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Critical Thinking Leading Innovation and Value Creation Andrew L. Urich, J.D. Puterbaugh Professor of Ethics & Legal Studies Spears School of Business.

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Presentation on theme: "Critical Thinking Leading Innovation and Value Creation Andrew L. Urich, J.D. Puterbaugh Professor of Ethics & Legal Studies Spears School of Business."— Presentation transcript:

1 Critical Thinking Leading Innovation and Value Creation Andrew L. Urich, J.D. Puterbaugh Professor of Ethics & Legal Studies Spears School of Business Oklahoma State University

2 What Happened to GM?

3 GM History 1950’s - Half of all cars in the US

4 GM History 1980 - 853,000 to 284,000 worldwide

5 1999 “The most versatile vehicle on earth” “Lifestyle support vehicle”



8 1 st Q 2009 Passenger cars Toyota19.4% GM15% Honda12.4% Nissan10.2% Ford 10.0% Hyundai6.2% Chrysler5.2% Mazda3.4% BMW 3.2% VW3.2% Kia2.6% Subaru 2.6% Volvo0.8% Saab0.2%

9 Critical Thinking Don’t try this at home! I prefer being given the correct answers rather than figuring them out myself. I don't like to think a lot about my decisions as I rely only on gut feelings. I don't usually review the mistakes I have made. I don't like to be criticized.

10 What is Critical Thinking? 1. Making decisions and taking action based on reason, evidence and analysis. 2. Detect and avoid thinking traps. 3. Reflect on the justification of one's own beliefs and values. 4. Understand the logical connections between ideas. 5. Metacognition: thinking about thinking.

11 What is Critical Thinking? Using your brain to create value for yourself and your organization! Value Superior analysis and judgment Intelligent decision making Focus on what matters Identify drivers of value Face reality

12 Value Focus JD Power Top 10 Reliability 20042007 Buick145 Porsche 110 Buick Porsche Lexus145 Lincoln114 Lexus Lincoln Cadillac162 Buick115 Cadillac Buick Mercury168 Lexus115 Mercury Lexus Honda169 Mercury121 Honda Mercury Toyota178 Toyota128 Toyota BMW182 Honda132 BMW Honda Lincoln182 Ford141 Lincoln Ford Subaru192 Mercedes142 Subaru Mercedes Jaguar197 Jaguar 20042007 Buick145 Porsche 110 Buick Porsche Lexus145 Lincoln114 Lexus Lincoln Cadillac162 Buick115 Cadillac Buick Mercury168 Lexus115 Mercury Lexus Honda169 Mercury121 Honda Mercury Toyota178 Toyota128 Toyota BMW182 Honda132 BMW Honda Lincoln182 Ford141 Lincoln Ford Subaru192 Mercedes142 Subaru Mercedes Jaguar197 Jaguar 20042007 Buick145 Porsche 110 Buick Porsche Lexus145 Lincoln114 Lexus Lincoln Cadillac162 Buick115 Cadillac Buick Mercury168 Lexus115 Mercury Lexus Honda169 Mercury121 Honda Mercury Toyota178 Toyota128 Toyota BMW182 Honda132 BMW Honda Lincoln182 Ford141 Lincoln Ford Subaru192 Mercedes142 Subaru Mercedes Jaguar197 Jaguar 20042007 Buick145 Porsche 110 Buick Porsche Lexus145 Lincoln114 Lexus Lincoln Cadillac162 Buick115 Cadillac Buick Mercury168 Lexus115 Mercury Lexus Honda169 Mercury121 Honda Mercury Toyota178 Toyota128 Toyota BMW182 Honda132 BMW Honda Lincoln182 Ford141 Lincoln Ford Subaru192 Mercedes142 Subaru Mercedes Jaguar197 Acura143 Jaguar Acura

13 Value Focus BMW “We don’t make automobiles [we make] moving works of art that express the drivers love of quality.” GM: Car guys and bean counters– no marketing

14 Value Focus Loss of Trust & Respect Trust Issues Consumers Dealers Workers Beat up suppliers Banks, Public opinion Shareholders - Bondholders Truth irrelevant when trust doesn’t exist

