed many great models. For example, Android and Chrome OS are both instances of interfaces developed through collaboration between Google and the outside community (Arbrar 2018).

In addition, it is evident that creativity is a foundation in Google via its mission statement. In the statement, the company’s adherence to a 20%-time philosophy, which encourages employees to allocate 20& of their work time to developing side-projects and to work cross-functionally with other team members (Arbrar 2018). Ever since its existence, this presence of free thinking, and creativity has allowed Google to develop a culture unlike few firms. In the past 25 years Google has earned a reputation of places employees enjoy working the most and it is through their willingness to promote creative thinking. Mcshane lays out the characteristics of creative people into four categories. Creative people have independent imagination which includes a high openness to experience and a strong self-direction value, cognitive and practical intelligence which is the ability to synthesize and apply useful ideas, knowledge and experience which allows individuals to not be locked into a fixed knowledge mindset, and persistence which encourages strong task motivation (Mcshane 2018).

Furthermore, our text describes what makes a work environment creative. The first characteristic being learning oriented, intrinsically motivating work, open communication, creative work setting with sufficient resources, and leaders/coworker support (Mcshane 2018). When firms create this creative culture it allows for more creativity activities on all levels. For example, firms regularly revisit abandon projects that were once deemed unsolvable. Secondly it allows for more associative play, which are playful activities, morphological analysis, and helps answer creative challenges. Another creativity activity that firms have embraced is cross pollination, or the exchange of ideas across the firm. Lastly, one of the more useful activities that most firms practice is design thinking, which is human centered and is a solution-focused creative process (Mcshane 2018). Finally, with firms embracing a more creative culture they are able to become better involved in the firm which will create a sustainable work environment in the future.

Mcshane offers the levels of employee involvement in a rather simple diagram with a scale of low to high with medium-low and medium-high in the middle Low involvement is when employees individually ask for specific information; and the problem is not described to them. Medium-low insists of employees hearing a problem individually or collectively then ask for information relating to that problem. In a medium-high involvement employee collectively recommend a solution to the problem. Lastly high involvement occurs when employees are responsible for the entire decision making process (Mcshane 2018). The text also offers an “Employee Involvement Model” to better illustrate how they become better involved. The contingencies of employee involvement are design structure where the problem is new and complex, source of decision knowledge where employees have relevant knowledge beyond leader’s knowledge, decision commitment (employees would lack commitment unless involved), and risk conflict which norms support firm’s goals and likely employee agreement. These contingencies then create the outcomes of employee involvement which are better problem identification, more/better choices generated, more likely to select the best alternative, and ensure stronger commitment to the decision (Mcshane 2018).

In conclusion, firms that practice creative thinking methods and promote these innovative decision making processes are the ones that survive and prosper in the end. There is not one simple norm that successful firms practice to create longevity. Decision making is made best through rational choices and being able to identify problems within the organization. Firms that practice design thinking and other collaborative methods are one’s that people enjoy working for the most, and help create the foundation of problem solving. Without the involvement of creativity, firms would be rigid in their decision making and the firm would be unable to grow. However, with creativity comes inevitable failures, and with failures comes crisis and a great opportunity for a firm to find a niche which in turn ends to sustainability in business. Ultimately, with this adaptation firms are allowed to operate at the highest level and what its what makes them create the necessary culture to survive in today’s forceful business world.