MANAGEMENT INSIGHT - The Wisdom of Bees: What the Honeybee Can Teach You & Your Company About Making Better Decisions

As organizations, we face thousands of decisions every day. Should we buy that new tablet press? Is it time to move into spray dry dispersion? How can we accelerate the proposal process? Should we use epoxy or vinyl on the new lab floors?

There are lots of studies on how we should make decisions, but what I find fascinating is the cognitive studies on how we actually make them. Once you understand what happens in your brain as you weigh your options, you can extrapolate this knowledge and look with fresh eyes at how your CDMO, large pharma, and the industry make decisions.

There are two primary theories that dominate cognitive decision-making theory. The first is the Race Theory. This theory holds that in a race between two competing ideas, the one that gets past the finish line first wins.

Let’s say you are driving down an icy road in a thick morning fog. You see a dark shape coming toward you. You know this is a busy street, and you are just as likely to see bikers as cars. One part of your brain starts working on the theory that it’s a bike, and another starts developing the theory that it’s a car. You will decide what you are looking at based on which chain of neurons moves the fastest; the one which thinks it’s a car or the one that thinks it’s a bike.

The other theory is the Diffusion Theory. In this theory, your brain is still working on both possibilities, only it’s about the accumulation of stimuli rather than the speed of stimuli. The repeated stimulation of neurons in the ventral striatum region of the brain continue on both sides of the decision, like marbles piling up on two sides of a balance, until one hypothesis eventually exceeds a certain threshold, and you make your decision. Yup, that’s a bike. Move to the next decision: brake or swerve?

Recent neuroscience research strongly favors the Diffusion Theory over the Race Theory, particularly in binary decisions in which an experiment called the Diffusion-Tensor MRI provides strong support.

HOW THE BEES DO IT

Honeybees are a classic example of Diffusion Theory at the organizational level. Every day, dozens of worker bees go out and look for flowers. As they return, each bee does a little wiggle dance to communicate where the flowers are. Let’s imagine that the first bee that returns wiggles about a lush park in bloom in the west. Five more bees arrive with dances about a magnificent botanical garden due east. The next 10 bees can’t stop going on about that first park due west. But the hive doesn’t decide yet, and good thing. Because after that, many more bees come in and eight out of 10 are absolutely raving about the possibilities in the botanical garden in the east. At a certain point, the threshold is reached, and the hive heads contentedly to find the freshly blossoming 52-acre Brooklyn Botanical Garden. Good choice.

What I find most interesting about the Diffusion Theory is that it doesn’t just describe how people and organizations make decisions, but how those decisions might evolve over time, and how long it might take to make decisions.

The threshold is important, because a snapshot at different stages before the threshold is reached might show different impending decisions. If the bees made the decision right away, as the Race Theory suggests, they would have gone to the park as soon as the first bee came back. If they had made the decision a few bees in, they would have leaned toward the Botanical Gardens for a bit, but then settled on the park after all. It took a little time for the majority to tip east, where the preponderance of opinion ultimately led.

If an organization sets its threshold low, decisions will be reached quickly, but the decisions may be wrong. There is a distinct speed/accuracy tradeoff. Decisions that are normally accurate can be reversed under time pressure. Very careful and deliberative decision-makers tend to use a high threshold.

HOW THE ELDERLY DO IT

It’s fairly common knowledge that adults over 65 or so take longer to make decisions. The prevailing wisdom is that this is due to cognitive decline, but this may not be the case, according to McKoon and Ratcliff in, “The Diffusion Decision Model,” published in the MIT Press Novels in April of 2008. The slowdown is almost entirely due to the older adults’ higher thresholds for decision-making, as demonstrated by recent Diffusion Model analyses of two choice data from a number of tasks involving six experiments with 30 or more subjects in each of three age groups per experiment. Older people tend to be more conservative, requiring more information to make a decision.

Is a higher threshold good? Maybe not if you’re an air traffic controller, or a trader buying stocks on the floor of the NYSE. The point is that it depends.

HOW ORGANIZATIONS DO IT

While small organizations may have an advantage in nimble decision-making, larger organizations have the advantage in making conservative long-term decisions. They simply have more bees to listen to. We like to de-ride large organizations for their plodding pace and pedantic bureaucracy, but the truth is, insofar as the bureaucracy is geared at securing weigh-in from other departments and knowledgeable decision-makers, taking the time to get all that input can improve decision-making.

FIAT CHRYSLER: IGNORING THE BUZZ COMPLETELY

Of course having lots of bees with lots of stories to tell doesn’t mean your CEO will listen to them. Sometimes a strong-willed CEO can chart an independent course. Take Fiat Chrysler’s strategy addressing changes in auto demand.