15 Value Focus Loss of Trust & Respect Loss of commitment Playing favorites Keep you head down and get along Stop working start having meetings (Sr. VP of Nothing) Lack of Fun Innovation Creativity

16 Lack of Diverse Opinion (Face Reality) Group think Stability over conflict Continuity over disorder Status quo over change 50 year old decision making structure Conformity over rebellion Same design centers Run off renegades De Lorean fired at GM -- Iacocca fired at Ford

17 Market Value versus Cumulated Strategic Investments at General Motors 1980 GM = $13 Billion 1980-1997 $167 Billion or $332 Billion R&D and capital spending 1997 GM = 40 Billion

18 Ross Perot on the Subject From 1980 to 1985 GM spent $45 billion in capital investments but only increased worldwide market share by 1%....... "For the same amount of money, we could buy Toyota and Nissan outright, instantly increasing market share to 40%.” Gorilla dust

19 Optimistic Illusions Ask Rick Wagoner why GM isn’t more like Toyota. (69/70) “We’re playing our own game – taking advantage of our own unique heritage and strengths.”

20 Distortion of Reality Let’s ignore gas mileage

21 Distortion of Reality No money in small cars

22 Who’s Reality Bob Lutz Global warming “is a total crock of [expletive].” “Hybrids like the Toyota Prius make no economic sense.”

23 Strategic Thinking The key to strategy is what you don’t do

24 Strategic Thinking Japan has robots we need robots

25 Sequel: Fuel Cell 9/2006 Due 2010 “Leapfrog the Japanese” “A Game Changer”

26 Volt: Electric Car 12/2006 “A game changer” “Beat the Japanese at their own game”

27 Bureaucracy & the Status Quo Risk taker to Risk avoidance Cash poor to Cash comfortable Contribution to Playing favorites Opportunities to Problems Marketing & sales to Finance & bean-counting Momentum to Inertia Working to Meetings END

28 Does Bureaucracy Materialize Out of Nowhere?

29 Applications Have you clarified exactly how you create value for Chesapeake? Focus on value creation and avoid activities that are not central to your strategy. Appreciate and seek diverse (and contrarian) points of view A fun and exciting atmosphere fosters creativity and productivity Rage against bureaucracy and the status quo.

30 Applications Management Issues Leader sets the tone Processes often get in the way Bloomberg abolished titles Conflict breeds creativity Presentations– one-way communication Promote and reward risk taking and attempts at innovation

31 Applications Jack Welch Bureaucracy Busting Be relentless and outrageous Celebrate impassioned boundaryless people Love the people who hate meetings Encourage managers to swing for the fences Create a culture of excitement END

32 Critical Thinking “There is no reason anyone would want a computer in their home.” President of world’s second largest computer company (DEC) arguing against the PC in 1977

33 Critical Thinking “The world potential market for copying machines is 5000.” IBM turning down the eventual creators of Xerox

34 Critical Thinking “I think there is a world market of about five computers.” Founder of IBM in 1943

35 Critical Thinking “Who the hell wants to hear actors talk?” Warner of Warner Brothers arguing against the need to add sound to silent movies

36 Critical Thinking Obama and McCain spent $1 Billion on their 2008 campaigns – Absurd? Coca-Cola spent almost $2 billion trying to get us to drink sugar water in 2008.

37 Critical Thinking “Sensible and responsible women do not want to vote.” President Grover Cleveland, 1905

38 Critical Thinking “We don’t like their music and guitar music is on the way out anyway.” Decca record executive turning down the Beatles, 1962

39 Critical Thinking “Television won’t last because eventually people will get tired of staring at a plywood box every night.” Daryl Zanuck, 20th Century Fox Movie Producer, 1946

40 Critical Thinking “Everything that can be invented has been invented.” Commissioner of US Patent Office arguing to President McKinley to close down the Patent Office in 1899

41 Why Don’t They Give Us an Owner’s Manual For Our Brain?

42 The Brain’s Inner Workings The Wiring 100,000,000,000 neurons (brain cells) 15,000 synaptic connections each By age 15 half are gone and the superhighways are up and running. These mental pathways become the filter–producing recurring patterns of thinking, feeling and behavior. Examples: Empathy–confrontation–authoritarian– dogmatic–emotions–tolerance for uncertainty.

