Intuition and your business. When is the sixth sense right?

When we hear about business success stories, quite often we hear that some of the key decisions were made based on “gut feeling”. Entrepreneurship and intuition are closely linked in the media and, consequently, in the minds of aspiring business owners.

My first close observation of how a business is run was of my father’s business. In fact, the decision making process was happening in the spare room of our house where dad and his partners met several times a week and which was the headquarters for his business for many years.

I have heard from dad many times that “something inside” made him feel that a certain decision is right, that a “sixth sense” or “gut feeling” led to a particular decision. I have also often heard that when the decision was wrong, it was because he didn’t listen to his gut feeling.

What is the role of intuition in business-related decisions,  particularly its comparative effectiveness of compared to a more rational approach. Unfortunately, this topic is largely ignored in conventional business education and the research is quite scant.

So what is intuition and how does it work? Most researchers agree that intuition is “affectively-charged judgment that arise through rapid, non-conscious and holistic association”. Are you still awake? There are two main points to take from this fancy description –

decisions based on intuition are relatively quick and the process relies on the mechanisms in your brain that are usually associated with emotions.

Because emotion-based processes in our brains are quite automated (they rely on pre-recorded patterns i.e. “fight or flight”), intuitive decision-making is also automated and this is what makes it quicker.

The other type of decision-making can be described as analytical or rational decision-making. This process relies on consciously manipulating and assessing information, and then making the decision through deliberation. Because of a sequential nature of this process, and because it does not rely on pre-recorded patterns in our brains as much as intuition does, this process tends to be slower.

So which decision making process is more effective? The answer isn’t that straightforward.

Most early researches found that rational approach produced better results across the board.

One big aspect that is often ignored during the research into intuition is the domain expertise of an individual.

In other words, the researchers didn’t take into account how much knowledge an individual had in a particular field that they were asked to make a decision about. The research that took domain expertise into account produced some interesting results.

Firstly, the intuitive decisions made by people with higher domain expertise tend to be correct significantly more often than intuitive decisions made by people who don’t have an in-depth knowledge of the subject.

Secondly, in one particular study, people with high level of domain expertise made correct decisions more often when using an intuitive approach, rather than analytical. What this means is that

strictly analytical procedures may essentially block your intuition process and prevent you from seeing and otherwise obvious solution.

So what do we take form the research? Should we always listen our gut feeling and not bother with analysis?

Actually, the key point of the research is that you need to have domain expertise to effectively use either decision making approach.

In addition to academic research, I also interviewed a few business owners from various industries and of different age and cultural background. I asked them about the role intuiting played in their business development. Overall, business owners who were a bit older and had more experience acknowledged that the role of intuition has increased in their decisions over the years.

Among others, I have also interviewed my dad asking him the same question. His observation was that when he was younger he relied more on analysis and rational thinking and the older he got, the more reliance he placed on his “sixth sense”. What is interesting is why he thought that was happening. He felt that this was because as he got older, he found it harder to keep up with technical advances and therefore was incapable to use analysis as much as before. I should add that his business is passenger transport and prior to starting his own business he worked for many years as transportation networks engineer.

If we project his experience with decision making onto the academic research, it becomes obvious that it’s not his inability to use analysis as often that leads to more intuition based decision. It’s the fact that his domain expertise has been continuously increasing therefore allowing him to use intuitive decision making process more often.

I keep stressing the role or research and planning in the success of a business. One of the reasons for that is the fact that continuous research into your chosen industry or business field increases your domain expertise.

Same principle lies behind continuous innovation and learning – these processes allow you to continuously increase you domain expertise. This in turn, allows you to make better decision.

So what really is the “gut feeling” that is mentioned in so many business success stories? It’s often years of building knowledge and experience coupled with the passion for continuous self-improvement.