The worker bees have been wiggling madly throughout the auto industry, and their message is well above the thresholds of all the major automakers. The message is threefold: First, there is no new and easy business blossoming in developing markets anymore; that pasture is already heavily populated with bees. Second, the SUV and truck segments that were once the richest flower beds around are no longer as attractive. Violent swings in gas prices and increasingly tough emissions regulations have made this market unreliable. And third, the rise of technology-driven new mobility paradigms, such as Uber car sharing and autonomous vehicles, threatens to overwhelm the traditional model of private ownership that is the foundation of the industry. In bee terms, think of a parking lot full of diggers, pipes, and cement trucks at the edge of the flower bed.

Addressing these issues takes a lot of capital. Car companies need to invest in new technologies, and that puts the little guys like Fiat at a disadvantage. Fiat CEO Sergio Marchionne was all in on tackling these challenges head on last year, when he spent much of his time trying to negotiate a merger to give Fiat the financial clout it needed. No luck.

So when Fiat presented fourth-quarter earnings in January, Marchionne performed a rather sudden about face and proclaimed all the industry’s bees to be wrong. Emerging market volumes are irrelevant, he said, because of today’s climbing truck and SUV sales. Emissions regulations can be managed by buying credits generated by his competitors with their unprofitable electric car schemes. And mobility paradigms? Futuristic poppycock.

His strategy may well hold up, if only momentarily. Prices at the pump look like they’re going to stay where they’re at for a while, which is what fuels SUV and truck sales demand.

And yet red flags abound, as the bees attest. By investing in only trucks, SUVs, and luxury brands like Alfa Romeo and Maserati, Fiat Chrysler loses the ability to offer customers a full product line offering. Marchionne claims to be looking for someone to partner with for their sedans, but what would a partnership look like anyway? Are they going to rebadge Mitsubishi sedans as Dodges and Chryslers? And while Marchionne may be right that electric powertrains and autonomous drive are not around the corner, Marchionne is ignoring the mounting evidence that consumers today are looking for slick new futuristic technologies like lane-change warnings and rear- and side-view cameras the way they used to look for speed and performance.

While I admire his ability to think outside the box, Marchionne needs to be aware that by ignoring the bees completely, he takes a substantial risk. As the other car companies invest billions in new technologies, fuel efficiency, and emission improvements, Marchionne is going all in on a gamble that the automotive industry isn’t going to change. Maybe history will prove him right. The bees have been wrong before, though much less often than they are right. Still, I can’t help but remember that Chrysler gambled once before on the auto industry not changing. And that didn’t turn out so well.

COMBINING HIVES: DECISION-MAKING WHEN LARGE PHARMA MAKES ACQUISITIONS

Large pharma grows by acquisitions. So whenever large pharma takes over a smaller company, the bees in the new acquisition have less voice than they did before. Add to this the “not-invented-here” syndrome, which is a natural human tendency to place less value on external inventions, and the end result is likely to be the cancellation of product lines developed in the acquired company. This may or may not be for the best, but understanding this tendency should highlight the possibility for error in these circumstances. It’s important to make sure that good ideas aren’t tossed out for the wrong reasons.

AGILITY VS. RELIABILITY – DAILY THRESHOLD TENSIONS AT THE CDMO LEVEL

CDMOs need to be small and agile, allowing them to move quickly and provide for full touch of the owner to client. But there is a tradeoff here. A smaller CDMO has fewer bees to weigh in on a decision, and a shorter process lays the organization open to a higher risk of error. Still, at this stage in the drug development process, speed and agility are widely considered to be paramount.

And yet, CDMO clients also expect reliability, which requires a higher threshold. Reliability and agility are often opposing tensions; sometimes even mutually exclusive. CDMOs must ride and balance this tension on a daily basis.

Here at Xcelience, I believe we have achieved a fairly unique balance. We retain a high degree of speed and agility by maintaining relative independence within the Capsugel umbrella. Yet, I am also learning that there are benefits, sometimes, from doing things the long way. Large organizations have more bees, who have travelled long and far and visited more pastures. We can learn from them. The trick going forward is going to be trying to strike a balance between nimbleness when we need to move quickly, and slower decisions when the situation warrants greater insight. Lots of weigh in and opinions is a good thing, except when it isn’t.

TO BEE OR NOT TO BEE: CHOOSING TO USE OR IGNORE THE WISDOM OF BEES

The key to making use of your understanding of Diffusion Theory is not to use it as a prescription for good decision-making, but to use it to understand how decisions are actually made, whether intentionally or not. We can choose a lower or higher threshold, based on our need for speed or reliability. Or we can choose Marchionne’s strategy and ignore the bees completely. The important thing is to realize how our decisions are being made, and how that process may affect outcomes.

Derek G. Hennecke, President & CEO, Xcelience