43 The Brain’s Inner Workings The Parts The brain is full of zero sum games Ever find yourself feeling conflicted? Competing modules MRI research on picturing yourself as old Stanford study No payments until 2010 Disagree– brain off Agree-- pleasure Parts of the brain Amygdale-fear responses Fleeing the stock market like you are fleeing a lion Prefrontal cortex – recently evolved – controls voluntary actions Logical and analytical Limbic system - oldest physical part of the brain The rat brain – Impulses gut reactions

44 Amygdale: Fear Responses Total US Stock Market 1982 value = $1.2 Trillion Return 1982 to 2007 13.3% Theoretical 2007 value $28.2 Trillion Actual value $18.7 Trillion Lost to market timing $9.5 Trillion NASDAQ 9.6% Return 1973 – 2002 4.3% Actual average return to NASDAQ investor Zweig, Jason, Money Magazine, December 2007, page 76

45 Your Strength Strength is a recurring pattern of thought, feeling, or behavior that can be productively applied. Strength is more important than experience, brainpower, and willpower. You cannot teach strength.

46 Your Strength What to notice, what to ignore What to love, what to hate Your motivations, ego, altruism How you think - practical or strategic Your attitude - optimistic or cynical Your filter is your Strength

47 The Strength of Great Accountants Innate love of precision Happiest moment is when the books balance Gallup survey

48 Using Your Brain Your Unique Strength + Critical Thinking = Success Your value and ability to prosper and reach your goals come from: “sensing, judging, creating, and building relationships.” Thomas Stewart, Intellectual Capital We all have the same information – it’s what you do with it that counts.

49 Punch-line Early in life we get theories of the world – the theories make sense – but making sense is not the same as being correct. Beware of your Brain’s wiring! Your brain is programmed

50 Applications Using Your Brain Exploit your strength! Don’t correct weaknesses, work around them. Skills and knowledge can be taught, Strength cannot. Here’s what we can change! Core beliefs New skills and knowledge Your values Self-awareness Capacity for self-regulation Hidden strengths

51 “Our minds are like inmates, captive to our biology, unless we manage a cunning escape.” Nassim Taleb The Black Swan

52 Why is Charlie Sheen an Actor?

53 Why Do We Do What We Do? Albert Einstein “Fear or stupidity has always been the basis of most human action.” Worst paper ever…. “People have two legs, animals have four, except fish which have none.”

54 Basis of Human Action and Decision Making? Beliefs Act out your beliefs Desires Pursue your desires Instinct Succumb to instinct

55 Beliefs You act out what you believe? I believe the world is a dangerous place. I believe people should______. I am skeptical of all claims. An “ideal” manager does ______. The best investment philosophy is___.

56 Beliefs Filters and Reinforcements

57 Desires Cialdini knows where our desires come from Are we honest about our desires? Mark Cuban and flattery Desire to feel good Desire to feel safe I have to scare you first. First I create the disease – then I create the cure.

58 Living by Instinct “Nature, Mr. Allnut, is what we are put in this world to rise above” Rose Thayer (Katherine Hepburn) The African Queen Human Animals – Instinct…...................Human Beings – Critical Thinking Wealth/Greed...................................Altruism and charity Seek security at all cost....................Get out of your comfort zone Preserve status quo..........................Change Meeting society’s expectations...........Be authentic to yourself (following the herd).......................... (think for yourself) Traditional gender roles....................Equality of the sexes Tribalism (nationalism).....................Multi-culturalism Praise authority................................Question authority Praise and follow the leader..............I don’t need a leader Consistency is safe............................Strive for improvement Guided by personal experience...........Critical thinking Freewill???........................................Free Will!!!!! Surviving........................................Living

59 Basis of Human Action and Decision Making? Beliefs, Desires & Instinct You do what you feel obligated to do. You do what is the easiest. You do what makes you feel safe. You do what you’ve always done.

60 You Might Be Thinking Critically If….. You change a core belief. You get outside your comfort zone. You admit you were wrong about something important. You increase your self-awareness. You do something you wouldn’t do. What if I like what I do?

