Avoiding Pattern Recognition Traps In Analysis

“Reality is made up of circles, but we see in straight lines. Herein lies the beginnings of our limitation as systems thinkers.”

Peter Senge

For me, competitive intelligence, market intelligence and market research came naturally. The processes were all so somehow familiar. These activities are all systems consisting of these elements; planning, inputs, processes, outputs, reporting and feedback loops. I have been doing similar activities for at least 35 years. The trap you have to avoid in performing any research and analysis is overcoming naturally wired internal and personal biases. It’s too easy to come up with what you think the answer may be and then you drive your research to support your own suppositions. What drives us that way sometimes is our own liner thinking in a non-linear world. Our systems approach works well to fool us if we think linear, but we should not abandon our systems thinking, we need to modify it.

Let me explain. In linear thinking we look for cause and effect and expect to see proportional relationships—an ounce of cause produces an ounce of effect. In actual practice this is not always so, the world is non-linear and complex. Generally, our thinking is guided by deeply rooted assumptions, generalizations and perceptions and the danger is we are unaware of it. So when we are doing analysis and our mental modes kick in we are blinded as to why something occurred the way it did. We try to fit together the existing research and information to fit our biases and we are good at it. On top of that our systems that we built can easily support the wrong conclusions. We built our systems to analyze the very nature of the market to help us unearth and recognize patterns so we can better understand what is happening. Our mind works hard to push us to see patterns that may not really exist because we want to find something that we have seen before, are comfortable with and know. It’s a perception problem guided by our own mental modes.

In my own personal experience in performing market analysis during the slowing down of my  industry, I got used to see the same patterns of behavior from the companies; layoffs, property reduction, buying back stock, divesting, issuing larger than normal dividends, focus on profits and margin while revenues shrink. The patterns were linear, single events caused predictable reactions. It made sense. The system, market and environment helped me develop new mental modes. Mental modes are contagious, once I explained my analysis to others they caught my mental modes, it spread like a virus. Then it happened, a company did something unexpected, it threw me for a loss because it was not something I was expecting. My first reaction was to think, they made a mistake, when in fact they did something brilliant. My new mental modes were working hard to preserve the pattern recognition I worked so hard to build!

So how do we solve this dilemma? How do we not fall into the trap of seeing patterns that our mind likes to see and treat each new analysis as if it were our first? Breaking mental modes is hard,  the truth be it some mental modes are good in some circumstances, but in a dynamic, non-linear world we need to remain agile. We have to look inward and challenge ourselves constantly, but that is only one step. We need to have others challenge us on a regular basis. In this process we are constantly learning, molding ourselves to think out-of-the-box, or as Peter Senge, author of “The Fifth Discipline”, points out become a learning organization.

So the next time you rush to a conclusion, stop and think for a moment, challenge yourself, have others challenge you. It may surprise you!

(C) Copyrite Caldgaran and Associates 2015

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