61 Do We Always Think the Same Way? Did GM Think About This? Global Product Development Tom Stephens, who runs the company's power-train unit Carl-Peter Forster London, Germany and Greece BMW, Opel

62 Requirements of Critical Thinking 1. Awareness of choices and real consequences 2. Self-awareness 3. Value focused proactive mindset 4. Avoid thinking pitfalls

63 1. Awareness of Choices and Real Consequences If you choose one of 10 known options when there are, in fact, more than 100 options, have you really exercised critical thinking? Cognitive bias: Ignoring alternatives

64 Junkfinger Test  Tattoos  Traffic tickets  Brushes with the law  Being sick  Promptness  Pets

65 If You Don’t Want to Fall in the Grand Canyon--Don’t Go to Arizona What I do today affects what happens tomorrow.

66 Junkfinger Test In the Business World  Inconsistency  Excuses  Making enemies at work  Always talking, never listening  Accept things as they are  Acting uninterested – not engaged  Lose credibility

67 Goldfinger Behavior and attitude that put you in a position for good things to happen: 1. ? 2. ? 3. ? 4. ? 5. ?

68 Most people end up where their behavior indicates they want to be.

69 2. Self-awareness Metacognition “The truth will set you free………. but first it will piss you off.” Werner Erhard, founder, est Training “The greatest of all faults, I should say, is to be conscious of none.” Thomas Carlyle (1795 – 1881) Scottish writer

70 3. Value Focused Proactive Mindset Life philosophies down 50% Man may be wired for meaning “Consider first the end.” Leonardo da Vinci

71 What Do You Really Want? Be proactive (3 kinds of people) Do most people suppress their personalities and their dreams? Picture your 70 th birthday Reeboks says “Life’s short– Play hard.” I say “Life’s long– Do something.”

72 Value Creation Goals and Goal Setting What do I really want? How do I set effective goals? How do I increase the likelihood of good things happening and reduce the likelihood of bad things happening?

73 The Trick to Setting Effective Goals  Worry about the means not the end.  In other words, set goals that are within your control that can lead to good things– as opposed to outcome based goals.

74 End based goal: Impress the boss/Get promoted Act with enthusiasm, show your passion and demonstrate self- confidence Don’t just do what you’re told– Develop the habit of doing things impressively Identify the prototype employee and emulate that person Professional Image Program PRO-ACTIVITY HOUR: Spend one hour a week planning and reflecting on how success is measured and why certain people are favored

75 Ends based goal: Be a millionaire/Retire early Study investing and business opportunities for three hours a week Draft a budget and stick to it Figure out what “matters” and do the those things first Get two jobs

76 Ends based goal: Vice president by age 35 Arrange four networking lunches per month Volunteer for high profile/difficult projects Find a mentor and stay connected Try and make every co-worker/client into a friend and supporter

77 End based goal: Find a good spouse Put yourself in places where “good spouses” hang out Don’t date losers while you’re waiting for a winner Project the image that attracts “good spouses” Be proactive not passive

78 Priorities of Management Andy Roddick Work Hard Have fun Be a good teammate Learn from mistakes Win

79 4. Thinking Pitfalls Critical Thinking vs. Traditional Thinking

80 Cannot Predict the Future vs. Spreadsheets and Models Predict Future Late 70sEnergy Crisis Early 80s Latin American Bank Defaults Mid 80s Junk Bonds, Michael Milken Late 80s S&L Crisis Mid 90s Derivatives crisis Late 90s Dot-Com Collapse 2000 Long-Term Capital Management 2008 Sub-prime Mortgage Debacle Before 2015Unexpected disaster

81 Cannot Predict Probability vs. Theory Predicts Probability “Most negatives in housing are behind us.” Alan Greenspan, October 2006

82 Cannot Predict Probability vs. Theory Predicts Probability “I don’t see (sub-prime mortgages) imposing a serious problem.” Treasury Secretary Henry Paulson, April 2007

83 Cannot Predict Probability vs. Theory Predicts Probability “We see no serious broader spillover to banks from the sub-prime market.” Fed Chairman Ben Bernanke, October 2007

84 Cannot Predict Probability vs. Theory Predicts Probability “The effective management of risk is one of the core strengths that has made Lehman Brothers so successful.” Still found on Lehman Brothers website one month after collapse.

85 Focus on Unknown Unknowns vs. Focus on the Known Risk Management - Mirage Hotel in Vegas Hundreds of Millions on Cheating Detection Employee Monitoring Probability and Diversification Theft Protection Four biggest losses: Tiger attacks Siegfried or Roy Contractor wires hotel with dynamite Forms not turned in to IRS Owner’s child kidnapped

86 Source: 2006 Report to the Nation on Occupational and Fraud Abuse by the Association of Certified Fraud Examiners (ACFE) Focus on Unknown Unknowns vs. Focus on the Known

87 Observation to Theory vs. Theory to Practice Coin flips heads 50 times in a row--what are the odds tails comes up next? Ideology = Tails is due Scientific probability theory = 50/50 Critical Thinking = Crooked coin

88 Embrace Uncertainty and Ambiguity vs. Must Have an Answer or Explanation Underestimate the role of luck in life Overestimate it in games of chance Think we can measure it in decision-making

89 Thinking vs. Computing The energy conferences Dot-com’s new world

90 Harmful Mental Shortcuts Heuristics “Everything in life should be made as simple as possible, but not simpler.” Albert Einstein Simplifying information processing–simple explanations are the easiest. As the world gets more complex, we seek refuge in simplicity.

91 Harmful Mental Shortcuts Things that are scarce are good. You can rely on authority figures. Confident people know what they are doing. The more similarities a person has to me the more I can rely on them.

92 Harmful Mental Shortcuts Experts know what they are talking about. Price = Value. Items on special are a good deal. The person in charge is responsible for the outcome. If everyone’s doing it, it must be good or right.

93 Applications Recognize and appreciate randomness, uncertainty and ambiguity. Develop a more realistic understanding of the inability to quantify and measure risk. Think! Don’t compute. Recognize the risk of thinking you know…what you don’t know. Pursue ventures with limited risk/cost and tremendous upside potential. Look out for pitfalls and cognitive biases

94 Critical Thinking Applications Awareness keeps your brain on track Question your beliefs and assumptions Be honest about your desires Struggle to think critically Lifelong learning Put yourself in positions for good things to happen Set goals and make things happen Doubt and wonder

95 The Secret to Happiness

96  Self-delusion  Hypocrisy  Ignorance

97 The Secret to Happiness Ignorance is Bliss “People who do things badly are supremely confident in their abilities—more confident, in fact, than people who do things well. Not only do they reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the ability to realize it.” Dunning, David Journal of Personality and Social Psychology December 1999.

98 The Secret to Happiness Why? Researchers believe that the same skills required for competency are the same to recognize incompetence.

99 Critical Thinking Imagine “Imagination is more important than knowledge.” Einstein “The reasonable man (woman) adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on unreasonable men (women).” George Bernard Shaw

100 Thank You I appreciate your time and attention.

101 References Ailes, Roger. You Are the Message. New York. Doubleday, 1988. Bazerman, Max H. Smart Money Decisions, Wiley & Sons, 1999 Buckingham, Marcus, First, Break All the Rules, Simon & Schuster, 1999. Cialdini, Robert B. Influence: Science and Practice. 3rd Ed. New York: Harper Collins, 1993. Ghemawat, Pankaj, Strategy the Business Landscape, Addison Wesley, NY 1999. Golman, Daniel, Emotional Intelligence, Bantam Books, New York, 1995. Hirshberg, Jerry, (Founder Nissan Design International) The Creative Priority, Harper Business, NY, 1999 Koch, Charles G., The Science of Success, Wiley & Sons, 2007. Lakoff, George, Moral Politics, Paul, Richard. Critical Thinking. Santa Rosa, CA: Foundation for Critical Thinking, 1993. Pink, Daniel H. The Whole New Mind, Riverhead Books, NY, 2006. Schramm, Carl J. The Entrepreneurial Imperative (HarperCollins) 2006.

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